On this episode of Crypto Bits, New York associate Jeonghoon Ha joins hosts Seth DuCharme and David Shargel to discuss smart contracts, a central feature of the crypto and blockchain ecosystem.
What is a smart contract?
Smart contracts are computer programs, or transaction protocols on blockchain, that self-execute when certain conditions are met. Most listeners probably know about bitcoin blockchain created by Satoshi Nakamoto that basically introduced a decentralized digital payment system. That’s why everyone’s really excited about this technology of Vitalik Buterin, founder of Ethereum.
Buterin envisioned introducing more advanced applications like decentralized exchange, financial derivatives on blockchain identity and reputation systems. He wanted to do it on Bitcoin blockchain initially, but because of inherent limitations of Bitcoin blockchain, he really couldn’t do it. So, he went ahead and developed his own blockchain called Ethereum.
This blockchain basically allows deployment creation, deployment and execution of smart contracts that we know now. Today when we talk about smart contract, we are in the Ethereum world.
How does a smart contract work? What makes a contract “smart”?
What you need to do first is to create a contract account on the Ethereum blockchain. This is different from a crypto wallet account that most of us think about when we talk about accounts on a blockchain system. So, the contract account says basically that crypto cannot be used to exchange cryptocurrency.
On Ethereum blockchain there will be ether, but you need to create a separate account called the contract account. After you do that, you need to use a solidity to write your own computer program. It’s a particular type of programing language that Ethereum uses. You could hire a software engineer to help you convert certain terms in natural language into computer language, or you could learn how to do that yourself and create…
