What are smart contracts?
Smart contracts are just like normal contracts.
Their initial purposes was to be stored on a distributed ledger for accountability.
Smart contracts are completely digital.
In Fact, it is a computer programme stored inside a blockchain.
What are smart contracts used for?
A good example of what smart contracts replace would be crowdfunding.
When you crowd fund you need to trust the crowd funding platform to handle your investment property and the company has to trust the crowd funding platform to handle their money as well.
Smart contracts are used for similar systems but don't require a third party platform like a crowdfunding platform.
Some other use cases for smart contracts:
Banks using it to promote automatic loan payments, postal companies using it to process payment on delivery, Insurance companies using it to support payouts etc
How do Smart contracts work?
Smart contracts work by setting the rules on which it should work and then the smart contract will execute as and when its criteria are met. E.g if you fail to raise the minimum funding then investor money is passed back to the investors.
How are smart contracts stored?
Smart contracts are stored in the blockchain so everything is distributed and no one is in control of the assets.
Smart contracts are hard to tamper because they are stored on the blockchain,so the terms of the contract cannot change.
The output of the contract is validated by the whole of the network so 1 person cannot force the contract to do anything,.
Where are they used today?
Bitcoin and Ethereum have the smart contract capability.
Ethereum was made specifically for smart contracts and uses a language called solidity