Smart contracts are written in virtual languages and have the ability to execute and execute autonomously and automatically based on a series of programming parameters. So you might be wondering what are Smart Contracts and how do they work. In this article, we will discuss Smart contracts.
What are Smart Contracts?
A smart contract is an agreement between two people or entities that is executed automatically in the form of computer code. The idea was introduced in the 1990s by Nick Szabo, a pioneer of modern computer science, who defined them as a set of virtual promises with associated protocols to enforce them. The Bitcoin protocol, which basically records proof of payment, can be seen as a primitive version of smart contracts.
Smart contracts are self-executing business automation applications running on decentralized networks such as blockchains. And because of their ability to eliminate administrative overhead, smart contracts are one of the most attractive features associated with blockchain technology. The blockchain acts as a kind of database that confirms that a transaction has occurred and that smart contracts execute predetermined conditions; think of smart contracts as computers that execute “if/then” or conditional programming.
How do Smart Contracts work?
Let's imagine a traditional online transaction without smart contracts. Say you want to buy a car online. For this you need:
- A listing site for all the cars you want to see
- A way to communicate with sellers
- A payment system that lets you exchange money after finding your car
- Ability to get a refund if the car proves to be a dud
- A way to register a change in car ownership with the authorities
Once the conditions of the agreement are met, the smart contract executes automatically. This means that no third parties such as banks, brokers or governments are required.
Hopefully, Now you know what are Smart Contracts and how do they work. So, as you can see, smart contracts can make the world a better place without commissions. It can reduce fraud, delays and the overall cost of many things. However, as we advance technology further, we no longer need certain jobs.
