A Smart Contract is a type of computer program that usually underpins the transfer of digital assets from one party to another. The “terms” of the agreement between the two parties is stored on the blockchain, and therefore can be easily tracked but once set, cannot be altered. This means that both parties must be in agreement to the terms of the Smart Contracts, just as traditional contracts. Smart Contract framework can also be used to assist negotiations digitally and verify any terms already set.
Similar to traditional contracts, a Smart Contract is a digital agreement between two parties. However, due to the “Smart” aspect, the specific terms to facilitate the contract, are stored on a blockchain, and hence, do not require the presence of a third party to intervene.
Smart contracts have significant advantages both practically and legally. Due to their direct and unambiguous nature, there are huge financial savings on legal fees. There is also an increased level of security and savings on time.
There have been various uses of Smart contracts, for example, in banking and insurance, where assets are transferred after certain pre-set terms have been met. The most popular Smart Contract platform is via the Ethereum blockchain. Smart Contracts are also present within the EOS and TRON’ blockchains. Whilst the Bitcoin blockchain does support Smart Contracts, is it much less popular due to the limited nature compared to Ethereum-based contracts.