In many ways, blockchain technology has saved time and money, besides eliminating the intermediaries. In my view, blockchains have their problems, but they’re faster, cheaper and more secure than traditional systems, heralding innovation. One such innovation is the use of smart contracts. Smart contracts are a new technology thriving on public blockchains. Rather than being enforceable by law, smart contracts enforce a relationship with cryptographic code. Smart contracts are programs executing exactly what they are set up to do by their creators.
Who Came Up With the Idea?
Since it was invented in 1993, the smart contract has come a long way. The idea was originally the brainchild of the cryptographer and computer scientist Nick Szabo, who conceived it as a type of digital vending machine, inputting data and receiving finite items from the machine.
The Utility of this Digital Vending Machine
Smart contracts can help users to exchange shares, property or something of value, not just cryptocurrencies. The transaction is in a conflict-free, transparent manner eliminating the middleman. Smart contracts not only define penalties and rules centred around agreements in a manner similar to a traditional contract, but also enforce obligations automatically.
Smart contracts are computer codes running on top of a blockchain, setting rules under which parties to the contract make the agreement to interact with one another. When pre-defined rules are met, the agreement is enforced. The smart code facilitates, enforces and verifies the negotiation or performance of agreements or transactions.
Smart Contracts For Intelligent Agreements
My assessment of smart contracts is that the auto enforceable code on app or protocol level results in standardised transaction rules, lowering costs of reaching agreements, formalisation, and enforcement. Smart contracts formalise relationships between people, institutions and assets owned. I see blockchain as a catalyst for the implementation of smart contracts.
Smart contracts track performance in real time and yield a lot of cost savings. I feel blockchain smart contracts can effect many industries and time stamping is just one of the ways these contracts can be used. Smart contracts can range from the simple to the complex.
Bitcoins as Smart Contracts
I also see bitcoins as the first basic smart contracts. This is because these transfer value from one individual to another. A network of nodes validates transactions when certain conditions are met. Smart contracts also have the potential to function as multi-signature accounts that work only when certain individuals agree.