What is Ethereum Smart Contracts?An Ethereum Smart Contract is a blockchain-based, digital contract that allows for the performance of credible transactions. They are also known as self-executing contracts. By utilizing computer protocol, transactions and negotiations are performed between permitted parties. The computer code is stored, replicated and supervised on the Ethereum blockchain. The results are ledger feedback that includes money transfer and receiving the intended products or services, as stated in the agreement. It’s very much a case of what you see is what you get.
Smart Contracts eliminate the need for intermediaries or middlemen and is therefore, cheaper and faster. Blockchain by nature is faster and cheaper but also adds other benefits such as security and credibility. This is why a lot of financial institutions such as governments and banks are making use of Smart Contracts.
Benefits of Smart Contracts
- Smart Contracts have back-up copies on the blockchain. Furthermore, they are also duplicated and can be safely stored with friends or business associates. They are encrypted on a shared ledger. Therefore, agreements cannot get lost.
- Smart Contracts are basically impenetrable. Due to the cryptography being used, hackers cannot gain access to your documents.
- Smart Contracts save a lot of time and money. There is no need to courier documents or manually process documents. Smart Contracts use software code to perform tasks and in so doing, avoid errors associated with manual filling.
How to use a Smart ContractA good example of a Smart Contract is by signing a rental agreement on an apartment through the blockchain and paying in cryptocurrency. You will be issued with a receipt in the virtual contract, pay with a cryptocurrency and the system will update the fulfilled transaction. There is no need to work through a rental agency.
Costs associated with an Ethereum Smart Contract can be paid with Ether and Gas tokens. Gas specifically is used to pay the network fees associated with executing an operation.