What is a Smart Contract?
A Smart Contract is an electronic agreement that works on the blockchain. Smart Contracts allow users to solve common problems in a way that minimizes trust.
For example: Alice will inherit her Grandmother’s car on her 18th birthday. In order to facilitate this, an agreement is signed. Then on Alice’s 18th birthday, she will have to arrange a date for her and her Grandmother to get the title of the car transferred over to Alice’s name. This arrangement means there are two events that involve trust on both parties. Then, to further complicate this arrangement, Alice must update her car insurance to reflect her new car.
Smart Contracts ensure that contracts are fullfilled transparently and securely.
If all of these actions were placed onto a Smart Contract with Alice and her Grandmother agreeing to all the terms, the Smart Contract would automatically transfer the car title into Alice’s name, alert both parties that the action has occurred, then automatically update her car insurance with the new change.
While this is a very hypothetical situation, users can see how Smart Contracts are beneficial and will simplify people’s lives. They are, in essence, agreements that can be used for nearly any kind of situation. Examples are: transferring car titles or property values, managing marriage and divorce agreements, placing bets in fantasy sports leagues, payments on student loans, and nearly every other thing imaginable that can be put into a contract.