Smart Contract Definition
A smart contract is a self-executing contract with the terms of the agreement directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.
Smart Contract Key Points
- Smart contracts automate transactions without the need for intermediaries.
- They are self-executing contracts with the terms of the agreement directly written into code.
- Exist on a blockchain network, providing transparency and security.
- Facilitates trusted transactions without the need for a third party.
What is a Smart Contract?
A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties, reducing the risk of fraud.
Why Do Smart Contracts Exist?
Smart contracts exist to eliminate the need for intermediaries in a transaction, and to automate contractual obligations. They provide a level of security superior to traditional contracts and reduce transaction costs associated with contracting.
Where Do Smart Contracts Operate?
Smart contracts operate on a blockchain network, which allows them to be decentralized and transparent. This means they can be accessed by anyone on the network and cannot be altered once they are set in place.
When Do We Use Smart Contracts?
Smart contracts are used when two or more parties want to engage in an agreement where they collateralize digital assets and distribute them according to the specified rules once the conditions are met, such as asset transfers, bets, or any form of agreement in a decentralized manner.
How do Smart Contracts Work?
Smart contracts encode specified contractual terms and automatically execute these terms once predetermined conditions are met. This is all done on the blockchain, meaning the contract and its outcomes are decentralized and immutable. Confidence in the transaction is not reliant on a single, centralized authority or intermediary, but on the distributed nature of the blockchain itself.
