I met with my friends yesterday and we discussed about crypto, well only one person was not a software developer and he's not even a trader or do anything crypto. We discussed until we mentioned smart contracts and he asked us what smart contracts are, well we laughed at him but we took out time to explained what a smart contracts really is and what it means in the crypto world.
So I decided to make this write up about Smart Contracts
Imagine buying car from an online dealer and after making payments, the dealer needs to prepare the car documents for you, and he makes mistake, let's say instead of Victor he wrote Victory, automatically the car doesn't belongs to you just because of that mistake.
Now, Imagine buying the same car from same online and after making payments and payments confirmed, the documents are automatically transfered to your name without any middle man, no need for agents, no time wasted and no mistake in your name.
That is exactly what smart contracts does
Now what is a Smart Contract?
A smart contracts is a digital agreements stored in a blockchain to exercuite automatically when conditions are met.
How does Smart Contract works
If you have used a vending machine before, you will be familiar with this;
Vending machine is used to sell snacks it has a button that you use to choose the particular snacks you need, when done, you make payments using your cards and the snacks will come out automatically without anyone selling it directly to you.
Same thing with a smart contract, it follows the same rule (remember this code is law philosophy) using code to accept contracts just like the real legal contract we sign.
Let me make an example.
When A wants to buy a token using smart contracts.
If payment is received, automatically transfer ownership of the token to the buyer.
If payment is not received, deny the transfer.
Smart contracts brings coding into business to build trust and reduce fraud, middle men expenses and time delays.
Benefits of Smart Contract
It offers transparency with fast transactions and helps us reduce the middle men (Agents) and finally accuracy, as I used the first example of car, where mistake of the buyers name was eliminated.
Smart Contracts are changing the way we do business but also increases the risk of hacking like what happened with DAO in 2015 or 16, when the DAO was hacked due to a bug in the code.
But it helps reduce stress and build trust among people especially the once doing business with others at far distance.
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