With all of the focus on smart contract technology in recent times, a lot of people are left wondering what this technological innovation truly means. Are these autonomous contracts as smart as people claim, or are we still in the early stages of smart contract development? The concept holds a lot of potential for the future; that much is certain.
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Understanding The Idea Behind A Smart Contract
Trying to explain this concept without getting into technical waters is quite a challenge, as it is difficult to compare it to something people can relate to. At its core, a smart contract is a computer protocol which can actively enforce the outcome of a contract between two or more parties. Think of it as a third-party overseeing a [business]transaction between two parties, but this third-party is a computer, rather than a human or company.
An example of how a smart contract works can be found in the events sector. Let’s say there is a concert, and 25,000 tickets are to be sold. Considering how the number of tickets is limited, someone has to make sure no more than 25,000 tickets are to be created. Such a type of admission control could be digitized and executed through a smart contract, as the system would ensure only so many tickets are made and validated.
One of the main reasons why people would prefer a smart contract over a traditional version is the fact there is no human element going over the outcome. As much as we hate to admit it, humans are susceptible to greed and corruption, which could influence the outcome of an agreement between parties. A smart contract, overseen by a computer, can not be “bought”.
But there are other reasons why a smart contract makes more sense, as it is a cheaper and global solution. In fact, depending on how the technological development evolves, smart contracts could eventually self-execute in its entirety, rather than being coded by humans. Should this ever be the case, there will no longer be a need for contractual clauses.
As interesting as smart contracts may sound on paper, it will all come down to how rules are enforced and executed. The Ethereum protocol, for example, was built with smart contracts in mind, and their website even offers coding samples as to how this technology can be wielded. In fact, several projects using autonomous smart contracts already exist, or are still in development.
Smart contracts can be used throughout different industries, including the financial sector and transferring digital ownership. Blockchain technology is perfectly suited to execute smart contracts on a global scale, and future development in this sector will give the world a better idea of what a [n autonomous]smart contract can do.
Partial Source: Wikipedia
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