In the management of a relationship or as part of an agreement, business and all parties involved often put a contract in place. The contract defines the terms and conditions that apply in the partnership or relationship like Purchaser/merchant, tenant/Owner, subscriber/service provider.
A traditional contract, the one that is still broadly used to date, is a written document that frameworks cooperation, it includes the terms and conditions of a partnership or service agreement. The contract is written in human language and may be subject to interpretation. Since the written contract is not void of ambiguity, both parties can have a different interpretation of the contract. It requires a third party to enforce the law and to decide during a dispute for instance, but it is common that a third party is often involved even though there is no dispute.
WHAT ARE SMART CONTRACTS
Smart contracts are translations of an agreement including terms and conditions into a computational code (script). Blockchain developers write the script in a programming language like Java, C++, etc. in a way that it is void of ambiguity and does not lead to interpretation. The code translates a set of rules that are automatically executed and validated. A straightforward example is a translation of: “if X provides the service, Y pays for it.”
Smart contracts codes are uploaded into the blockchain to check the validity of a contract and enable required steps. From its initialization, a smart contract is automatically executed. The main difference between smart contract and a traditional contract is that smart contract doesn’t rely on a third party; cryptographic code enforces it.
Blockchain has so many facilities and the best thing is that it gets rid of the middlemen altogether. So, you won’t have to pay any intermediate anymore, not while you’re on blockchain network anyway. Blockchain technology has introduced smart contracts that change the very nature of how we do business today.
This system really saves up a lot of time. They have their fair share of problems. However, they are one of the cheaper, faster and more secure methods than all traditional means. It is the sole reason for banks or governments not being so fond of this awesome tech.