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¿What are smart contracts?

Behind the cryptocurrencies is the blockchain, but behind this are the Smart Contracts.
Let’s see in a simple way what are smart contracts. In order to understand this, we need to understand cryptocurrencies and Blockchain.

Traditionally, money has been used to do business throughout the world.

In fact, the word salary is born in the exchange of salt, hundreds of years ago people are exchanged for salt as an exchange of payment, hence the word salary.

Over the years, humanity stopped using species to start exchanging products and services for gold coins. Years later, seeing the difficulty of transporting these gold coins to exchange goods and services, they created physical money, always backed by banks and gold reserves.

Until today, each country or group of countries had their own currency, some countries support their physical currency in gold such as the European Union and the euro, other countries back their gold and oil bills like the United States. All countries in the world exchange goods and services with each other through money, but this is done electronically, through banks.

The Blockchain was born in 2008, where a person or group of people published a kind of protocol, this open source protocol was a “formula” for making transactions on the Internet as “banks do” but without the need for intermediaries, this protocol allowed an individual to turn money to another person thousands of kilometers away without the approval of an intermediary, in this case, without a bank or financial entity.

With the first open protocol “Blockchain” arises the first cryptocurrency in the world, which we now know as Bitcoin.

What is Blockchain? It is a chain of blocks, imagine that the blocks are accounting books, just as there are accounting books for companies and individuals, where charges, bonds and general accounting are recorded. The Blockchain is a kind of book but from the Internet, this chain of blocks forms a database and records every historical movement of the chain of blocks, which makes it impossible to tamper with it or make a change, since the same system Blockchain would not let us. The Blockchain system needs a digital currency in its system to be able to make transfers. Since otherwise it would not work.

Intelligent Contracts
Normally in a business plan, or in a commercial plan, it is almost always essential to know who we are going to do business with, especially if the payment is going to be made immediately, or if it is going to be done in later periods.

Let’s imagine that we have a blockchain transaction, and one of the characteristics of the blockchain is that it can generate intelligent contracts.

An intelligent contract is a code, which runs at the top of a chain of blocks, which contains a set of rules under which the parties to this intelligent contract agree to interact with each other.

What is the main objective of the smart contract? It is allowing two anonymous parties to trade and also do business with each other, usually through the Internet without the need for an intermediary.

The blockchain allows automated transfers between the parties with the same guarantee as a normal transaction, but, superior. Because when using smart contracts we do not need intermediaries to be able to do business between the interested parties.

 

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