To put it simply, the transactions that have been determined in advance, and the conditions that the two parties agreed within the framework of these rules are realized without the need of any intermediary, are called "smart contracts". As its name suggests, it basically has a simple two-phase process logic. It works with the logic of “If it happens - it will happen”. So it doesn't need 3rd party. The process operates on the basis of trust and the contract takes place. This trust foundation is of great importance to the parties because both parties are in a situation where there are equal conditions.. It is not possible for either side to excel over the other. For these reasons, it is a trust-based contract.
The idea of a smart contract was first introduced in 1993 by Nick Szabo. Due to this and the idea of Bit Gold, Szabo is also thought to be Satoshi Nakamoto by some people.
If we give more detailed information about smart contracts and applications, we should also mention Vitalik Buterin, the owner of the Ethereum platform. Buterin thinks that the use of blokchain should not only remain as a cryptocurrency and should be used in many different tasks. When the developers in the system create a contract that can work anywhere in the world, they are rewarded with the cryptocurrency called “ether”. Users pay ether to use smart contracts. The more efficient the developers produce, the less the ether paid to the system.
How Smart Contracts Work?
Firstly, the product or products that are considered as valuable when the contract is made are determined.
Contract conditions are determined and coded bilaterally.
Commodities and conditions are entered as a new block in the blockchain, which is permanent and cannot be changed.
Contract conditions are processed if provided bilaterally.
The initially determined commodity transfer is carried out according to the terms in the smart contract.