Dear curious reader, we are more than glad to have you here. Please be welcome to the marvelous world of smart contracts.
Although the model got a lot of attention in the past couple of years, it is worth remembering that it was first coined in the 90’s by Nick Szabo. The genius behind the smart contracts was a computer scientist, a law scholar, and a cryptographer. In fact, the different roles were probably most useful in the development of smart contracts. In other words, his knowledge was the perfect recipe to make these a reality.
They are exactly like contracts in the real world, except their format is entirely different: smart contracts are 100% digital computer programs that are stored inside a blockchain. Just like other decentralized apps, they make the middleman obsolete.
Here’s an easy analogy to understand the value proposition of a smart contract:
Think of it as a vending machine. Say, for instance, you wanted a title deed for your brand-new house. If you wanted to go with the traditional method, you would go to a notary, pay a costly fee and wait, often a couple of days or a week, for the document. With a smart contract, you simply insert a coin - in this case, usually, a portion of a cryptocurrency, such as Ethereum, Bitcoin, or others - into the vending machine, and the title deed drops into your account. It does sound simple and that’s because it is.
Since they’re stored and developed inside a blockchain, smart contracts share the same benefits of these protocols. They are immutable, which means they can’t be changed once submitted, and no one can go behind someone’s back and change it without your permission, and they operate in a distributed way, which means the output of your contract is validated by the network validators.
Think of these individuals as the common notaries, but twenty-first-century agile and fast-paced professionals who work in the blockchain in an autonomous way to make sure everything runs smoothly.
It is also worth noting that the smart contracts autonomously execute the rules outlined in the protocol. As an example, you can apply a smart contract to a crowdfunding campaign - one of the usual initiatives where the creator only gets the money if they reach or surpass the goal. Instead of having someone check if the campaign was successful, a smart contract either automatically transfers the money to the author (in case it was successful) or refunds the backers (in case it failed).
Autonomy, Backup, Safety, Speed, and Trust are just five of the features that are usually used to positively describe a smart contract.
Other than the documents to record property ownership, such as the one described above, smart contracts can be applied to multiple industries.
Take a look at the next few examples, for instance:
If we had to guess the only barrier smart contracts are now facing, it would definitely be the regulation to make them official - the everlasting discussion about code being recognized as law (read this article about the subject written in 2000). We are pretty sure this is the biggest challenge the smart contract area will have to face since most of the startup ecosystems have the talent, knowledge, and resources to provide this service. Besides this, they are ready to take over multiple industries!
Speaking of… Have you read about our challenge with Telos Foundation? Make sure to read all about it and register here.