Over time, blockchain’s application extended beyond Bitcoin to include smart contracts. Smart contracts involve a set of rules embedded in computer code with execution of those rules occurring only when a predetermined event occurs. They exist on the blockchain, meaning that once they are transferred to the blockchain, they cannot be altered. This makes them unlike traditional contracts because there is no “contract interpretation” or “contract modification” allowed and there is no breach. In fact, these agreements are not “smart” in a sense that a smartphone is smart, and they are not contracts like the traditional contract negotiation and execution processes. Smart contracts are an innovation because they reduce the need for intermediaries. They can simply be programmed to do something at a certain time. For instance, a smart contract can release funds once a year on a specified date. It can authorize the transfer of title to the buyer after financing has been satisfied. It can send payment to the vendor once the buyer receives goods. The list can go on and on.
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