Smart Contracts 101
Smart contracts 101
Smart contracts are among the most exhaustively repeated words on the cryptosphere but do you really know what they are?
Contrary to the belief of many smart contracts aren’t something new, their concept comes from more than 20 years from a white paper written by a computer scientist called Nick Szabo. In his paper Szabo defines smart contracts as: “a machine programmed with rules that we could have defined in a contract, instead machine performs or verifies performance”.
Szabo’s technology was quite a few years ahead of the curve and it wasn’t before Satoshi figure out how to solve the double-spend problem (defined on the Bitcoin white paper) that other people noticed that they could apply a similar process to create trustless smart contracts.
Most notably Vitalik Buterin who described in a 2013 white paper a smart contracts platform for decentralized applications called Ethereum.
Simply putting smart contracts are nothing more than computer programs with a very specific function. The advent of blockchain technology allowed platforms like Ethereum to exist offering trustless and immutable computer programs that will always deliver the expected outcome, or at least that should always deliver the expected outcome. That basically means that there’s no need for a 3rd party to enforce the execution of smart contracts deployed in a platform like Ethereum.
Ethereum development started early 2014 and shortly afterwards many similar platforms followed suit offering smart contracts implementations using different languages and consensus rules. The objective of this article is not to compare platforms once it can be a very delicate subject in the crypto space but it’s important to stress that even with all it’s well known issues Ethereum is still, by far in my opinion, the most mature smart contracts platform out there. It’s still in very active development wit a solid roadmap and any other platform selling itself as an Ethereum killer right now should be taken with a good pinch of salt.
In short smart contracts allow you to exchange anything of value in a transparent way with low or no costs and maybe most important, without relying on services from a 3rd party or middleman.
Industries like finance, supply chain, voting systems, notary registrations, real estate, insurance can all benefit from reduced costs and more transparency and these are features where smart contracts excel.
We’re still in very early stages on all things crypto related but smart contracts offer a massive potential to disrupt several industries in a way never seen before.
