What is the smart contracts in plain language?

The idea of “smart contracts” in the modern world represents a promising cloud technology to store various kinds of documents, agreements, contracts, etc. Along with this we often we hear such concepts as “smart contract”, “bitcoin”, “blockchain”. In this article you will learn what all these terms are and why they are needed.

What are smart contracts?

Smart contract – electronic Protocol written in computer code. Its purpose is the transfer of information and the enforcement of the terms of the contract by both parties. It is also called a smart contract.

Features smart contract

Smart contracts give the possibility to securely share money, shares, property and other assets directly, without intermediaries.

In order to conclude any transaction, you should contact a notary or lawyer, to pay for the documents and wait for their clearance. Often, many items of the documents contain references to legislative articles that can be interpreted by itself, to get around. In case of default of the terms of the deal, in real life people have to go to court, then spend the money and prove his innocence. At the conclusion of such transactions in General can not speak about the confidence of the parties to the Treaty.

Look at an example transaction: you-me, I-you. Let’s say you want to buy a mobile phone with hands on trading web site. But it is not possible to check the feedback, and the seller requests payment. Asks, because he’s afraid that if he will send a parcel cod, you ain’t taking her, and he would lose the money for shipping back and forth, that is, will get a loss. You, with your hand, afraid that the seller’s a crook, take your money and not send the product or send not what you need.

This program was developed, which monitors the implementation of obligations of both parties as prescribed in the contract, and automatically impose fines for violation or failure to comply with the terms of the transaction. Smart contracts provide the security of the transaction and deprived risk of ambiguous interpretation of the terms, due to the fact that based on cryptography. This is a better deal financially, since the person does not have to pay lawyers, mediators, or to sue when breach of contract. What the conditions of the transaction occurs automatically with minimal costs of their maintenance, without the involvement of third parties (intermediaries).

When and why a smart contract

In 1994, the cryptographer and specialist in law Nick Szabo realized through a decentralized registry is possible to conclude electronic contracts samospalenie. They can be written in the form of code. The contracts will provide a network of computers which is controlled by bloccano. Thus, people will be able to translate each other money, to obtain goods and services. Only in 2008 managed to realize in practice the idea of smart contracts, thanks to the advent of the technology of the block chain.

In 2013, smart contracts began to be put into practice through the establishment of the Ethereum project.