Smart Contracts have pushed cryptocurrency to the forefront with the ability to encode contracts onto the blockchain easily. This article is a short introductory guide to smart contracts.
The cryptocurrency industry is coming of age, and this year it has witnessed an absolute explosion in its reach as use is becoming more widespread with more niches of business adopting it. Bitcoin the pioneer of this industry brought about a revolutionary idea that changed the way business is being done, with its new peer-to-peer bank-less payment system.
However, Bitcoin wasn’t a perfect means of transaction as it came with its peculiar challenges, among which is the levels of risks those using it for transactions expose themselves as there wasn’t any cover or security to ensure that the recipient upholds their own side of the bargain. But in 2014, a newer even more outstanding invention was released called the Ethereum blockchain.
This newer blockchain technology platform addressed so many issues that the industry was grappling with at the time among which was the high fraud rate Bitcoin transactions are known for. The Ethereum blockchain’s solution to this problem came in the form of Smart Contracts.
What are Smart Contracts?
A Smart Contract can simply be defined as the few lines of instructions that are incorporated in an Ethereum blockchain-based payment, which specifies certain conditions and time period under which a payment is finalized to the recipient. Smart Contracts are a form of agreement between the sender and receiver, which states that a certain amount of Ether or other Ethereum based tokens will be transferred from one entity to another once the condition that triggered the transfer are fulfilled.
Features of a Smart Contract
A Smart Contract has a number of features that makes it a unique development in the cryptocurrency industry, these include:
- Tamper-Proof: In order to ensure its integrity is guaranteed, a Smart Contract is designed in such a way that once it is initiated, neither participating parties can tamper with it in any way. Neither the sender nor the receiver can alter the conditions of the contract making it completely resistant to human bias
- Automatic Executions: A Smart Contract is created in such a way that it guarantees whoever is due for payment gets it as soon as the conditions set on it are fulfilled. Payment to recipient is automatically finalized if they fulfill the conditions or it is reversed directly to the sender in case the recipient fails to honor their own side of the deal within a specific period of time.
- User-Friendly: A Smart Contract is also created in such a way that the layman is able to create one for themselves, without ever needing a coding expert. Smart Contracts have been envisioned to eliminate the need for lawyers, agents and all kinds of middle men that stifle business and make it expensive. With a Smart Contract anyone is now able to conduct their deals by inserting a few lines of instruction in common English.
Smart Contracts have been able to bring much needed sanity into an industry that was struggling to keep its name clear of its dark early stages. It has greatly been able to enable genuine business thrive in places where mistrust would have killed it in the past, giving participants a free and fair atmosphere to transact with one another honestly.