The advent of blockchain technology brought about the development of smart contracts, which are self-executing programs that enable automated transactions on a decentralized and distributed blockchain network. This article explains the evolution of smart contracts from their initial development to their current state and highlights the benefits that they provide.
The First Invention of Smart Contracts
In the 1990s, Nick Szabo, a computer scientist, and cryptographer developed the idea of smart contracts as digital protocols that enable information transfer using mathematical algorithms to execute transactions and establish secure connections over computer networks. Szabo defines smart contracts as a combination of computer codes that aid applications and operations such as credit and payment systems. Furthermore, cryptography secures all the contracts that took place. However, the technology needed to execute them was not available at the time.
An Advanced Level of Smart Contracts
The introduction of Bitcoin in 2008 was a turning point for smart contracts. It allowed for secure and decentralized peer-to-peer transactions. The blockchain technology that Bitcoin was built on was the missing piece that smart contracts needed to become a reality. With the increase in cryptocurrencies, the usage of smart contracts also increased, but the limitations of blockchain technology at the time hindered the full realization of Szabo’s vision. However, with the launch of the Ethereum blockchain, smart contracts gained popularity and were put into practical use.
Present-Day Smart Contracts
Smart contracts have evolved from a concept to a reality that can be used in several fields such as healthcare, real estate, payment settlement, law, supply chains, government registries, and voting. The security of smart contracts on blockchain technology also ensures that agreements between parties are tamper-proof, transparent, and unhackable.
Benefits of Smart Contracts
Smart contracts have several benefits, including transparency, accuracy, efficiency, speed, security, and cost savings. Furthermore, they ensure transparency by eliminating third-party involvement in transactions, and they automate contracts, eliminating paperwork and reducing errors. Smart contracts are also secure, as the programs and codes are encrypted, making them difficult to hack. Finally, smart contracts save costs, as there is no need for intermediaries or manual reconciliations.
The evolution of smart contracts has been significant since their inception in the 1990s. With the development of blockchain technology, smart contracts have become more practical and are used in several fields, providing several benefits. Furthermore, with the potential to revolutionize how we carry out transactions, smart contracts will continue to evolve and improve, and more fields will adopt them.
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