It’s a computer code that simplifies the execution of certain agreements and eliminates the need for a middleman.
Take delivery services as an example: a smart contract can automatically transfer money to a courier once a parcel is delivered. There’s no need to sign any traditional contracts – the sender just puts money (cryptocurrency) into a smart contract which then handles everything.
In other words, a smart contract executes what’s written into its code when certain conditions are met. It makes transactions transparent, fraud-resistant, faster, and irreversible, and doesn’t require a central authority. It’s just code that helps two parties collaborate without a middleman.
The notion of smart contracts has been talked about for more than 20 years. But it was only with the arrival of blockchain technology that it got the chance for broader utilization.
Smart contracts can be useful for exchanging money, property or other assets, streamlining business processes and avoiding waits for approvals, tracking inventories, automating dividend payments, controlling your personal data, and even fighting cancer. They’re usable in the finance, energy, real estate, healthcare, media, entertainment sectors, and even in government.
Demand for smart contracts is projected to rise along with the development of the Internet of Things. You can read more about use cases here.
Still, smart contracts are just taking their first steps and there are still many issues to address, like security. Consider a smart contract that has obvious security holes but can’t be fixed quickly. There are also more fundamental questions, like the regulation of such contracts.
The most popular platform for developing and running smart contracts is Ethereum.
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