A smart contract is a computer protocol intended to facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts were first proposed by Nick Szabo in 1996.
Proponents of smart contracts claim that many kinds of contractual clauses may be made partially or fully self-executing, self-enforcing, or both. The aim with smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting.
Smart contracts have been used primarily in association with cryptocurrencies. The most prominent smart contract implementation is the Ethereum blockchain platform, where they are known as a decentralized application (dapp, stylized ĐApp).
Nick Szabo in 1996 first publication, "Smart Contracts: Building Blocks for Digital Free Markets" was published in Extropy and then later reworked as "Formalizing and Securing Relationships on Public Networks."
New institutions, and new ways to formalize the relationships that make up these institutions, are now made possible by the digital revolution. I call these new contracts "smart", because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied. A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises.
Notable examples of implementation of smart contract technology are:
- Ethereum implements a Turing complete language on their blockchain. It is the most-used smart contract platform.
- RootStock (RSK) is a smart contract platform that is connected to the Bitcoin blockchain through sidechain technology. RSK is compatible with smart contracts created for Ethereum.
- Namecoin is a replicated domain name registry.
- Ripple (Codius), development halted in 2015
- Automated Transactions is another turing complete smart contract language, used in cryptocurrencies like Burstcoin and Qora. An example for its usage is atomic cross-chain trading.
What are Smart Contracts?
Smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.
The best way to describe smart contracts is to compare the technology to a vending machine. Ordinarily, you would go to a lawyer or a notary, pay them, and wait while you get the document. With smart contracts, you simply drop a bitcoin into the vending machine (i.e. ledger), and your escrow, driver’s license, or whatever drops into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforce those obligations.
Unpacking the term ‘Smart Contract’
The word ‘contract’ and Ethereum. Then comes the big leap. As Vitalik starts to outline Ethereum’s mechanics, we hear that “contract” will be the label for that foundational layer’s “lego block” — i.e., that core object on the blockchain. “Everything that you want to implement through Ethereum,” says Vitalik, “you would have to implement as a contract.”
Blockchain’s Smart Contracts: Driving the Next Wave of Innovation Across Manufacturing Value Chains
Smart contracts with embedded business rules promise not only to reduce transaction costs but to create more agile value chains that enable closer cooperation and enhanced trust across the extended manufacturing ecosystem.
Described as a contract wizard, the platform eliminates the intricacy in coding or programming a smart contract. Etherparty offers a template library wherein users can create a customized contract. The contract wizard will guide the user through the process of creating the agreement and can choose from data sources or contract clauses. It has a contract builder wherein the user can enjoy the interface and have access to the custom contract.