Sunday, December 26, 2021

Everything You Need to Know About Smart Contracts

If you’re following Ethereum and its developments, you’ve probably heard about something called “Smart Contracts.” These contracts can help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.

Some Smart Contract History

Smart Contracts

Smart contracts have been around since way before Ethereum. Nick Szabo first proposed them in 1994. He was a cryptographer who also helped lay down the groundwork for Bitcoin. He was a pretty smart man! When developing smart contracts, Szabo’s goal was to connect somehow contract law and related business practices to work with internet payment protocols to complete a safe transaction between strangers over the internet. He came up and coined the term “Smart Contract.” These smart contracts would be used to lower fraud, arbitrations and enforcement costs, and other standard transaction costs.

So how does this all relate to Ethereum? Why do I need to know what a smart contract is? One sec, let’s add a subtitle first, so it’s easier to read…

Smart Contracts and Ethereum?

Smart Contracts

Have you noticed all these ICOs popping up? I sure have, and that’s no fluke. Smart contracts are the key to creating your own cryptocurrency and are used during ICOs to distribute the tokens to the investors once the crowd sale is over. Once you send money to an ICO, the smart contract will then determine how much of the token you should receive, and it will distribute the token to your wallet automatically. If a person sends too much or too little, the smart contract will automatically refund those investors.

What Makes a Smart Contract Smart?

Smart contracts have allowed us to transfer things of value to strangers over the internet with little to no risk. If you have any questions or anything you’d like to add to the discussion, leave a comment below, and I’ll reply ASAP!

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