The blockchain thesis is revolutionary in terms of re-imagining how we move data, and it laid the foundation for a system where individuals could trade between each other, without needing to rely on an intermediary. Bitcoin, as the first blockchain, utilizes only the essential functions of the framework. As with nearly every new idea, it's quickly expanded upon and transformed into something entirely different. While the blockchain is the foundation, smart contracts make up the real functionality of decentralized, encrypted data flow.
Contracts are just agreements between two or more people. but contractual obligations and stipulations are usually set and enforced by an outside entity, such as a lawyer or arbitrator. This ensures that both parties commit to their end, or otherwise dissolve the contract fairly. Nearly all business and government functions revolve around contracts, and an entire legal industry is devoted to processing legal contract documentation.
A smart contract is drawn up on the blockchain, and automatically settles itself when all the conditions are met. Being on the blockchain grants each contract certain inherent values:
These properties are necessary in order to make transactions between people all over the world, but the smart contract is much bigger.
Smart contracts enable people to use the blockchain as an application platform, like Android or Windows, giving cryptocurrencies and digital assets a means to provide value. Without this addition, Bitcoin and altcoins would have very limited capacity and function. The leading blockchain to use smart contracts as an app development backbone, is Ethereum.
