A smart contract is a piece of computer code that contains business rules and conditions, such as paying employees by a certain date. When a certain condition is triggered, a smart contract executes itself automatically. For example, when the correct date arrives the smart contract executes itself by distributing a certain amount of Ether among the employees. Smart contracts act as a substitute for legal contracts where the terms of the agreement are encoded in a computer code. Since smart contracts are controlled by computer code, they run exactly as they are programmed. This means there is no room for human error, fraud, third party interference or downtime which makes smart contracts more secure than the traditional legal contracts. The main purpose of a smart contract is to enable two strangers to do business with each other without the need for expensive middlemen such as lawyers and accountants. Smart contracts can also message and interact with other smart contracts to deliver certain tasks.
Articles in this section
- What is Ethereum?
- What is Ether (ETH)?
- What are the purposes of Ether?
- Who created Ethereum?
- Ethereum story in a nutshell
- What is the difference between Ethereum and Bitcoin?
- What is a smart contract?
- What are decentralised applications (dApps)?
- What are the benefits of Decentralised Applications?
- What is a DAO?