A smart contract is simply a computer protocol projected to digitally simplify, validate, or implement the concession or performance of a contract. Smart contracts allow the performance of reliable transactions without involving third parties. These transactions are traceable and irreversible.
Nick Szabo who was a legal professor and a cryptographer realized in 1994 that these decentralized ledgers could be used for smart contracts, which were initially called digital contracts, self-executing contracts or simply blockchain contracts. Under this format, contracts could be transformed into computer code, kept and simulated on the system and administered by the network of computers that run on the same blockchain network. This will result in ledger response such as transferring money and receiving the product or services conveniently. One of the best things about the blockchain is, as it supports a decentralized system that exists between all legitimate parties, there is no need to pay mediators (Middlemen) and it saves time and conflict.
Supporters of smart contracts state that many kinds of contractual clauses will be made fully or partially self-executing, self-enforcing or both. The purpose of smart contracts is to deliver security that is superior to traditional contract law and to lessen other transaction costs linked with contracting. Many cryptocurrencies have implemented types of a smart contract which includes Ethereum, Cardano, Neo, Waves, Rootstock. Ethereum is a gold standard in smart contracts and has the biggest capitalization among available platforms.
Main advantages of a smart contract over its corresponding usual financial tool include reducing counterparty risk, decreasing settlement times, and improved transparency. Smart contracts benefit you interchange money, property, stocks, or anything of value in a transparent and hassle-free way while evading the services of a middleman.
Autonomy – Use of smart contracts removes the risk of manipulation by a third party since the implementation is copied automatically by the assigned network, rather than by one or more possibly biased individuals.
Trust – All the documents are encoded on a shared ledger. There is no way that somebody can say they lost it.
Backup –On the blockchain, each and everyone linked to a particular blockchain system has the backup. Your documents are replicated many times over.
Safety –Cryptography, the codes of computer language stores your documents safely. There is no hacking.
Speed –Smart contracts use software code to automate tasks, thereby shaving hours off a range of business processes.
Savings – Smart contracts save money since they remove the presence of an intermediary.
Accuracy – Automated contracts are not only faster and inexpensive but also avoid the faults that come from manually filling out loads of forms.
Contact Block Labs experts if you wish to understand smart contracts more in details and how the optimized machines are linked to smart contract and blockchain technology.