An Overview of Smart Contracts
By: Nikhil Chouhan
Tags: Blockchain Technology, Smart Contracts

Nikhil Chouhan | 4th year B.Tech Integrated (Computer Engineering),

NMIMS’s MPSTME.

I. Introduction

The concepts of bitcoin and blockchain were first proposed in 2008 by Satoshi Nakamoto, who described how cryptology and an open distributed ledger can be combined into a digital currency application. Blockchain could be regarded as a public ledger and all committed transactions are stored in a list of blocks.

An appealing application that can be deployed on top of blockchain is smart contracts. A smart contract is executable code that runs on the blockchain to facilitate, execute and enforce the terms of an agreement between untrusted parties.

II. Blockchain Technology

A blockchain is a distributed database that records all transactions that have ever occurred in the blockchain network. This database is replicated and shared among the network’s participants. The main feature of blockchain is that it allows untrusted participants to communicate and send transactions between each other in a secure way without the need of a trusted third party.

Blockchain is an ordered list of blocks, where each block is identified by its cryptographic hash.Each block references the block that came before it, resulting in a chain of blocks. Each block consists of a set of transactions.

III. Smart Contracts

A smart contract is executable code that runs on the blockchain to facilitate, execute and enforce the terms of an agreement. The main aim of a smart contract is to automatically execute the terms of an agreement once the specified conditions are met. Thus, smart contracts promise low transaction fees compared to traditional systems that require a trusted third party to enforce and execute the terms of an agreement. The idea of smart contracts came from Szabo in 1994. However, the idea did not see the light till the emergence of blockchain technology.

IV. Platforms for Smart Contracts

Smart contracts can be developed and deployed in different blockchain platforms (e.g., Ethereum, Bitcoin and NXT).

• Bitcoin is a public blockchain platform that can be used to process cryptocurrency transactions, but with a very limited compute capability. Bitcoin uses a stack-based bytecode scripting language. The ability of creating a smart contract with rich logic using Bitcoin scripting language is very limited.

• Ethereum is a public blockchain platform that can support advanced and customized smart contracts with the help of Turing-complete programming language. Ethereum platform can support withdrawal limits, loops, financial contracts and gambling markets. The code of Ethereum smart contracts is written in a stack-based bytecode language and executed in Ethereum Virtual Machine (EVM).

V. Smart Contract Applications

There are various possible applications where smart contracts can be applied to. Some of these applications are as follows:

• Internet of Thing and smart property: there are billions of nodes that are sharing data between each other through the Internet. A potential use case of blockchain-based smart contracts is to allow those nodes to share or access different digital properties without a trusted third party.

• E-commerce: a potential use case is to facilitate the trade between untrusted parties (e.g.,seller and buyer) without a trusted third party. This would result in reduction of trading costs. Smart contracts can only release the payment to

VI. Closure

Blockchain technology is a distributed database that records all transactions that have ever occurred in the network. The main feature of blockchain is that it allows untrusted parties to communicate between each other without the need of a trusted third party. One of these applications is smart contracts, which are executable codes that facilitate, execute and enforce an agreement between untrusted parties. Ethereum is currently the most common blockchain platform for developing smart contracts, although there are some other available platforms.

References

https://www.researchgate.net/publication/328230865_Blockchain-based_Smart_Contracts_-_Applications_and_Challenges

https://www.investopedia.com/terms/b/blockchain.asp