Smart Contracts Crypto

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Smart Contracts Crypto

What are Smart Contracts?


First coined by Nick Szabo in the 1990s, a smart contract in the world of cryptocurrencies is defined as an application/program that runs on a blockchain. Usually, smart contracts operate as a digital agreement enforceable by a specific and pre-coded set of rules, which are replicated and implemented by all network nodes.


Smart Contracts Explained


Put simply, a smart contract functions as a deterministic system. It executes a specific task when and if certain pre-determined conditions are met. As such, a smart contract system often follows an "if… then…" statements. As misleading as it sounds, smart contracts are not legal contracts, nor smart. They’re simply a piece of code running on a distributed system, or blockchain.


Smart contracts accommodate the formation of trustless protocols. This implies that two parties can make certain promises and assurances via blockchain, without having to know or trust each other. Blockchain and smart contracts therefore go hand in hand. Ultimately, users have the certainty that if the contract’s conditions aren't fulfilled, then it won't be executed. Smart contracts can also eliminate the requirement for third party intermediaries, which dramatically reduces operational costs.


Crypto smart contracts were made popular by Ethereum’s creator and co-founder, Vitalik Buterin. In 2015, Ethereum was launched, the first smart contract platform in the world, creating the foundation for an ecosystem of decentralized applications (dApps). An Ethereum smart contact is responsible for implementing and handling the blockchain operations that occurs when different addresses interact with each other. An address that isn’t a smart contract is termed as an externally owned account (EOA). As a result, smart contracts are controlled by computer code, whilst externally owned accounts are controlled by users themselves.

Ethereum smart contracts hold two major components – a contract code and a set of public keys. The first public key one that is provided by the originator of the contract. The other key represents the actual smart contract, put in place as a digital identifier, unique to each individual smart contract.

 

Top 10 Smart Contracts Features

  • Self-Enforcing
  • Self-Verifying
  • Distributed
  • Deterministic
  • Autonomous
  • Immutable
  • Customisable
  • Trustless
  • Transparent
  • Secure

 

Advantages/ Use Cases


What is essentially programmable code, smart contracts are extremely customizable, offering numerous services, applications, and real-world solutions. For example, Nick Szabo spoke their applications in multiple examples and industries where contractual agreements are a major component - such as credit systems, payment processing, and content rights management.


Smart contracts also hold valuable utility particularly in situations that require the transfer/ exchange of funds between two or more parties.


Smart contracts have the capability of raising transparency and reducing operational costs due to their self-executing and decentralized nature.


Smart contracts can also be designed and applied to a huge variety of novel cases. For example, e-voting systems, developing tokenised assets, mobile apps, dApps, cryptocurrency wallets setup, and much more. Its technology can move to tackle the fields of DeFi, charity, supply chains, health, and even governance.

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