-SmartContractsThe next developmentexemplified in the second era blockchain framework called Ethereum was the”Smart Contracts”.In December 2013, a mannamed, Vitalik Buterin releases a white paper on what might turn into the”Ethereum venture” – a blockchain platform with the ability to builddecentralized applications.Ethereum is a blockchainbased distributed computing, public, open-source stage highlighting smartcontract facility.Vitalik was a noticeableBitcoin lover for quite a long while and was a prime supporter of the Bitcoinmagazine in 2012. He tried to update the original Bitcoin protocol and failedto gain agreement within the Bitcoin community, post which he gathered a teamof super programmers to develop a completely new blockchain protocol featuring’Smart contracts’ that would allow programmers to build scripts into theblockchain which would act as contractual agreement and execute when thementioned conditions are met. He named this new blockchain ‘Ethereum’.
Smartcontract is a piece of code which is stored on the blockchain network. Anythingof value, like money, property or shares can be exchanged with the help ofsmart contract in a conflict-free , transparent way while avoiding the servicesof a middleman. Itdefines the conditions to which all parties using the contract would agree, socertain actions are executed if the required conditions are met. A smartcontract is saved on each computer on the network and all of them must executeit to get the same result. In this way users can be sure that the outcome iscorrect.Let ustry to understand Smart contracts in detail by using an example:Lets sayUser A want to ship a truck full of goods to User B. User Z is the trucker whowould be carrying the truck full of goods to User B. User A may have trust onUser B, but not on the trucker.
On the contrary, even the trucker may not trustthe sender (User A), may be he may not pay him?User Awould then sign an agreement with the trucker that he would process the paymentonly after the goods are received by User B. Such process would usually involvea third party wherein legal papers and contracts are signed, printed andscanned.Usingsmart contracts, this can be made simpler and the rules can be added in thecode.User Acan use Smart contracts to sign an agreement with the trucker wherein theprogram would mention a code wherein the payment would not be processed tillthe delivery is confirmed by user B. Once the delivery is confirmed, thepayment would be automatically triggered and processed by smart contract.This canfurther be modified by adding a GPS tracker attached to the truck, which wouldeliminate the need for User B to confirm in this entire process and the paymentcan be processed once the stated conditions are met.
To use asmart contract on Ethereum blockchain , mini payments of Ether, thecryptocurrency for Ethereum were required. Since smart contracts are stored onEthereum blockchain, anyone can access or inspect the contract for an bugs orirregularities since its contents are public. Additionally, no one can accessthe funds on the smart contracts, not even the developers.
This innovationof smart contract in the blockchain system ethereum, built small computerprograms directly into blockchain that allowed financial instruments, like loansor bonds, to be represented, rather than only the cash-like tokens of thebitcoin. The ethereum smart contract platform has a marketcapitalization of billions of dollars and has hundreds of projects headingtowards the market.Ever sinceits launch in 2014, Ethereum has grown significantly and is now considered thesecond largest cryptocurrency after Bitcoin. By June 2014, the Ethereum projectwas funded by a crowd sale. Investors realized how Ethereum could unlock a newlevel of functionality for blockchains and were keen on investing in the same.It has been growing ever since.