Smart Contracts have pushed cryptocurrency to the forefront by providing a framework to code and execute smart contracts on the blockchain. 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 in itself isn’t natively as efficient as cryptocurrencies designed specifically to facilitate contracts, this brought about a new wave of gen 2 cryptocurrencies starting with the release of Ethereum. This newer blockchain technology platform addressed so many issues that the industry was grappling with at the time in creating trustless and secure means of transacting according to a predefined set of rules. 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 encoded on the blockchain, which specifies certain conditions 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 cryptocurrency 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 make 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 fulfil 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 middlemen that stifle business and make it expensive. With Smart Contracts anyone is now able to conduct sometimes complex and costly transactions by inserting a few lines of code.
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. Smart contracts open up a world of opportunity to revolutionize the way we enter into trustless contracts removing the need for 3rd party arbiters and automating processes.