And What Exactly is a Smart Contract?
Smart contracts are digital versions of contracts stored on a blockchain that are automatically executed when all terms and conditions have been met. They typically are used to automate the fulfilling of an agreement so that all participants involved can be 100% certain of the outcome, without any intermediary (3rd party) involvement or time loss. They can also automate a workflow, triggering the next action when terms or conditions are met. Essentially, it’s a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained in that contra exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.
Though the term “smart contract” may still be in it’s adolescence, the concept certainly isn’t new. In fact, smart contracts were first proposed in 1994 by Nick Szabo, an American computer scientist who invented a virtual currency called “Bit Gold” in 1998, fully 10 years before the invention of bitcoin. In fact, Szabo is often rumored to be the real Satoshi Nakamoto, the anonymous inventor of bitcoin, which he has denied. He wanted to extend the functionality of electronic transaction methods, such as POS (point of sale), to the digital realm.
Examples of smart contract applications include financial purposes like trading, investing, lending, and borrowing. They can be used for applications in gaming, healthcare, and real estate; and they can even be used to configure entire corporate structures.
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