A smart contract is a self-executing contract defined by a computer program, in which the terms and execution of the agreement are built into immutable code and recorded on a blockchain (Ethereum being the most popular). But other blockchains are quickly poaching Ethereum’s market share as protocols choose to home their projects in new habitats — like Solana or Binance Smart Chain. The native tokens for these alternative blockchains can be found on OVEX.
There can be many terms of contracts that dictate an exchange — from timing to circumstances in which the contract becomes void. These ‘clauses’ can all be hard-coded into a smart contract.
Arguably the first instance of a smart contract was the vending machine. You put $1 into the machine, then it dispenses a snack for you. The entire transaction is pre-determined by the machine’s programming without external influences.
💡So why are smart contracts superior to their traditional counterparts?💡
When engaging in a traditional agreement — think of what is necessary besides the piece of paper and the two (or more) parties signing the agreement?
- Lawyers are often essential, first to write the contract’s language (perhaps even translate it) and then to ensure it is executed accordingly.
- If a contract is breached, you often need a judge, a courtroom, and other costly resources.
- In large financial exchanges such as buying a house, it is common to use an escrow, which is a third party who holds funds until both parties meet the agreed-upon conditions.
All these intermediaries and resources required to make traditional binding agreements come at a cost, not to mention the trust you must put into these external institutions to carry out their parts faithfully and in a timeous manner.
Smart contracts remove the middle men, you don’t have to pay, trust, or wait for third parties to execute them. This is what makes them so attractive.
