What are smart contracts on blockchain?
What is blockchain?
Blockchain technology is most simply defined as a decentralized, distributed ledger that records the provenance of a digital asset. A simple analogy for understanding blockchain technology is a Google Doc. When we create a document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the document at the same time. No one is locked out awaiting changes from another party, while all modifications to the doc are being recorded in real-time, making changes completely transparent.
What are smart contracts on the blockchain?
In 1994, Nick Szabo, a legal scholar, and cryptographer realized that the decentralized ledger could be used for smart contracts, otherwise called self-executing contracts, blockchain contracts, or digital contracts.
Smart contracts are lines of code that are stored on a blockchain and automatically execute when predetermined terms and conditions are met. At the most basic level, they are programs that run as they’ve been set up to run by the people who developed them. The benefits of smart contracts are most apparent in business collaborations, in which they are typically used to enforce some type of agreement so that all participants can be certain of the outcome without an intermediary’s involvement.
What are the benefits of smart contracts?
Speed: Smart contracts use software code to automate tasks, thereby shaving hours off a range of business processes.
Trust: Your documents are encrypted on a shared ledger. There’s no way that someone can say they lost it.
Savings: Smart contracts save you money since they knock out the presence of an intermediary. You would, for instance, have to pay a notary to witness your transaction.
Accuracy: Automated contracts are not only faster and cheaper but also avoid the errors that come from manually filling out heaps of forms.
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