Smart contracts and its function

Smart contracts and its function

in Cryptocurrency, Ethereum, Ethereum
The thing that remains a confusing place is “smart contracts”. Standard contracts outline the terms of a relationship. A smart contract enforces a relationship with cryptographic code which means that smart contracts are programs that discharge exactly as they are set up to by their creators. Nick Szabo initially described the idea in 1933 as a sort of digital vending machine. In the example, he described how a user can input value or data and get a finite item (a kind of a snack or whatever you can buy in a vending machine). As to the cryptocurrencies, a user can send, for instance, 8 ethers to a friend using a smart contract. He creates a contract and sends the data to the contract to execute the desired command. Ethereum was built especially for the smart contracts which can also form the blocks for decentralized apps, and decentralized anonymous companies. The basic smart contracts were supported by Bitcoin. But, bitcoin is limited to the currency use case. Ethereum creates a language with the help of which developers can write their own programs replacing Bitcoin’s restrictive language. So, the developers can create their own smart contracts which have the following features:
  • Multi-signature accounts functionality.
  • Enable to manage agreements between users
  • Provide utility to other contracts
  • Store information about an application
Simply put, smart contracts need cooperation with other contracts. Supposing someone places bet on the temperature on a hot spring day. This may trigger a sequence of contracts under the hood. One contract would use outside data to determine the weather, and another contract could settle the bet based on the information it received from the first contract when the conditions are met. To run contracts ether needs transaction fees, which depend on the amount of computational power required. The Ethereum Virtual Machine then executes smart contracts in 'bytecode', or a series of ones and zeroes that can be read and interpreted by the network.

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