What are smart contracts?

Article by on Altcoin MagazineOften associated with the Ethereum protocol, which is positioned as a more programmable version of Bitcoin, the term “smart contract” has become popular only very recently, although the legendary cypherpunk, Nick Szabo, has written on the subject for the first time in 1994. Nick was a legal scholar and cryptographer and came to a conclusion that any decentralized ledger can be used as self-executable contracts which, later on, were termed as Smart Contracts. He imagined that these digital contracts could be converted into codes and allowed to be run on a blockchain.It was not until 2015 and the deployment of Ethereum to see a first application of smart contracts. These represented the central point of Ethereum, a point that can be felt in the official whitepaper of the project. Today, with the advent of distributed consensus protocols and crypto-currencies invented to allow borderless, secure, censorship-resistant and programmable digital value exchanges, it is a whole technological sector opening up to contract programming. Ethereum is the best-known protocol for programming smart-contracts, but it’s not the only one, and smart contracts can now be deployed on other competing blockchains.In this document, we will particularly take the Ethereum project, led by Vitalk Buterin, as an example, since it was one of the forerunners of the adoption of smart contracts as we know it today.Smart contract: definitionSmart contracts are irrevocable computer programs, most often deployed on a blockchain, that execute a set of pre-defined instructions. The main idea behind this concept of smart contracts is to guarantee the binding force of contracts no longer by law, but directly by the computer code: “code is law”.As with every computer program, the complexity varies from one smart contract to another. Some implement simple conditions, like an “if” function (if this condition is fulfilled, then the contract is executed) whereas other smart contracts are incredibly complex and sometimes hard to understand. To illustrate, some smart contracts even have the ambition to replicate all clauses and rules allowing companies (commercial or otherwise) to function. In this regard, we often speak of DAO, acronym for Decentralized Autonomous Organization. It should be noted that often, complexity is the enemy of security.In short, we can specify this definition by summarizing these particular contracts in four points:1. A smart contract is an agreement between several parties in the form of computer code.2. They are distributed and therefore stored in a public database and cannot be modified, altered or falsified on top of blockchain.3. They allow transactions to be performed automatically without the need of a third party, thus relying on no one.4. Automated transactions occur when one or more conditions of the contract are met.Want to know more about smart contracts? Visit to read the full article.Altcoin Magazine What are smart contracts? was originally published in ALTCOIN MAGAZINE on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Author: Altcoin Magazine