Ethereum smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts enable the execution of transactions and agreements between parties without the need for a central authority, legal system, or external enforcement mechanism.
The term “smart contract” was first coined by Nick Szabo in 1996. Szabo’s idea was to create a protocol in which contract law could be enforced digitally.
He realized that the decentralized nature of the Internet could be used to create a system in which two parties could interact without the need for a third party to mediate or enforce the transaction.
While smart contracts have been around for some time, they gained popularity after the launch of Ethereum in 2015. Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third party interference.
Ethereum smart contracts are written in code and stored on the blockchain. The code is executed by the Ethereum Virtual Machine (EVM), which is a decentralized platform that runs on thousands of nodes across the world.
The code of a smart contract is available publicly, and anyone can see it. This transparency is one of the main advantages of using smart contracts.
It allows anyone to audit the code and verify that it does what it is supposed to do.
Another advantage of smart contracts is that they are immutable: once they are deployed on the blockchain, they cannot be changed. This means that they are resistant to fraud and third-party interference.
A disadvantage of smart contracts is that they are often complex and difficult to understand. This can make it hard to debug errors in the code.
Additionally, because smart contracts are stored on the blockchain, they are permanent and cannot be changed or deleted. This can lead to problems if there is a mistake in the contract code.
Overall, Ethereum smart contracts offer a number of advantages over traditional contract law. They are transparent, immutable, and resistant to fraud and third-party interference.
However, they can be complex and difficult to understand.