While trade and barter systems have been around since ancient times, today’s formal contract system was a by-product of the Industrial Revolution – a period when economic activity shot up through the roof. We are on the brink of another revolution, this time, courtesy of machines that can think, analyze, derive conclusions and act without relying on human input.
Contracts today are written, tracked and executed largely using human intelligence – of course, there are systems to facilitate and streamline the process. Today, terms like AI, machine learning and IoT are a part of our everyday vocabularies. Naturally, these technologies will have widespread applications across businesses before they are adapted for consumer use.
Smart contracts are not really contracted in the traditional sense of the word – it is software that enables transactions to be carried out between two separate systems using Blockchain.
So, what’s Blockchain then? We’ve heard of blockchain mainly with reference to bitcoins and other digital currencies. It is the authentication protocol behind each transaction – a record of every transaction is maintained in a distributed ledger. This enables computers to verify past records, confirm the authenticity and execute transactions based on certain conditions instantly.
Having looked at what smart contracts are and their basic working principle, we’ll talk about a few real-world applications of smart contracts in the next post of this series.
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