Smart contract

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A smart contract is a software protocol that executes certain commands once specific conditions are met. These contracts typically include pertinent information built into the protocol about each party, the conditions of the agreement(s) between parties, and any other important information necessary to carry out the transaction. They can be used to perform credible transactions between two parties without the need for a third party to verify them.[1] In order to accomplish this, smart contracts utilize distributed ledger technology, such as blockchain.[2] One example of a smart contract would be a rental agreement for an apartment that automatically disburses a refund if the key to the apartment is not received by the resident on the agreed upon move-in date. Smart contracts could also be used to make sure the tenant automatically pays rent at a set time.[3]

Smart contracts can theoretically be used to streamline existing commercial practices by automating certain aspects of transactions and other arrangements. They remove the need for trustworthy intermediaries because transactions are made on a public distributed ledger that is unalterable once recorded, and is witnessed by thousands of people. Carrying out transactions in such a way makes the need for trustworthy human intermediaries obsolete, because the software executes the agreement once the terms of the agreement are met, regardless of other conditions.[4]

Background

Cryptographer Nick Szabo first introduced the concept of smart contracts in an essay he wrote in 1994.[5][6]

In 2013, the white paper for Ethereum was published by Vitalik Buterin. This led to the creation of the world's first smart contract platform.[7][8]

References