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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

Related Terms

Dapp What is a DApp? The term is the abbreviation of decentralized application.  These applications are build to run on decentralized blockchains.
Block Reward A block reward is the amount of Bitcoin or cryptocurrency that is awarded to a miner for confirmation of transactions in a block.
What is Tether (USDT) and Is It Safe? Tether is a cryptocurrency coin that claims to have a 1 to 1 ratio with specific fiat currencies. Find out if the risks USDT and if it is safe to trade.  
What is a Cryptocurrency Fork? A fork or hard fork is a the a blockchain to splitting into another branch, allowing for the development of other features or maintenance of different data.