Blockchain was initially designed for Peer to Peer money transfer only. But it soon showed the potential to be used for any kind of P2P value transaction on top of the Internet. The Ethereum project thus introduced the idea of decoupling the contract layer from the blockchain layer, where the ledger itself is used by smart contracts that trigger transactions automatically when certain pre-defined conditions are met. By decoupling the smart contract layer from the blockchain layer, blockchains like Ethereum aim to provide a more flexible development environment than the Bitcoin blockchain. A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.
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 of smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting. Various cryptocurrencies have implemented types of smart contracts.
These smart contracts are a piece of code running on top of a blockchain network, where digital assets are
controlled by that piece of code implementing arbitrary rules. They have properties of contractual
agreements but should not be confused with legal contracts.
If and when all parties to the smart contract fulfill the pre-defined arbitrary rules, the smart contract will
auto execute the transaction. These smart contracts aim to provide transaction security superior to
traditional contract law and reduce transaction costs of coordination and enforcement.
Smart contracts can be used for simple economic transactions like sending money from A to B. They can
also be used for registering any kind of ownership and property rights like land registries and intellectual
property or managing smart access control for the sharing economy just to name a few. Furthermore,
smart contracts can be used for more complex transactions like governing a group of people that share
the same interests and goals. Decentralized Autonomous Organizations, DAOs, are such an example for
more complex smart contracts.
With blockchains and smart contracts we can now imagine a world in which contracts are embedded in
digital code and stored in transparent, shared databases where they are protected from deletion,
tampering and revision.
In this world every agreement, every process, task and payment would have a digital record and signature
that could be identified, validated, stored, and shared.
Intermediaries like lawyers, brokers , bankers and public administrators might no longer be necessary.
Individuals, organizations, machines and algorithms would freely transact and interact with one another
with little friction and a fraction of current transaction costs.
Blockchains & smart contracts:
❏ Radically reduce transaction costs (bureaucracy) through machine consensus and auto-enforceable
code.
❏ Bypass the traditional principal-agent dilemmas of organizations, thus providing an operating
system for what some refer to as "trustless trust". This means that you don't have to trust people
and organizations, you trust code which is open source and provides transparent processes.
This was on overview of smart contract and later on I shall also share some more topics about blockchain, cryptocurrency and more.
Thanking you and waiting for your feedback or comments.