A smart contract is computer software developed as an auto-fulfillment contract, which means that it starts certain actions after the predefined conditions have been met. A Smart contract can be used, for example, as digital agreements that interfere with the exchange of cryptocurrencies (or any other digital resource) between two parties.
As soon as the terms of the agreement are established, the intellectual contract verifies their execution and the actions are distributed accordingly.
In other words, a smart contract is basically lines of code that perform a specific function after certain conditions have been met. The code usually follows the “if … then …” instructions that are activated.
For example, an online store can implement a smart contract that ensures that “if the payment is received, the goods are delivered”, which will make the whole process more efficient and less prone to human error.
Although smart contract became popular in the context of blockchain and cryptocurrency, this concept was first described by the American cryptographer Nick Sabo in 1994, many years before the creation of Bitcoin.
Smart contracts play an important role in the blockchain and cryptocurrency markets, especially for ERC-20 tokens, which represent the class of tokens created in the Ethereum network and conforming to the ERC-20 standard.
These tokens are often distributed through ICO (Initial Coin Offering) events, and the use of smart contracts allows you to reliably and conveniently exchange funds during sales. Their use can also facilitate payment processing for decentralized applications (DApps) or decentralized exchanges (DEX).
Another area where smart contracts are suitable is the financial services sector. For example, technology can be used to automate clearing and settlement of transactions, pay bonds, or even calculate and pay claims.
Despite its obvious use in finance, intellectual contracts are universal enough to apply in virtually any industry where funds, digital resources, or any type of digital information must be transferred between the parties. For example, the equipment leasing industry has widely used these contracts in real conditions to make leasing contracts more efficient.
In the health sector, technology is seen as a countermeasure against data manipulation in clinical trials. Intellectual contracts can even be used to enforce intellectual property agreements by setting the final report on joint property rights and allocating all intellectual property rights and income, respectively.