Blockchain and Smart Contracts
Blockchain is a tamper-proof distributed database that enables permanent, transparent and secure storage of all kinds of transactions. It records data across a network in real time, without central ownership or control. Blockchain allows information to be shared amongst a community and creates an immutable record that cannot be changed. Information held on blockchain exists as shared and replicated ledger, visible to anyone with access privileges who also can verify the authenticity of the information. Once entered into the database it cannot be altered or removed.
What are smart contracts?
A smart contract is used to exchange money, property, shares, or anything else of value in a transparent way without involving a middleman — legal standard conditions are embedded within the contract itself rather than being provided by a third party. Due to the nature of Blockchain, smart contracts actually run on a computer that is distributed across the Internet thus removing any single point of failure.
The “Contract” can be coded to handle unlimited numbers of users, automatically executes transactions and provides an audit trail. These smart contracts are stored and replicated in all nodes participating in the network making them transparent to anyone with access privileges. The technology allows individuals and businesses to use blockchain technology for automatic processing of payments –not just currencies but also stocks or other assets– when certain conditions are met
What is Ethereum?
Ethereum (ETH) is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. In essence Ethereum is a platform that helps to run smart contracts and DApps (Decentralized Applications).
The project started in 2014 with the goal of building upon Bitcoin’s only weakness: its lack of Turing completeness; being unable to run programs developed for other languages. That means there cannot be any complex code on Bitcoin’s main-net blockchain –a restriction which makes many use cases unfeasible.
Smart Contract example on Ethereum:
A simple user story for Smart Contracts could be : Bob wants to sell his car and wishes to receive payment instantly, he could put a “For Sale” sign in the window of his car with a QR code that contains all the information for potential buyers to check (vehicle make, model, year of manufacture etc.) and then automatically receive payments to his bank account when agreed conditions are met. The “Smart Contract” is running on a blockchain network which prevents fraud or any other interruptions to the process from occurring.