If you’re not familiar with peculiar terms such as smart contracts or blockchain technologies, that’s fine. We are here to help.
The one thing you need to know is that blockchain technology can minimize the amount of trust required from any single actor in the system.
So what are Smart Contracts? Well, Smart Contracts are just like regular contracts but the only difference is that they are completely digital. Because Smart Contracts are stored on a Blockchain, they inherit some interesting properties: They are immutable and they are distributed.
Immutable: That means that once a Smart Contract is created it can never be changed again. So no one can go and tamper with the code of your Contract
Distributed: That means that the output of your contract is validated by everyone in the network. So a single person cannot force an outcome of a contract because other stakeholders on the network will spot this attempt and will invalidate the contract.
What is the purpose of a Smart Contract?
Smart contracts rely on blockchain technology and they help us to exchange money, property, shares, data or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.
Smart contracts are account holding objects on the blockchain. They contain code functions and can interact with other contracts, make decisions, store data, and send ether to others.
Contracts are defined by their creators, but their execution, and by extension the services they offer, is provided by the blockchain itself. They will exist and be executable as long as the whole network exists, and will only disappear if they were programmed to self destruct.