Smart Contracts are a term originally thought to be coined by Nick Szabo in the mid 1990s. He is a renowned computer scientist and cryptographer. Basically he thought smart contracts could combine protocols with user interfaces to formalize and secure relationships over computer networks.
Years later bitcoin came about and then ethereum and the concept of a Turing compete blockchain platform opened up this smart contract concept to the rest of the world. Smart contra today can be thought to leverage and convert a contract into logic and computer code, stored and replicated on a technology system like blockchain, and under authority and supervision of the distributed decentralized computer network.
How Smart Contracts work
A contract enforced and defined by cryptography and in some instances , computational gas costs(ethereum). They are self executing, rules-based programmatic code and built within a if-then-else logic tree. Think of a real estate or eBay or Craigslist transaction by two or more parties exchanging funds and the entire process is automated and secured within a smart contract Escrow released payment cycle. And these payments are only release based on the logic within that smart contract.
Think Voting transparency and storage possibilities. Digital healthcare identity’s and medical records stored on blockchain. And many more people are cases.
Smarter contracts automate away the complexities of third party payments and inefficient processes. The strength is the blockchain network, private or public , which provides some form of distributed immutability and security, reliability, and transparency.
As a business or organization you feel secure and comfortable in your knowledge that relationships between customers, vendors , partners , contractors and employees are built within this automated intelligent secure smart contract blockchain network. An Optimized efficient and less manual process without the need for paperwork .