Have you heard about “Contracts?” No, not the paper contracts that you have come across. Neither they’re those traditional ones that are signed between two entities. As the name suggests, “Smart Contracts”, tend to have that smartness.

Why “Smart” and not just “Contracts”?

They are simple programs stored on a blockchain that run when some conditions are met. These conditions are pre-determined. They’re simply a collection of code and data that stays at a specific address on the blockchain.

User accounts interact with them by submitting transactions that execute functions defined on these smart contracts. They cannot be deleted by default. They can define rules and automatically enforce them through the code. Hence these are not just contracts but “Smart Contracts”.

Benefits of Smart Contracts

Money Saving:

Smart contracts remove the need for intermediaries to handle rules and transactions.

Secured:

Transaction records in a Blockchain are encrypted which makes them hard to hack. These transactions are interconnected to each other and hence hackers need to alter the entire chain to change a single record.

Trust:

Since there is no third party involved and encryption of records is mandatory, there is no question of information being altered.

Transparency:

All records are synced and publicly available.

Speed, Efficiency and Accuracy:

Contracts are executed once the condition is met. There’s no paperwork to process and no time to reconcile errors that occur from manually filing documents.

Permissionless? Really?

Yes. Anyone can write it and deploy it to a network. You just need to learn how to code. Deploying is technically a transaction so you need to pay Gas (Fees). However, they must be compiled before they can be deployed.

Limitations

They can’t send any HTTP requests since they are designed that way. Hence they alone cannot get any information about real-world events.