March 8, 2016
What are smart contracts and how did they start?
One of many advantages of distributed ledger technology is a "smart contract." The smart contract is quite a simple concept. The aim of a smart contract is to reduce the human factor in transaction processing and verification. A software protocol automates and self-executes an action when certain conditions are met. The automation and self-sufficiency can significantly cut the costs and diminish the risks for businesses and individuals. The cost-efficiency comes from the reduction of overhead necessary to initiate, execute and enforce contracts.
Smart contracts started with Nick Szabo, the author of the Smart Contracts: Building Blocks for Digital Markets paper, published back in 1997. The concept started with... Vending machines. Vending machines have been executing the simplest version of a smart contract for almost 20 years now – they release an item after the correct value is submitted and the selection of an item is made.
As smart contacts automate exchanges based on specified conditions, they have a potential to be applied in a wide range of cases. The idea of a smart contract has been explained by ...