One of the things that keep me up at midnight is the morality vs. the legality of Shylock's dilemma in Shakespeare's Merchant of Venice, I’m sure you can relate! On a moral level, he is definitely in the wrong, but on a legal level, he should have won?! Well, if Shylock had a smart contract, the play would’ve been over midway through!
If this; then that, or else
A smart contract is essentially a written code on the blockchain detailing an agreement between two parties that may or may not know each other and guarantees that each party will take what is theirs at the end. That means no fraud, no backing out, and no playing around; it’s immutable.
Many people call smart contracts the "if this; then that, or else". That is because a smart contract is an automated one, so none of the parties really own it. It acts on its own depending on whether certain conditions of a contract have been met or not. Because of that, smart contracts are deterministic. This means that the final outcome of the contract will not be changed no matter who triggered the conditions.
Looking back at Shylock's dilemma, if Shylock had a smart contract, then automatically Shylock would have his way immediately and without any interference. Now how does that translate to the real world? Well, that would mean that if you sign a smart contract where you’d sell your house for X amount in cryptocurrency with the condition that the buyer owns 5 cats, then the deal would be done once the buyer accepts it. If the buyer doesn’t have 5 cats, then the deal would fall through as the conditions of the contract hadn’t been met! Hence; if this; then that, or else.
Why we love smart contracts
- Smart not hard
Like we said, smart contracts are codes on the blockchain. If you remember anything about blockchain, it is the most reliable source to check authenticity. So every contract transaction will be stored on the blockchain in chronological order and can be accessed by anyone. However, the information on the parties involved can be hidden for privacy reasons.
2. Say goodbye to the middleman!
Smart contracts are easy, reliable, and transparent. There’s absolutely no need for another person outside of the involved parties.
3. Fraud-free system
Once a smart contract hit the blockchain, there’s no changing it back and it gains autonomy. Meaning that none of the parties owns it. Since it’s on the blockchain, it would be incredibly hard to commit fraud and change the details of the agreement as it’s computation-intensive.