If you’ve invested in Ethereum, you need to understand what smart contracts are. People are incredibly optimistic about the technology and there’s good reason for it. Smart contracts significantly expand on the traditional blockchain’s capabilities and the technology has even attracted the attention of several Fortune 500 companies.
Still not convinced? Have a look at Quorum, a fork of Ethereum that JP Morgan developed as a result of interest in Ethereum’s smart contracts.
In this blog post, I go over what smart contracts are before shilling hard for the technology. But seriously, I really do believe in smart contracts.What’s a smart contract?
At a high level, smart contract technology let’s you run complex instructions on the blockchain. The traditional blockchain allows you to run one kind of instruction, a transaction instruction. Ethereum’s smart contracts, on the other hand, allows you to write instructions using a Turing complete programming language which is incredibly expressive. Just like transactions, every smart contract instruction run by the blockchain is logged by the blockchain.
Think of it like this: when you issue a transaction to Bitcoin’s blockchain, you’re telling the blockchain to subtract money from your account and add money to someone else’s account. When you issue a smart contract program to Ethereum’ blockchain, you’re telling the blockchain you want to execute this program and this could mean doing anything from simple transactions to multiplying numbers to image editing. That being said, you probably wouldn’t run complex computer algorithms on the blockchain since if it would be quite expensive and you don’t care for your instructions to be logged in a permanent public ledger. As such, most smart contracts would probably only use simple logic to perform economic activities.
If a traditional blockchain is a system capable of moving numbers around, then a smart-contract-enabled blo...