You must have heard the world Smart contracts very frequently in the crypto sphere but do you know the meaning of this term? Do you know the history if Smart contracts?
The term smart contract was first coined by a computer scientist and legal scholar Nick Szabo in the year 1994. He has successfully embedded a legal contract into a computer code which was termed as Smart contracts.
Originally, smart contracts were not known but with the market of cryptocurrencies and the blockchain ecosystem, smart contracts have become very popular.
How do they work?
Smart contracts convert the human-readable language like legal contracts and term and conditions known as the “wet code” into a computer-readable language known as the dry code.
The wet codes have a higher degree of malleability and can be interpreted in different ways based on human knowledge and thinking, but they are also less fair and subject to manipulations. While the dry codes are rigid and fair and not subject to any deviations. They are less flexible but also much cheaper than the wet codes.
Our life has different types of contracts in every aspect of life such as marriage contracts, employment contracts, government contracts, mortgage contracts etc. The concept of smart contracts was introduced so that many different types of clauses of a contract can be embedded in the software and hardware to reduce the transaction cost and making the practice more fair and transparent.
Properties of Good Smart Contracts
Smart contracts are made to facilitate the common existing law and help people and even computers to make contracts with each other. The smart contracts should have the following properties:
- Verifiability: You should be able to verify the actions of the other party in the contract.
- Observability: F and when you enter into a smart contract, you should be able to observe what the other party is doing and what they said they would be doing in the contract.
- Enforceability: After observing and verifying their action, you should be able to enforce consequences for breach of contract.
- Privacy: The terms and conditions of the contract should be kept private as only you and the other party should know about your contract and its terms.