A smart contract is a digital protocol that seeks to enable the verification, negotiations, and performances of a contract. Smart contracts can allow for reputable transactions to be carried out, without the influence of a third party. Smart contracts are traceable and are irreversible, making them a very effective tool and generally, tamper-proof.
Smart contracts aim to provide a method of security for the parties to contract, that is superior to the traditional channels of contract law and to reduce transaction costs that can be associated with the provision of a contract. Various cryptocurrency providers have created their own smart contracts within their platform.
The term ‘smart contract’ was first created by a man named Nick Szabo. Due to the fact that smart contracts are generally implemented using blockchain technology, the term is more specifically assigned to the general computation that will take place on a blockchain platform’s distributed ledger. The Ethereum Foundation, also referred to as IBM has stated that a smart contract does not necessarily constitute something similar to a traditional contract as we know it but, can be used to reference any type of computer program.
In 2018, the United States Senate released a report that essentially said that smart contracts are not necessarily new and are rooted in the basic principles of current contract law. The comparison was made in the sense that, the courts will hear contract disputes and attempt to enforce terms within the contract. Smart contracts essentially do the same thing, using a program built into the code that will enforce the contract.
Specialist algorithms also allowed for digital security, through decentralization to form smart contracts.
There are numerous examples of different blockchain projects that utilize smart contracts. Please refer to them below:
-Ripple (Although, development on their smart contracts was halted during 2015.)