What is a smart contract?
Smart contracts are computer programs, or transaction protocols
on blockchain, that self-execute when certain conditions are met.
Most listeners probably know about bitcoin blockchain created by
Satoshi Nakamoto that basically introduced a decentralized digital
payment system. That’s why everyone’s really excited about
this technology of Vitalik Buterin, founder of Ethereum.
Buterin envisioned introducing more advanced applications like
decentralized exchange, financial derivatives on blockchain
identity and reputation systems. He wanted to do it on Bitcoin
blockchain initially, but because of inherent limitations of
Bitcoin blockchain, he really couldn’t do it. So, he went ahead
and developed his own blockchain called Ethereum.
This blockchain basically allows deployment creation, deployment
and execution of smart contracts that we know now. Today when we
talk about smart contract, we are in the Ethereum world.
How does a smart contract work? What makes a contract
“smart”?
What you need to do first is to create a contract account on the
Ethereum blockchain. This is different from a crypto wallet account
that most of us think about when we talk about accounts on a
blockchain system. So, the contract account says basically that
crypto cannot be used to exchange cryptocurrency.
On Ethereum blockchain there will be ether, but you need to
create a separate account called the contract account. After you do
that, you need to use a solidity to write your own computer
program. It’s a particular type of programing language that
Ethereum uses. You could hire a software engineer to help you
convert certain terms in natural language into computer language,
or you could learn how to do that yourself and create your own
smart contract if you have time and ability to learn about
solidity.
Will the creation and coding of smart contracts become easier
in the coming years as smart contracts become more utilized and
widespread?
Based on my conversation with some software engineers who work
on smart contracts on a day-to-day basis, it sounds like the
standards that Ethereum has on its own blockchain system is very
simple for software engineers. Basically, it’s as simple as one
of the limitations of Ethereum blockchain and the smart contract
technology is very simple.
What are some examples of real-world smart contracts?
One example is writing a program to run an auction as if
you’re going on eBay and doing auction to buy a certain item.
You would first define the kind of digital assets that is being
auctioned, and then you write various functions to run that
auction. You would have a function to have participants make bids
and then you would have a function to say when the highest bid
comes, that person would be the highest bidder. You would also have
a function saying that at certain time this auction will end.
Lastly, the function saying that at that moment when the auction
ends, the highest bidder will be the winner.
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