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8.1 What Are Smart Contracts

A smart contract is computer code stored on a blockchain that automatically executes the terms of an agreement. The code replaces legal contracts and ensures all parties receive what was agreed upon without a middleman. When certain conditions are met, like an expiration date or price threshold, the smart contract self-executes to transfer money, property or other assets according to the predefined terms in the code. Regulators can use blockchains to understand market activity while maintaining individual privacy.

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18 views6 pages

8.1 What Are Smart Contracts

A smart contract is computer code stored on a blockchain that automatically executes the terms of an agreement. The code replaces legal contracts and ensures all parties receive what was agreed upon without a middleman. When certain conditions are met, like an expiration date or price threshold, the smart contract self-executes to transfer money, property or other assets according to the predefined terms in the code. Regulators can use blockchains to understand market activity while maintaining individual privacy.

Uploaded by

abdullahi tijjani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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What are Smart Contracts ?

Smart Contracts
A smart contract is a term used to describe computer program code that is capable of facilitating, executing, and enforcing
the negotiation or performance of an agreement using Blockchain technology.

The entire process is automated can act as a complement, or substitute, for legal contracts, where the terms of the smart
contract are recorded in a computer language as a set of instructions.

In general, smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free
way while avoiding the services of a middleman.

They often function as escrow facilities, ensuring that all the money and the right of ownership can be deposited in the
scheme and transferred at precisely the same time to the participating parties.

A smart contract can operate on its own, but it can also be enforced along with any variety of other smart contracts.

2
Smart Contracts

A contract between the parties A triggering event like an Regulators can use the blockchain to
is written as code and published expiration date or strike price is understand the activity in the
into blockchain. Individuals hit, and the contract executed market while maintaining the
involved are anonymous, but the itself according to the coded privacy of individual actors
contract is visible in public terms. positions.
ledger.

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Traditional Contract Vs Smart Contract
Traditional physical contracts, such as those created by Smart contracts, often created by computer
legal professionals today, contain legal language on a programmers using smart contract development tools.
vast amounts of printed documents.
They are entirely digital and written using programming
Traditional physical contracts heavily rely on third parties code languages such as Solidity, C++, Go, Python, Java.
for enforcement. They can be misinterpreted.
Code defines the rules and consequences, stating the
obligations, benefits and penalties which may be due to
either party in various different circumstances.

This code can then be automatically executed by a


distributed ledger system.

4
How Smart Contracts Work

STEP 3: EXECUTION
One of the computers in this network STEP 1: CODING
of distributed ledgers receives the Smart Contracts are mostly written
code, and then each node comes to in Solidity. It is imperative that they
an individual agreement on the do precisely what the parties want
results of the code. them to do.
The network would then update the This is achieved by inputting the
distributed ledgers to record the proper logic when writing your
execution of the contract, and then smart contract.
monitor for compliance with the The code behaves in predefined
terms of the smart contract. ways and doesn’t have the linguistic
nuances of human languages.

STEP 2: DISTRIBUTED LEDGER


The code is encrypted and sent out to other computers via a
distributed network of ledgers

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Components of Smart Contract
Smart Contract Code: The code that is stored, verified and executed on a blockchain.

Smart Legal Contracts: A smart contract that articulates and is capable of self-executing, on a legally-enforceable basis.

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