300 Words for Smart Contracts
Introduction to the concept of Smart Contract: the pillars behind some of the most interesting use cases for the blockchain.
Coined in 1994 by Nick Szabo, the term Smart Contract defines a program stored in the blockchain and that is automatically executed when the terms and conditions clarified in its code are met.
Already widely adopted within the crypto world, the metaphor commonly used to describe the underlying principles of a smart contract is that of the vending machine:
If you select a product
Then the machine shows you its price
If you insert the money
Then the machine will count how much they are worth
If the sum requested for the selected product is reached
Then the machine will dispense the product for you
If the money you have inserted is more than what requested
Then the machine gives you back the difference
In a nutshell, when looking at a SM, we can usually identify:
A line of code, that might trigger a potentially infinite variety of actions.
One balance, which can store, receive or send cryptocurrencies.
The blockchain, where this contract is safely stored.
Because of their encryption in the blockchain, smart contracts also gain two additional advantages:
they are immutable, hence no one can change them once signed
they are highly transparent, because accessible and verifiable at any point in time.
Thanks to all the advantages described above, and with the ability to interact with one another, but also with Oracles, smart contracts are incredibly versatile tools that can be leveraged across industries and applications.
Smart Contracts are being studied and further developed as we write this article and we are sure that they will play a vital role in the development of the blockchain.
While this happens, we recommend some additional content for an interesting deep dive on the topic:
Smart Contract by Nick Szabo - Paper
Smart Contracts: Building Blocks for Digital Markets by Nick Szabo - Paper
Smart Contracts – Ethereum.org – Article
Smart Contracts Explained by Finematics – Video
What Are Smart Contracts in Crypto? by Whiteboard Crypto – Video
Smart Contract Applications in the Insurance Industry - Video