Smart contract technology is booming due to public blockchains and the platforms that have made it simpler to build and deploy them. Ethereum is a platform that was built specifically for creating smart contracts. To understand the relationship between these two crypto buzz words, let’s start with:
Smart contracts were invented in the mid-90’s by a computer scientist and cryptographer Nick Szabo. He realised at the time that computers were making it possible to run algorithms that used to be too costly, and believed they would eventually evolve into “smart contracts”. He understood the vast potential of contracts that could be created and executed digitally.
“A smart contract is a piece of software that contains rules and regulations for negotiating the terms of a contract. It automatically verifies the contract and then executes the agreed upon terms.” CoinSutra
By using code to automate tasks, smart contracts can help you exchange money, property or anything of value in a transparent, conflict-free way. No need to rely on trust or a middle-man, automated contracts are faster and cheaper. You can find more information on smart contracts on our website.
<Image source blockchaintechnologies>
Ethereum’s main objective was to replace internet third parties, making individual’s data more secure and less vulnerable to hackers. It aims to function as both a decentralised internet and a decentralized app (dApp) store. The idea was to start a platform enabling people around the world to compete to offer services on top of this infrastructure. The blockchain platform runs on its native currency, Ether, also referred to as gas.
You can read more about Ethereum here.
While Bitcoin was the first to employ the use of smart contracts, Ethereum took it a step further and revolutionised the way these contracts could be used. With Bitcoin, smart contracts make it possible to transfer value from one person to another, if certain conditions are met, but Ethereum took it one step further: allowing users to write their own smart contracts. Aside from opening the endless realm of possibilities, the platform also ensured that all code created is stored on a decentralized network.
Say you were using an app to store personal information and this app suddenly closed down, you would lose access to your personal information. Ethereum makes this impossible as it stores the smart contract code and state of the smart contract on the blockchain. Any app that is created on the Ethereum platform can never cease to exist, as all information is backed up on nodes all over the world (and encrypted).
By allowing developers to program their own smart contracts, also referred to as applications, Ethereum created a “world computer” with endless possibilities.
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