Smart contract – a very fashionable concept in the world and Crypto-Investors cryptoworld in general. But what is it, how they work and what problems are solved, thought only the most inquisitive minds. And in vain, it is a very interesting topic, and today we will deal with it on the shelves. I promise, it will be interesting and understandable without abstruse terms. Go!
Defining smart contract was first used by Nick Szabo in 1997. Yes, thus Szabo, who was suspected of creating a Bitcoin. What is interesting, the first cryptocurrency – Bitcoin, appeared only in 2009, much later than the concept of a smart deal. If you get rid of abstruse expressions Szabo and to give you only the essence, we get this: he wanted to use a distributed global code storage contracts.
Now smart contracts act as ordinary contracts in the real world, the only difference is that they are fully digital. Almost Smart Contract – a tiny computer program that is inside blockchain. Let’s take an example to understand how smart work contracts.
I’m sure everyone is familiar with the Chinese giant – AliExpress. Surely each of us at least once there is something ordered. The principle of operation of this platform is very easy – making the order, you pay for it, but money is not the seller, and AliExpress administration that acts in your contract with the seller as a third party, the mediator. In turn, the seller sends the goods to you, but he will not get paid for it as long as you do not receive the order and confirm receipt in your account (omitted nuances are important right now). Only if the administration of AliExpress transfers funds to the seller. If you have not received the goods, the administration will return your money. Thus, both sides need to trust a third party, the administration, which is the guarantor of your contract.
Co smart contracts we can build a similar system, which does not need a third party, unlike AliExpress. The most extensive use of smart contract at the moment, it is in the ICO (see the article “What is a ICO?”).Let’s look at how they are programmed to do so.
Smart deal can be configured so that all the money is frozen until the full collection of funds, investors can transfer the money directly into a smart deal. If the project is successfully collected the necessary amount, smart contract automatically gives money to the creators ICO. If the project was not able to collect the required amount, the money will automatically be returned back to investors. Because smart contract is based entirely on blockchain, all completely decentralized, with this technology no one controls the money of investors.
Perhaps you have a question, why we can trust the smart contract? Because smart contracts are based entirely on blockchain and they inherited the interesting properties. They are immutable and decentralized. Constant contracts, once constructed, can not be edited or altered, no one can forge source smart contract. A decentralized smart contract means that the contract will be checked by each node on the network. One person can not force the termination of the contract because the other people in the network to identify the attempt and mark it as not valid. Forgery smart contract becomes absolutely impossible.
Well, now you know what a smart contracts and what problems they solve.
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