Smart contracts are a cornerstone of blockchain technology and a crucial component of the Ethereum network. They are independent, decentralized, transparent, and trustless; they cannot be changed once implemented. Platincoin points out that smart contracts have many different use cases in this article.
What are Smart Contracts on a Blockchain?
Digital contracts, known as “smart contracts,” are executed automatically when certain criteria are met and are maintained on a blockchain. Simply put, smart contracts are blockchain-based algorithms that execute when certain criteria are met. Platincoin buttresses that smart contracts are often used to automate the implementation of an agreement so that all parties can be certain of the conclusion immediately, without the need for an intermediary or additional delay.
How Do Smart Contracts Work?
Smart contracts work using the simple “if/when…then” phrases typed into code and placed on a blockchain. When predefined circumstances have been verified to have been met, a network of computers will carry out the actions, either by paying out money to the right people or sending out notices.
When the transaction is finished, the blockchain is then updated. As a result, the transaction cannot be modified, and only parties to whom permission has been granted can view the outcome. Participants must agree on the “if/when…then” rules that govern those transactions, consider all potential exceptions, and define a framework for resolving disputes to establish the terms.
The History of Smart Contracts
The concept of blockchain and cryptocurrencies were not invented when programmer Nick Szabo originally released smart contracts in 1994. Rather, smart contracts became a technological reality with the 2009 debut of Bitcoin but gained more popularity through the emergence of the Ethereum protocol. While simple smart contracts, such as multi-signature wallets, are possible on Bitcoin, the more flexible and complex smart contracts currently subject to much discussion are mainly found on Ethereum.
Smart contracts are digital and automated, so there is no paperwork to complete or time spent fixing mistakes that frequently occur when documents are filled out manually. Instead, the contract is promptly carried out if a condition is satisfied. There is also no need to wonder whether information has been changed for one participant’s gain because no third party is engaged, and participants share encrypted records of transactions.
Because blockchain transaction records are encrypted, they are incredibly difficult to hack as the hackers would need to alter the entire chain to change a single record on a distributed ledger because each record is linked to the records that came before and after it. Platincoin believes that soon, trustless enforcement of contracts may become standard and would be incorporated in almost every sector, from real estate and finance to healthcare and hospitality.
Conclusion
Smart contracts are electronic programs or transaction protocols designed to carry out, manage automatically, or record events and activities following the conditions of a contract or other agreement. Platincoin highlights that the goals of smart contracts are to decrease the need for trustworthy intermediaries, arbitration fees, fraud losses, and malicious and unintentional exceptions.
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