Get to know what a Smart Contract is and its Functions

The concept of smart contracts was first introduced in 1994. Actually, what is a Smart Contract and what does it do? Read the explanation here.

What are Smart Contracts?

Smart Contracts, or smart contracts, are computer programs designed to automatically execute, negotiate, or enforce agreements or contracts digitally without the need to involve a third party. 

The concept of smart contracts was first introduced by a computer scientist named Nick Szabo in 1994, although their practical use only became popular with the development of blockchain technology.

Smart contracts operate on a blockchain platform and leverage blockchain features such as transparency, security, and decentralization. 

Smart Contracts are coded using a special programming language and stored on the blockchain, allowing them to be executed automatically when specified conditions are met.

As a simple example, we can consider the use case of smart contracts for the delivery of goods.

In such a smart contract, when the buyer receives the delivered goods, the system automatically sends payment to the seller without the need for intervention from a third party such as a bank or notary.

Smart Contract Functions

Automatic Execution

One of the main functions of smart contracts is their ability to automatically execute agreements based on predetermined rules. 

This capability allows the parties involved to ensure that their agreements are implemented without the risk of manipulation or involvement of third parties.

Transparency

Smart contracts operate on blockchain, which allows all transactions and contract execution to be recorded publicly and transparently. 

Every detail of the contract, including terms and conditions, is visible to all parties involved, eliminating any doubt or uncertainty that may arise in a traditional agreement.

Security

Smart contracts are stored on a decentralized blockchain and encrypted with cryptographic technology, making them safe from manipulation or change by unauthorized parties. 

Additionally, because smart contracts are executed automatically, the risk of human error or misuse of information is minimized.

Cost Efficiency

Compared to traditional processes that involve multiple parties and additional costs, smart contracts can significantly reduce administration and transaction costs. 

By using smart contracts, the parties involved can avoid additional costs usually associated with notaries, lawyers, or financial institutions.

No need for intermediaries

One of the main advantages of smart contracts is that they do not require intermediaries or third parties to negotiate or enforce agreements. 

This ability reduces people's dependence on financial institutions or the government.

And they can also provide greater control to the parties involved in the contract.

In business settings, smart contracts can be used in various applications, from supply chain management to digital asset management. 

For example, in the insurance industry, smart contracts can be used to automate insurance claims based on pre-defined conditions, reducing the time and costs associated with traditional claims processes.

With their ability to increase efficiency, transparency, and security in a variety of scenarios, smart contracts continue to be an exciting innovation in the world of blockchain technology. 

As blockchain technology continues to develop, the hope is that the use of smart contracts will continue to grow and touch various aspects of life in the future.

Also Read:

What are Cross-Chain Contract Calls?

What is a Contract for Difference (CFD)?

What is a Hashed Timelock Contract (HTLC)?

Bitcoin Virtual Machine (BitVM), Evolution of Smart Contracts in Bitcoin

What is Stacks (STX)? Layer 2 Blockchain for Bitcoin Smart Contracts

DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.