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What is a Smart Contract?

Smart contract is a collection of code and data that mediates an agreement between two or more parties when certain conditions are met. It’s basically a program that runs on a blockchain network without the need for a third-party authority. Codes are written with simple “if-then” statements and executed when predetermined conditions have been met and verified. Executed actions are then updated in the blockchain. Users cannot change the code once it’s executed which makes smart contracts irreversible.

Let me give you an example. Imagine you bought a property and after a while, someone else comes in with a contract and claims it is their property. Your contract is a confirmation of that property’s ownership and we know that often mistakes can happen with traditional contracts, so it is necessary for you to prove in court the legality of your contract. With smart contracts, only one person can be the owner of the contract and there is no other way for someone else to be, which makes it much more secure than trusting the institutions.

Why Smart Contract?

Security 

Transaction will not happen if predefined conditions are not met. Once the transaction is executed it cannot be undone. Irreversibility makes it more secure than traditional contracts. 

Accuracy

There is no need for a middleman or any type of intermediary. Trust is put in a code that eliminates the possibility of a human mistake.

Speed 

Without the need for a middleman, the whole process is automated, hence much faster.

What is Smart Contract used for?

As mentioned above, smart contracts can be used to prove ownership in a more secure way. In real estate, smart contracts are removing the necessity for expensive lawyers and agents. In supply chains, smart contracts can automate operations. They can be used as validators for voting or for issuing prescriptions based on a medical record. Smart contracts can basically replace all traditional contracts to make transactions more secure and efficient.