What is Smart Contract?
A smart contract is a protocol designed to transmit, validate or enforce contracts in an informational manner. Smart contracts allow trusted transactions to be made without a trusted intermediary third party, and these transactions are traceable and irreversible.
The concept of smart contracts was first introduced by Nick Szabo in the 1990s: "a smart contract is a computerized transaction protocol that executes the terms of a contract. The general objectives of smart contract design are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitration and enforcement costs, and other transaction costs."
In other words, a smart contract is a contract written in code and executed automatically. The blockchain acts as a repository of contract code and protocols, automatically executing the contract when specific requirements are met and completing the transaction operations specified in the contract.
One of the simplest examples in life is the vending machine. After the user pays for the vending machine and selects the item he or she wants to buy, the machine automatically performs the operation through a built-in system and delivers the item the user wants to buy to the shipping gate, completing a fully automated transaction.
Features of Smart Contracts
Thanks to the tamper-evident nature of blockchain, smart contracts were formally used on the network only after the creation of blockchain technology and, in particular, the development and promotion of the Ethereum network.
No permission required: Anyone can participate in the network and see the relevant events happening in the system.
Unrestricted: Not restricted by government, law, or any centralized institution.
Resistant to censorship: The decentralized and transparent nature of blockchain technology makes it particularly resistant to censorship from centralized institutions. All transactions are verified and recorded through a network of nodes, with ultimate certainty.
Through smart contracts, anyone can turn into and have transactions automatically executed when specific conditions are met. With the features of blockchain, proper smart contract applications can solve realistic problems such as third party corruption, or modification of contract terms by any party. The development of smart contracts and related technological advances have also led to the creation of so-called "decentralized applications" (dApps). Through smart contracts, the terms and conditions of an application can be written directly in code, so dApps can manage digital assets, execute transactions, and rules and regulations in a secure and transparent manner.
Disclaimer
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Crypto investment involves significant risks. Please proceed with caution. The course shall not be considered investment or financial advice.