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Admittedly, at some point it does start to sound like the makings of a dystopian sci-fi film. Because bitcoin is itself is a computer program, smart contracts can speak to it just like they would any other piece of code. But as always with this cutting edge of financial technology, major questions abound: How will this all align with our current legal system? And, of course, will anyone actually use these things anyway?What Is A Smart Contract?The idea of smart contracts goes way back to 1994, nearly the dawn of the World Wide Web itself. They just happen to be doing it in a way that interacts with real-world assets. If you can’t make a payment all of a sudden your car could be digitally and remotely repossessed, all without any human interaction.
One of the best things about the blockchain is that, because it is a decentralized system that exists between all permitted parties, there’s no need to pay intermediaries (Middlemen) and it saves you time and conflict. Blockchains have their problems, but they are rated, undeniably, faster, cheaper, and more secure than traditional systems, which is why banks and governments are turning to them.
Smart contracts are computer programs that can automatically execute the terms of a contract. Smart contract technology is now being built on top of bitcoin and other virtual currencies–what some have termed “Bitcoin 2.0” platforms. I agree to my information being processed by TechTarget and its Partners to contact me via phone, email, or other means regarding information relevant to my professional interests. The door of a car or a house could be unlocked by connecting smart contracts to the Internet of everything. Someday, these programs may replace lawyers and banks for handling certain common financial transactions.And the potential for smart contracts goes way beyond simple transfers of funds. Codius aims to be interoperable between a variety of cryptocurrency, such as Ripple and bitcoin, although it is managed by the private company. I may unsubscribe at any time. Codius was developed by Ripple Labs, which also created its own digital currency called Ripple. Please check the box if you want to proceed. When a pre-programmed condition is triggered, the smart contract executes the corresponding contractual clause.Smart contracts are really the killer app of the cryptocurrency world.Szabo’s original theories about how these contracts could work remained unrealized because there was no digitally native financial system that could support programmable transactions. One is called Codius and the other is Ethereum. That’s when Nick Szabo, a cryptographer widely credited with laying the groundwork for bitcoin, first coined the term “smart contract.” At core, these automated contracts work like any other computer program’s if-then statements. The puzzle pieces are falling into place.