What is smart contracts?

Blockchain technology comes with various inventions, one of which is smart contracts. 

If not for smart contracts, probably blockchain would not have evolved into what it is today because decentralized applications which makes it easy for individuals to interact with blockchain were built using smart contract.

What is a smart contracts? 

According to Wikipedia, smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. 

On the  other hand, Investopedia defines a smart contract as a self-executing contract with the terms of agreement between buyer and seller being directly written into lines of code.

History of smart contracts

After the launch of the Bitcoin blockchain, another blockchain was launched on July 30th, 2015. The blockchain was Ethereum blockchain. 

Ethereum blockchain was proposed by Vitalik in 2013 while the development started in 2014.

The launch of the Ethereum blockchain is the beginning of a new episode of smart contract but not the beginning of smart contracts.

Smart contract was first used in 1994 by Nick Szabo who is a computer scientist.

Nick Szabo coined the term and used it to refer to “a set of promises, specified in digital form, including protocols within which the parties perform on promises”.

In 1996, Szabo reiterates that, “whether enforced by a government, or otherwise, the contract is the basic building block of a free market economy”.

To break this down, lets take for instance, your SIM card. 

Whenever you recharge your line, there’s an obligation from the network provider to either give you airtime or internet access based on how you choose to spend the airtime. 

The contract is that you will be given airtime or internet access only if you recharge your line. 

Szabo was of the opinion that smart contract is part of our society already 

Why is smart contract heavily linked to blockchain? 

Smart contract offer a self-executing command, blockchain offers tamper-proof record and transparency. 

If it is a contract and it is written on the blockchain therefore it is irreversible. 

Also as a user, you are assured of getting the results if the conditions are satisfied. 

Significance of smart contracts

Automation 

One of the biggest benefits of smart contracts is automation that is attached to it. 

The automation curb trust issues in a situation where there is trust issue and third parties. 

Digital identity

The non-fungible token is a byproduct of smart contracts. 

Smart contracts provide digital identity and eliminate duplication of the same identity. 

Supply chain management 

Managing the supply chain might be a huge task but smart contracts help to track each item within the supply chain thereby improving various aspects of business.

Finance

Finance is an aspect of human endeavor that has been greatly influenced by smart contracts. 

Smart contract power decentralized finance which facilitates financial service across the globe at low transaction cost. 

This blog post explained what a smart contract is and its use cases. You can read more about blockchain technology, history of blockchain and other contents on Kumo Academy. 

About Kumo

Kumo, registered as Kumo Technologies Inc in Delaware, U.S. is a fiat and crypto social payment app which allows users to exchange fiat (NGN) to crypto, save and earn interest in dollar with as low as $5, utility payment such as DSTV subscription, airtime, data among others.

Kumo wallet is your all-in-one social payment app for seamless payment solutions.

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