Smart contract

Contractual transaction on a decentralized platform / From Wikipedia, the free encyclopedia

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A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement.[1][2][3][4] The objectives of smart contracts are the reduction of need for trusted intermediators, arbitration costs, and fraud losses, as well as the reduction of malicious and accidental exceptions.[5][2] Smart contracts are commonly associated with cryptocurrencies, and the smart contracts introduced by Ethereum are generally considered a fundamental building block for decentralized finance (DeFi) and NFT applications.[6][7]

Vending machines are mentioned as the oldest piece of technology equivalent to smart contract implementation.[3] The original Ethereum white paper by Vitalik Buterin in 2014[8] describes the Bitcoin protocol as a weak version of the smart contract concept as originally defined by Nick Szabo, and proposed a stronger version based on the Solidity language, which is Turing complete. Since Bitcoin,[clarification needed] various cryptocurrencies have supported programming languages which allow for more advanced smart contracts between untrusted parties.[9]

A smart contract should not be confused with a smart legal contract, which refers to a traditional, natural-language, legally-binding agreement that has selected terms expressed and implemented in machine-readable code.[10][11][12]