With the advancement of IT technologies and blockchain platforms, a new type of contract has emerged: smart contracts.

In this article, we’ll explore smart contracts and how they’re being used today.

What are smart contracts. Smart contracts explained

What is a smart contract? It is like a digital agreement that runs on its own, with all the terms and conditions written directly into the code. It operates on a blockchain network, so the contract automatically carries out and enforces itself when the set conditions are met.

There’s no need for intermediaries like lawyers or banks because the contract’s rules are transparent and unchangeable once deployed. Essentially, smart contracts in cryptocurrency streamline and secure transactions, making them faster, more efficient, and less reliant on third-party oversight.

Historical background

The concept of smart contracts dates back to the mid-1990s when computer scientist and cryptographer Nick Szabo first proposed the idea.

He envisioned a digital protocol that could automatically execute the terms of a contract when predefined conditions were met, similar to a vending machine dispensing a snack when the correct amount of money is inserted.

But it wasn’t until blockchain technology came along, especially with the launch of Ethereum in 2015, that smart contracts took off. Ethereum’s blockchain gave developers the tools to create and run code that could handle complex agreements on its own. This breakthrough led to a wave of new decentralized apps, shaking things up by automating transactions and eliminating the need for middlemen.

How do smart contracts work

Smart contracts use straightforward “if/when…then…” commands written into the blockchain. They automatically handle tasks like releasing funds, registering assets, or sending notifications once conditions are met. The blockchain’s permanence ensures transactions are visible only to authorized parties.

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Author: Nastassia Chigir