Legal Basics of Smart Contracts
What are Smart Contracts?
Smart Contracts are computer codes created in a blockchain, like Ethereum or NEAR Protocol, that facilitate the verification and execution of settings when certain conditions are met. These smart codes allow the exchange of money, property rights, or anything else of value in an automated, transparent way and without the necessity to trust third parties, which avoids the need for intermediaries. The characteristics of the Smart Contracts include their immutability, autonomy, cost-effectiveness, speed and transparency.
The way users interact with a smart contract is very different from a traditional written agreement. As they are computer codes programmed on a blockchain, their functionality could be incomprehensible to an average person. The best way to explain what smart contracts are is with the example of the vending machine, which is regularly used to illustrate the concept to newcomers. When the buyer selects the product he wishes to buy, the vending machine checks the availability of the selected merchandise. If the product is not available, the machine indicates it to the buyer. On the other hand, if it is available, the vending machine shows the price that the user must pay. When the user enters the required quantity, the machine delivers the product automatically, instantly and without the intermediation of third parties. If we extrapolate this example to a code developed on a blockchain, we have a Smart Contract.
