Smart contracts are self-executing or computer protocol contracts on a blockchain where the terms of an agreement can be expressed in code as a conditional statement or conditional block that will execute if a certain expression evaluates to true, which is to say that smart contracts check whether a certain condition is true or a certain event has occurred and then they execute either a transaction or they set a flag that can be used to evaluate the conditions on another smart contract.
Smart contracts can provide superior security compared to traditional contracts that can be executed without emotion and with lower transaction costs. Due to the nature of blockchain technology once executed those transactions are traceable, transparent, and irreversible.Source: pixabay.com – Smart contract security
Cryptographer, Nick Szabo, started discussing smart contracts as early as 1996 when he realized a decentralized ledger or blockchain could be used for self-executing contracts where all participants of the contract would have full transparency, could easily verify the agreed upon terms while divulging only the necessary details specific to that contract in play, all at a lower cost due to the removal of traditional middlemen.
The purpose of smart contracts, if designed properly, is to make transactions more available, efficient and economically more viable
Think of the execution of a smart contract similar to how your bank operates – if your late on a payment the bank automatically penalizes you. If you pay your bill on time nothing happens, if you are one second late you are penalized and it is all done automatically via a computer program. The emotion is removed from the equation. Smart contracts act in a similar way – If Action A happens, we move to the Action B part of the contract. If A does not happen then Action C of the contract gets executed. It does not take a human to go over the terms of the contract to execute any part of it –...