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What is a smart contract? How does Smart Contract work?

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What is a smart contract? How does Smart Contract work?

What is a smart contract? How does Smart Contract work?

Imagine you are on the street and want to take a taxi. You request a car from the internet taxi and the self-driving car (without a driver) will pick you up. The taxi goes to the gas station and pays for the fuel from the digital currency received from the previous passengers.
Then it will take you to your destination and your fare will be paid from your wallet with digital currencies. Before that, the car will automatically pay the owner’s annual insurance and monthly debt, and after you leave, it will go to the repair shop to fix possible defects.

You might think these are scenes from a science fiction movie; But this is the future of the world. Smart contracts can play a key role in such a future.

In this article, without going into technical and complex concepts, I will explain smart contracts in simple terms and tell about its applications by presenting several examples.

What is a smart contract?

A smart contract or a smart contract is a program or code that is stored on the blockchain and will be executed without an intermediary and without the need for anyone’s approval if certain conditions occur. The concept of these contracts was first presented by Nick Szabo in 1994.

Smart contracts are written in such a way that after the execution and fulfillment of all parties are sure of the correctness of its implementation and the middleman in the contract is removed.

The main attraction of the smart contract is that when it is executed, even the developer himself cannot prevent its execution, unless he has thought about it before the execution. That is why all parties are sure of its correct execution after implementation.

History of smart contract

Nick Zabo, the developer of Bit Gold digital currency, first proposed the concept of smart contract in 1994. The Ethereum network was the first network for smart contracts created by Vitalik Buterin.
Zabo defines a smart contract as a protocol that executes a computer contract based on specified conditions. Zabo’s goal in providing such a protocol was that he wanted to bring the functions of electronic transactions into the digital space.

How does a smart contract work?

What is a smart contract? How does Smart Contract work?

The principle of smart dating is very simple: if something happens, execute these commands. If something else happens, execute another command and so on. The working method of smart contracts is similar to the work of automatic vending machines that we see in the metro and their public possibility.

For example, when you want to buy a soft drink from these machines, you give the money to the machine and the machine automatically processes the money and delivers the soft drink; Without an intermediary. To implement a smart contract, there are three main steps:

The conditions are written in code and stored on the blockchain.
Commands are automatically executed when the conditions in the code are met.
The result of the execution of the contract is stored on the blockchain.
Smart contract features

Since open blockchains like Ethereum are highly secure and not easily tampered with, smart contracts have now become a revolutionary innovation that can eliminate the need for people to trust intermediaries or at least reduce the role of blind trust.

Even the programmer of the smart contract cannot change the code of the smart contract registered in the blockchain.

The main attraction of the smart contract is that when it is executed, even the developer himself cannot prevent its execution; Unless he thought about it before the execution.

Another attraction of the smart contract on public blockchains is that its code is free for everyone to review and everyone can learn about the code behind the scenes.
To implement normal contracts, we need intermediaries that we have to trust. These intermediaries can be centralized computer servers or banks and governments and offices.

What is the difference between a smart contract and a normal contract?

What distinguishes smart contracts from normal contracts is the use of blockchain technology. In other words, a smart contract is a code that is activated on the blockchain to review and implement the terms of an agreement between two parties without the need for intermediaries.

When a smart contract is executed on an open blockchain like Ethereum, it is unstoppable and no one can stop its execution; Unless there are already instructions in the code to prevent the operations.
With smart contracts, it is possible to develop programs and projects that will continue to work forever without any intermediaries. These programs are also called decentralized programs (Dapp).

The best smart contract platforms

Ethereum: Currently, Ethereum is considered the most popular smart contract platform in the blockchain world, and hundreds of different decentralized applications are built and run on it.
Solana: Known as one of the “Ethereum killers”, Solana has gained popularity among smart contract enthusiasts in recent years.
Polkadot: Another powerful smart contract platform created by Gavin Wood, an Ethereum developer.
She Tezos: Tezos is a blockchain platform that supports smart contracts and decentralized applications. The platform, due to its self-healing capability, can implement new updates without having to stop or change its functionality.
Tron: Tron is a blockchain platform developed by Justin Sun to create a global, decentralized network for sharing digital content.
The Open Network: The Open Network, abbreviated as TON, is a unique community-oriented blockchain designed by the Telegram team.