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Smart Contract Definition

What is a Smart Contract?

A smart contract is a coded contract that is stored on the blockchain.  The contract, once signed, can not be altered and will execute on the programmed conditions.  The most popular platform for smart contracts is Ethereum.  Ethereum differs from Bitcoin since it is a platform for these smart contracts, rather than a cryptocurrency.  It charges “gas” to execute these contracts and to transact on the network.

The term “smart contracts” was created by Nick Szabo in 1996, who was a computer scientist and cryptographer.  Szabo’s first publication, “Smart Contracts: Building Blocks for Digital Free Markets” was published in Extropy #16.  The idea behind the smart contract was described to be a kind of digital vending machine.  The example he gave, described how a user could input data, and obtain a physical good from a machine, in this example it was a snack or a soft drink.

There are many uses for smart contracts that will revolutionize different industries. Below is some examples of the industries and uses that will come from this technology.

Uses for Smart Contracts:

  • Insurance
  • Identity Management
  • Land title recording
  • Rent and Mortgages
  • Supply chain
  • Financial data recording
  • Financial derivatives
  • Trade of Securities or Trade of any kind

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