Home / Crypto News / A thorough commentary on easy-to-understand “Smart Contract” that anyone should know!

A thorough commentary on easy-to-understand “Smart Contract” that anyone should know!

People who are interested in block chain technology or those who are investing in cryptocurrency certainly have heard the word Smart Contracts somewhere.

I understand that Smart Contract (so-called common name) is related to block chains, but the exact definitions and functions are actually very deep and difficult to understand.

Smart Contract is a technology that plays a role at all, and what is the difference from words such as block chains and distributed ledgers? On this page, I will explain these questions easily.

Sumacon is surprisingly old? I was born in 1994

Smart Contract seems like a new word seemingly because attention took a leap in the period of the appearance of Ethicalam.

However, this word was created in 1994 by American cryptographer Nick Szabo. Mr. Szabo is a person who proposed the digital currency which became the basis of the idea of ​​Bitcoin called “Bit Gold”.

Smart contracts defined by Mr. Szabo refer to computer programs that automatically generate, approve, and (force ) the contract (contract) digitally.

What are the benefits of using Smart Contract?

Let’s say that Mr. A sends money to Mr. B. Traditionally, a bank exists between Mr. A and Mr. B as an intermediary, “We will receive money and intermediary fee from A and send it to B”.

What happens if we do this process automatically with the following Smart Contract?

  • When you receive a request to transfer 10 coins from A to B, do the following
  • Make sure A has 10 coins or more
  • After confirming, subtract 10 coins from the account of A
  • After processing account A, add 10 coins to account B

By doing this, you can omit the intermediary, you can make remittance faster with a cheaper commission than before. In other words, there is a merit that automatic contract execution can be executed without a third party for Smart Contract.

Because of this nature, smart contracts are expected to be utilized in a variety of fields such as international remittance , voting system , management of asset ownership , supply chain , healthcare .

Smart Contract and Block Chain

Let’s go back to the example of remittance from Mr. A to Mr. B previously.

It is good that the program is executed, but who is actually doing processing between accounts of Mr. A and Mr. B (providing computer power and electricity bill) actually ?

Also, how can I prove that this contract has been done properly ?

Block chains play an active part here. The execution and recording of Smart Contract is performed by an unspecified number of network participants (nodes).

Also, since anyone can view and verify the transaction history recorded on the block chain, fairness and security of the contract will also be maintained.

In other words, Smart Contract has block chains .

What is the difference between “block chains” and “distributed ledgers”?

Although I explained a little in the above, let’s check the difference between smart contract and block chain , distributed type ledger here.

Distributed ledger (DLT)

First, a distributed ledger is a system in which banks and governments do not collectively manage one ledger (documents that record transactions) but manage copies of ledgers to all .

Since all participants in the network hold copies of the ledger, there is an advantage that fraud can be immediately identified even if one person tamper with it .

Block chain

Which is a kind of the distributed ledger of is the block chain. In addition to the characteristics of the distributed ledger mentioned above, in the block chain, data (transaction recording) is grouped into a group called block and encrypted.

In order to decrypt this encrypted block, you need the data of the previously created block . However, to obtain the data of this block, the data of the previous block is required.

Thus, in the block chain, there is a merit that it is impossible to tamper with data by making a chain of encrypted blocks .

Smart Contract

Finally, Smart Contract is a program that can generate, approve, and execute contracts automatically .

Because this program is executed automatically and unattended, intervention by a third party becomes unnecessary .

However, someone has to provide the computing power (electricity) to execute and record the Smart Contract.

By using block chains, unspecified number of nodes can substitute for such work.

The definition of smart contract is ambiguous?

Up to this point, it was assumed that Smart Contract is a program that can automatically generate, approve, and execute contracts.

However, there are some ambiguous parts in the definition of Smart Contract and how to use terminology .

For smart contracts, there are simple things like a simple remittance program, and there are complicated programs such as multiple smartconds gathering to add extensions to tokens.

Even such a single thing, precisely one gathered by several smart cars, tends to be called smart contract in general .

Smart Contract Development Language

Although I explained that Smart Contract is a program, what kind of programming language is it written in?

This section introduces the Smart Contract Development Language used in Bitcoin and Ethernet.


Although recognition is not so high, it is possible to develop smart contracts even with Bitcoins.

It is well-known and there are things like ” lightning network ” and ” atomic cross chain “.

Lightning network is a technology that attempts to facilitate payment by performing transactions in the space “channel”.

Atomic cross-chain is a technology for conducting transactions between different block chains (currencies).

These technologies are programs using smart contracts .

But Bitcoin’s Smart Contract Development Language is said to be “incomplete Turing” and it can not be combined with any program.

To be precise, this development language is limited to the purpose of developing an extension of Bitcoin (BTC) as money as in the example above.


It is written in five languages: Solidity , Serpent , LLL , Mutan , and Vyper (Test Phase). Among them, Solidity is a very famous Smart Contract development language.

The development language of the company is “Turing complete”, which is wider than that of the Bitcoin.

It is easy to understand that thinking that Bitcoins are only possible for smart cards on currency exchange, Solidity and others can handle various asset ownership .

In other words, it is a platform that made it possible to utilize block chains and smart contracts in various industrial fields .

In carrying out this contract and maintaining the network, ETH is paid as a fee to the node. So, ETH is not a cryptocurrency, but a virtual “fuel” to move a node.

Problems of Smart Contract

As well as there are various problems in the block chain, there are many challenges also in Smart Contract.

For example, while traditional contracts are enforced by law, smart contracts are executed based on codes, but should governments in each country also impose legal regulations on smart contracts What?

It is good for the contract to be executed automatically, but what happens if you want to make refund or return?

Also, I explained that the execution history of Smart Contract is shared among all nodes, but what should I do if I do not want history (financial institution etc) to be seen by specific individuals or organizations?

In this way, there is still much room for improvement and discussion in smart contracts.


A Smart Contract was to refer to an automatic execution programIf so, this is done” on a distributed network.

There is an advantage that it is possible to carry out the deal automatically automatically without a third party for Smart Contract, and by combining it with the block chain it was possible to ensure the legitimacy of the contract.

The definition of Smart Contract is ambiguous and it is not limited to a single program but a program that collects multiple contracts is sometimes called a Smart Contract.

Please read this article and definitely want to learn more about Smart Contract! Those who think that it also recommends to look through online courses such as Etherium and RSK.

Author: Yuya 【Coin Desk News】 – Source Post: https://crypto-times.jp/what-are-smart-contracts/

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