Crypto EDU

Smart Contracts

  • August 16, 2021
  • Expert
  • cryptocurrency
  • ethereum
Smart Contracts Image

The concept of smart contracts predates the invention of cryptocurrency. It was developed in the 1990s by a computer scientist and cryptographer named Nick Szabo, who wanted to create contracts that would exist on a digital ledger that everyone in a given network has access to (what is essentially a blockchain). The contracts take the form of a short bit of code that automatically initiates a transaction once the terms of an agreement are reached. 

Because they’re automatic, smart contracts bypass the need to trust a third party, like a lawyer or a bank, in order to enforce an agreement. And because they’re encoded in a blockchain, they are virtually impossible to alter. Several blockchain platforms support them, but the most popular is Ethereum, which was built specifically to facilitate the creation of smart contracts. 

As smart contracts have gotten more popular, platforms have emerged to automatically incorporate real-world data into such agreements. The leader in this field is Chainlink, whose native token, LINK, has become one of the top 15 cryptocurrencies in terms of market cap. Smart contracts have also attracted the attention of a number of industries, thanks to their wide array of possible applications—everything from securing loans and automatically validating insurance claims to simplifying voting. 

Why should you care about smart contracts?

The ability to provide secure transactions with minimal fees further reduces the need for middlemen in nearly any situation, whether you’re loaning a friend money or betting on the Super Bowl.

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