We continue our exploitation of the ecosystem around cryptocurrencies with smart contracts, which are one of the possible uses of blockchains, and which could well arrive quickly in our daily life.
This article is part of the file “Cryptocurrencies, the big folder”
Origin of smart contracts
If we associate smart contracts with cryptocurrencies (therefore with something recent), they have been theorized well in advance. It Nick Szabo , an American computer scientist and cryptographer, who formalized this concept in the 90s.
But it is actually the implementation of blockchains in the context of Bitcoin and Ethereum that has enabled the implementation of smart contracts. Indeed, blockchains, due to their traceability and their robustness, make it possible to have a reliable and concrete application of what was until then only a concept.
Principle and uses of a “smart contract”
Concretely, a smart contract is a contract that will run automatically depending on conditions.
In general, this triggering is accompanied by a transfer of assets. These conditions and the computer program of the contract are stored in the blockchain. Thus, the proper execution of a contract depends on criteria defined in advance and known to all, and it is the algorithm which, once the conditions are met, will trigger the actions. In this case, there is no longer any need for a trusted third party to validate the proper performance of the contract.
We can thus see that a smart contract can have many possible applications in everyday life. For example in the field of insurance, logistics, rental…
Let’s take a simple example. You have probably already participated in crowdfunding, for example in the context of the launch of an artistic project. The principle of crowdfunding is as follows: a goal is set with an amount on a date. Internet users can participate in this fundraiser. If the objective is achieved, the funds are paid to the artist, otherwise they are returned to the participants. This is typically the kind of example where smart contracts take on their full interest. Because one could totally imagine that it is a smart contract that controls the payment of funds according to the conditions set.
Advantages and disadvantages of smart contracts
These smart contracts (the term may not necessarily be the most appropriate one by the way) have different advantages. Transparency, because the conditions are known to everyone. Cost reduction and efficiency due to the elimination of many intermediaries.
In terms of disadvantages, we can of course mention the fact that as it is based on a computer program. It may therefore be subject to security vulnerabilities. One can also be reluctant to have an algorithm completely govern a contract, because that leaves no room for human interpretation. And in some cases, that just won’t be possible.
Learn more about smart contracts
If you want to go deeper into the subject, here are some links:
- an excellent article, very thorough as often, on the Cryptoast
- a Wikipedia file on the impacts, advantages and disadvantages of these contracts
- a very complete article from a legal point of view (on the other hand, you will have to be a subscriber to see the end of the article)
- Ethereum learning tools if you want to start learning how to code smart contracts
A quick presentation video of the principles and some concrete examples
A set of videos to learn to code in Solidity, I put you here episode 1, you will find the others on the same YouTube channel:
