With the rising of public blockchains such as Bitcoin and later with Ethereum, the smart contract was introduced. This is an attractive and practical feature in the use of blockchain and decentralized systems. In this article, I will try to talk about it in simple words and away from technical complications.
What is a smart contract?
A smart contract is a piece of code and a computer program that, like all existing computer programs, is written and executed with a programming language by an expert programmer. Now the question is that if this is the case, then why is it called a smart contract and why is it being discussed as a new issue? The thing is that these computer programs include special features that distinguish them from other programs.
The differences between a smart contract and a common computer program
Smart contracts have unique differences from other common applications we know, which we mention here:
1. Smart contract codes are stored and executed on the blockchain platform using a technology called Ethereum virtual machine. Therefore, they cannot be stored and executed on a common computer or mobile system.
2. The structure and logic of smart contract codes cannot be changed after being deployed on the blockchain. Although some parameters and variables can be changed, this feature must be implemented at the time of coding.
3. Smart contract codes and how it works can be seen, checked, and even tested by everyone.
The features mentioned above make us have programs that:
1. How they work is transparent and auditable for everyone.
2. There is the assurance that the owner of that code or smart contract cannot change the way it works in the future.
3. As long as the blockchain network on which the smart contract is deployed and executed is up and running, that contract will also work and will not be dependent on the decision of its creator or another organization. Even if the author of a smart contract has written it in such a way that it no longer works in a certain situation, this will be visible in its code, and users can notice this before using it.
As you may have noticed, these features make us have computer programs that can guarantee a proper level of trust and confidence in performance, and this is an attractive and privileged feature.
Why is it called a smart contract?
In reality, when 2 people want to do something together, they must agree on the way of implementation, benefits, and problems of the work, and usually to document this agreement, its contents are set in the form of a contract and the parties sign it. They declare their satisfaction and agreement. These contracts exist in different formats and purposes in our daily life. Usually, the parties to the contract consider guarantees and penalties to ensure that the other party fulfills its obligations, and if these contracts are official and approved by the government organizations of each geographical region and government, they are also supported by the government.
Now let's imagine that the agreement of those 2 people is written and executed in the form of a computer code with the features mentioned above. In this case, we have a digital contract that is running on a blockchain network and implements the terms of the contract in an automatic and guaranteed manner if the necessary conditions exist. This is what we call a smart contract.
Can smart contracts cover all agreements?
Currently, the answer to this question is no. Smart contracts, with all their attractive features, cannot cover all real agreements, but maybe one day this will be possible. Smart contracts are completely dependent on blockchain technology and cryptocurrencies. This issue limits their use. As much as blockchain technology and the use of cryptocurrencies for financial exchanges become more popular and accepted by people and organizations, smart contracts can also find more applications.
