What are Smart Contracts?
Smart contracts are agreement between two or more people in the form of computer code which running on blockchain. Thus, their information is stored on public blockchain and cannot be changed.
The transactions that happen in smart contracts processed by the blockchain, which means they can be sent automatically without third-party. This means there is no one to rely on.
The transactions only happen when the conditions in the agreement are met — there is no third-party, so there is no issue with trust.
HOW DO SMART CONTRACTS WORK?
To find the answer, let’s start by looking at how smart contracts can be used:
For instance, escrow is the process of guaranteeing that the funds will be transferred if the products will be delivered successfully. For this, the action is taken by payee to release the funds. However, in the case of smart contract usage, it will be possible to automate the whole thing as soon as the service provider submits its work and confirms that everything is well about the process.
This is just one of many examples of how a smart contract can be used, actually a smart contract can be used for any type of transaction — it doesn’t have to be financial.
WHY TRUST SMART CONTRACTS?
Smart contracts are designed and implemented within blockchains, and thereby they inherit some of the blockchain’s properties:
· They are immutable, which means a smart contract cannot be changed and no one can tamper with or break a contract.
· They are distributed, which means that the outcome of the contract is validated by everyone on the network. Distribution makes it impossible for an attacker to force control to release funds, as all other participants would detect such an attempt and mark it as invalid.
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