Smart Contracts are simple programs that are programmed to be automatically self-executed when certain conditions are met and those conditions are set during the deployment of the Smart Contract. These new-age modern contracts are irrevocable in their interactions and enforce specific rules automatically to eliminate the need for any third-party arbitrator.
In actuality to any layman, Smart Contracts are mere lines of codes that can run over decentralized networks having immutable ledgers and preferably blockchain networks.
These Contracts are generally written in the universal language of Solidity, which is understood by developers across the globe and therefore can code easily to do Smart Contract development.
Origin of Smart Contract
The concept of Smart Contract was first coined by Nick Szabo in 1994, who is an American scientist and in his seminal writing he gave a broad description. These Contracts got their first introduction on a large scale through Bitcoin in 2009 as a primary protocol smart contract, responsible for establishing a condition between Bitcoin users to transfer Bitcoins.
Worldwide there are different types of Contracts being employed by different sectors and certain characteristics are found in them, which are mentioned below.
Characteristics of an ideal Smart Contract
- Distributed
- Deterministic
- Immutable
- Autonomy
- Customizable
- Transparent
- Trustless
- Self-verifying
- Self-enforcing
How does a Smart Contract work?
The idea of Smart Contracts primarily revolves around Blockchain technology, so the ideation of a smart contract begins by determining the terms of the contract. The terms of the contract would include the phrases like “if/when…then” statements in the language of programming code.
These codes would represent a number of different conditional statements that describe the possible scenarios of a potential future transaction. This created code is then stored in the blockchain network and gets replicated among the nodes in the blockchain.
Whenever a transaction is conducted by a network of computers when predetermined conditions are met and validated, the block is updated. Further, the said transaction can’t be changed or remains immutable and the details of the said transaction can only be seen by the participating users.
There are often many stipulations mentioned in the contract by developers that lead to the satisfactory completion of transactions in a satisfactory manner while resolving possible disputes.
Conclusion
Smart Contracts are already in use in various sectors, like banks and insurance organizations, in their daily operations. They have been tried and tested in real-world conditions and in the future, they will be used to automate more tasks and eventually become a part of our daily lives, as quoted by a senior Smart Contract developer.
Apart from mere convenience, Contracts have helped reduce mundane administrative works and red tape to some extent.
Also read: 5 Habits That Prevent You from Becoming A Good Programmer
