What is a Smart Contract?

Simply put, a Smart Contract is a program, that’s always stored on a blockchain. It runs when predetermined conditions are met.

Smart Contracts typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without an intermediary’s involvement or time loss.
They can also automate a workflow, triggering the next action when conditions are met.

What is Smart Contract? Image Courtesy: Unified Infotech

How do Smart Contracts Work?

Smart contracts work by following simple “if/when…then…” statements that are written into code on a blockchain.

A network of computers executes the actions when predetermined conditions have been met and verified.
These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket.
The blockchain is then updated when the transaction is completed.
This means the transaction cannot be changed, and only parties who have been granted permission can see the results.

Smart Contracts are digital and automated programs. In other words, they are the brains of blockchains. There are many benefits to summarize a few:

Speed: Because it is digital, so transactions are fully automated without paperwork.
Efficiency: Automated process avoids reconciliation of errors.
Accuracy: Execution is based on predefined conditions only.
Trust & Transparency: Transaction Records are encrypted. No third party is involved. You cannot alter a smart contract for personal benefits.
Security: Each transaction record is connected to the previous and subsequent records on a distributed ledger. Hackers would have to alter the entire chain to change a single record which makes smart contracts the most secured.
Savings & ROI: Think about transactions without the involvement of 3rd party support, assistance, and fees.

Explore More!