What you need to know about smart contracts
For traditional vending machines, you feed in coins and they will give out your choice of drink/food. Smart contracts are nothing different from this, but instead they are pieces of codes which allow more customisations and utilities.
Smart contracts on the blockchain will execute what they have been written for, and everyone can check it. Hence, unlike a vending machine which we have to trust that it actually holds enough drink or coins for exchanges, the smart contracts can be verified by anyone and so it is a trustless way of executing a contract.
Why are they useful?
Ethereum is the first platform that promotes smart contracts. On the platform, users can code a smart contract for different purposes: let the contract to hold some balance of coins, or to secure a transaction, or even ask it to trigger another smart contract under a specific condition.
The chain reaction of smart contracts can be very powerful and can create decentralised applications (Dapps) in which everything is executed on the blockchain. A list of applications built on Ethereum has shown that they can have impact on different industries, and the limit is really up to our imagination.
After all, smart contracts are the next generation of “vending machine” which do not require users’ trust and can run exactly for their purposes. Their flexibility also opens up for millions of possible innovative applications. They would play a main role in the future of blockchain technology and hence everyone should have an idea about what it is and how it would impact the the future development.