The Origin of the Smart Contract
The term “smart contract” was first coined over twenty years ago by Nick Szabo, a digital currency and cryptography pioneer. Szabo is famed for designing BitGold, which many consider to be the precursor to Bitcoin. It is also rumored that he might be Satoshi Nakamoto, the elusive creator of Bitcoin.
Smart contracts are self-executing contracts, or digital contracts, that enable anyone to exchange money, property, shares, or other items of value in a transparent, conflict-free way.
Smart contracts are purely digital. The terms of the agreement as well as the rules and penalties are embedded in the code in a way that is hard to tamper with.
When writing a smart contract, a few variables need to be defined to create the terms of the agreement:
- Who are the parties involved?
- What asset or item of value is being exchanged?
- When / on what conditions will the transaction be conducted?
The smart contract will execute itself only if the terms of the deal are satisfied, eliminating the need for a middleman to mediate the deal. With smart contracts, two or more parties who don’t know each other can engage in a bulletproof guarantee. The smart contract facilitates that an agreed upon transfer of funds will happen as expected and no one will get cheated. This fundament powers exchanges made on decentralized systems like Bitcoin and Ethereum.
While smart contracts are a powerful transaction engine, researchers have found that today 45% of contracts written in Solidity, Ethereum’s programming language, have security vulnerabilities. Researcher are still defining the different security holes that make these smart contracts susceptible.
Firmo Network is dedicated to building the financial infrastructure necessary to securely execute smart financial contracts on the blockchain. One way to avoid the vulnerabilities of Ethereum is to bypass Solidity all together putting contracts directly onto the blockchain. Read more here about what makes smart contracts vulnerable here.
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