Smart Contracts

A smart contract is a computer protocol that runs on a blockchain and executes the terms of an agreement or transaction as specified by its programming code.
In essence, it's just a simple business transaction that can be programmed to facilitate the exchange of money, content, property, shares, or anything of value automatically.
A smart contract usually has the following characteristics:
  • It's self-executing.
  • It's transparent.
  • It can trigger events based on predetermined conditions.
  • It can store information about agreements in the blockchain.

Who Uses Smart Contracts?

Smart contracts are a set of rules that have been programmed into a digital system, defining the terms of an agreement between two parties. The two parties do not need to know or trust each other to enter into an agreement. The smart contract will execute the terms of the deal. It will also enforce penalties for any party that does not uphold its obligations. Smart contracts have many use cases, including financial services, supply chain management, healthcare, and real estate. They can help reduce fraud, increase transparency in transactions and reduce transaction costs.

How Do Smart Contracts Work?

Smart contracts are self-executing contracts written in code and stored on the blockchain. The code is there to ensure that both parties meet all the contract terms. It also eliminates any need for a third party to oversee the agreement. A smart contract works because it has specific rules and conditions set by both parties before entering into an agreement. A smart contract will only execute if these conditions are met, and it will only use what has been agreed upon to execute this agreement.

What Can You Do With Smart Contract Technology?

Smart contracts have the potential to change how we do business, as they can automate many of the tasks that would take time and money, such as making sure suppliers meet deadlines and quality standards. They also have the potential to change how we enforce agreements by removing the need for expensive legal proceedings. The use of smart contracts is not limited to business and legal settings. They are also used in other areas such as insurance, financial services, supply chain management, and healthcare. In business and legal settings, smart contracts can help with anything from employee benefits to shareholder agreements. They can also be used for things like escrow services or for enforcing arbitration clauses.

Benefits of Smart Contracts

A smart contract is a protocol that facilitates, verifies, and enforces the negotiation or performance of an agreement. It is a digital protocol that runs on blockchain technology. The advantages of using a smart contract are:
  1. 1.
    The terms of the agreement are transparent - All information pertaining to the agreement can be shared with all parties involved in the transaction.
  2. 2.
    It is tamper-proof - The data cannot be changed once it has been written onto the blockchain.
  3. 3.
    It is self-executing - The terms of the agreement are enforced by code and cannot be violated by either party.
  4. 4.
    It is immutable - The data in a block cannot be changed, and any new blocks that are added to it must refer back to and agree with all previous blocks

Real World Use Cases

The use cases for smart contracts are endless. They can be applied in any industry where there is an agreement between two or more parties that needs to be enforced. Smart contracts are a way of using blockchain technology to make an agreement, or a contract, that is self-executing and cannot be changed. Some examples of how smart contracts are being used in the real world include:
  • In the agricultural industry, smart contracts are used to track food products from farm to table.
  • In the music industry, smart contracts can be used to distribute royalties automatically and fairly.
  • In healthcare, smart contracts can be used for patients with chronic conditions who need regular prescriptions.

A Quick Recap Before We Talk About DAOs...

A smart contract can automate practically anything, making it faster, cheaper, and more reliable than a written contract. Not yet thoroughly explored, the full potential of smart contracts remains undiscovered and an exciting prospect. Turn over the page to learn about the revolution that is a DAO.