Smart contract: what is it?

smart contract literally means: smart contract. It’s the creator of Ethereum, Vitalik Buterin which is the origin of smart contracts. A great fan of Bitcoin, Buterin lamented that this original cryptocurrency was not able to execute computer code. He first proposed to evolve Bitcoin in this direction. Faced with the lack of interest aroused by his proposal, he decided to create a new currency, Ethereumassociated with a programming language, called Solidity.

Associate a program with a currency

It was in 2013 that Vitalik Buterin published the Ethereum white paper and exposed the mechanism of smart contracts. The strong idea: to be able to bind a cryptocurrency to programs that run automatically under certain conditions. Some examples :

• if the temperature drops below a certain number of degrees, which compromises the harvest, automatically trigger the payment of insurance;
• if a team wins a certain football match, as soon as the match ends, a certain sum in ETH (Ethereum) is paid into the wallet of the person who bet for this team;
• if the price of ETH falls below a certain level, exchange its holdings in this currency for USDT (a stable corner whose value is always equal to one dollar).

The wave of cryptocurrencies

The concept of smart contract has created a real revolution in theuniverse crypto.

First, many of the cryptocurrencies that have appeared since 2015 are variants of Ethereum, with specifications specified according to the ERC-20 standard. This is notably the case of REP (Augur), BNT (Bancor), DAI (MakerDAO), SAND (The Sandbox). Their operation is defined by a smart contract specific.

Moreover, the smart contracts led to the appearance ofapps innovative financial services grouped under the DeFi or Decentralized Finance application: loans (Aave, Compound), remunerated savings (Mirror, Synthetix), lottery (PoolTogether), yield optimizers (Pancakeswap)… All have the particularity of not being associated to a given company: they operate automatically, according to the rules enacted in their smart contract.

Certain cryptocurrencies and applications of the Challenge are based on a different base than Ethereum, such as the Binance Smart Chain, Polygon or Solana. And the DOT currency (Polkadot) was first developed on the Solidity language specific to Ethereum, before evolving into another language, Substrate.

A major societal evolution

Applications based on smart contracts are able to make a large number of administrative tasks unnecessary and therefore to facilitate a lot of procedures that are currently daunting.

In fact, it is often considered that the appearance of smart contracts was as important as that of Bitcoin.