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What are smart contracts?Jan. 23, 2018, 4:57 a.m. GMT
Like many ideas in the Blockchain industry, a general confusion shrouds the so-called 'smart contracts'.
Think about smart contracts like the digital equivalent of a physical contract. It is a program or a code that specifies roles and responsibilities of the parties to a contract as well as the triggering event under which the parties will have to discharge the said roles and responsibilities. In the case of a physical contract, who is the supervisor that keeps the parties honest? The law-enforcement on the territory or the country.
In the case of smart contracts, it is done by the deployment of the contract on a Blockchain. Once the contract is agreed upon and deployed on the Blockchain and signed by the private keys of the parties, the contract cannot be edited or deleted. It automatically gets executed by the Blockchain on a set date or the occurrence of the triggering event. In its simplest form, think of a Smart Contract just like a person who can be trusted, can hold assets temporarily and will follow orders that have been programmed and deployed.
Ethereum is an open source Turing-complete Blockchain platform that offers the ability to code and deploy Smart Contracts to do practically anything. It offers a decentralized virtual machine to handle and execute the contracts by using its digital currency called Ether.
So, in a nutshell, smart contracts are self-executing contracts where the terms of the agreement between buyer and seller are directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized Blockchain network.
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