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Smart contracts are a core part of the crypto economy, and their applications are growing rapidly. Here’s why.
Like traditional contracts used by Canadians for business and mortgages, smart contracts are agreements between parties—the difference being that they exist virtually. Defined by computer scientist Nick Szabo as a “computerized transaction protocol,” smart contracts are lines of code with the terms and conditions of a contract written into them. This code is programmed on an irreversible blockchain, and it self-executes based on the existence of certain conditions. In other words, it doesn’t need human beings to intervene to make decisions and perform actions.
Smart contracts are at the heart of non-fungible tokens (NFTs), and one of the advantages of public-blockchain-based smart contracts is that they’re trackable and publicly verifiable. While smart contracts are used most often for financial transactions such as trading, lending and investments, they can also be used in industries as diverse as real estate, gaming and health care.
Example: “Vikram will earn a 10% commission on all secondary sales of his NFT without him having to do anything—this rule is coded into the NFT’s smart contract.”
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