What is a Smart Contract ?
A smart contract is a computer protocol that facilitates, verifies, or enforces the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.
Smart contracts were first proposed in 1994 by Nick Szabo, a legal scholar, and computer scientist. Szabo envisioned a virtual “lockbox” that could securely store digital assets, be programmed to execute specific instructions, and provide a verifiable audit trail.
Smart contracts are similar to traditional contracts in that they are agreements between two or more parties. However, instead of relying on a court system to enforce the agreement, a smart contract relies on computer code. This code is stored on a distributed ledger, such as a blockchain, and is run on a network of computers.
Smart contracts are self-executing, meaning that they can automatically carry out the terms of an agreement between two or more parties without the need for manual intervention. This eliminates the need for a third party, such as a lawyer or a notary, to mediate disputes. The terms of the agreement are written into lines of code, which are then stored and replicated on the blockchain. Every time the contract is executed, it produces an immutable record that cannot be altered or tampered with.
Smart contracts offer a number of advantages over traditional contracts, including: greater accuracy, transparency, and security. They also provide a more efficient way to conduct transactions, as they reduce manual processes and paperwork. As a result, they are becoming increasingly popular in a wide range of industries, including finance, banking, real estate, insurance, and healthcare.