Contract Definition
In the context of blockchain and cryptocurrencies, a contract refers to a smart contract, a self-executing contract where the terms of the agreement between the buyer and the seller are written in lines of code that is stored and replicated across a decentralized blockchain network.
Contract Key Points
- A Smart contract is a self-executing digital contract stored on a blockchain.
- It involves two parties and fulfills the contract automatically once conditions are met.
- It increases transparency, accountability and speed in digital transactions.
What is Contract?
When the term contract is used in the field of blockchain technology, it denotes the presence of a smart contract. A smart contract is a digital protocol intended to facilitate, enforce, or automate the negotiation or execution of a contract in a secure and tamper-resistant way.
Why are Contracts important?
The use of smart contracts enhances the efficiency and speed of transactions on the blockchain. They eliminate the need for a third-party intermediary such as a bank or lawyer, which in turn reduces the cost and time of any transaction. Moreover, they bring about trust and transparency because once a contract has been initiated, it cannot be modified, thus eliminating the chance for any party to falter on their agreement.
Who uses Contracts?
Smart contracts are used by a wide range of entities. Industries such as finance, real estate, healthcare and legal industries, along with individual owners of blockchain tokens, make use of contracts to carry out safe and secure digital transactions.
Where are Contracts used?
They are used on blockchain networks that support them, such as Ethereum, where smart contracts form the basis for all transactions. Any place that needs secure, automated enforcement of a contract can make use of smart contracts, whether this is for a financial transaction, data exchange or even for voting systems.
When are Contracts used?
Smart contracts are used whenever a secure, trust-less transaction needs to take place. For example, when releasing funds only when a condition has been met (such as the delivery of an item), or registering ownership of a digital asset once payment has been received.
How do Contracts work?
Smart contracts work by having the rules of the contract embedded in their code. This code is stored and duplicated on the blockchain. When the conditions stipulated in the contract are met, it executes automatically. This eliminates the need for a third party to check whether the conditions have been met, boosting efficiency and reliability.
