A smart contract is a computer program or a transaction protocol respectively, which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract, of an agreement or of a negotiation. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions. In a word, it functions just like any contract: one party meets a condition, which triggers an action by another party.
Blockchain and Smart Contracts
Because of its decentralized nature, blockchain technology has proven a useful tool for tracking anything of value, and this means establishing the protocols of a contract, and upholding them. Recording the sustainability of a product, such as an advanced, bio-based renewable fuel, is one such way that blockchain can lock in the sustainability value of that product by the unit of sale. With that sustainability value managed through blockchain, and it is therefore beyond reproach and immutable, and has great potential.
Blockchains maintain a record of transactions across a linked peer-to-peer network of computers. Because all computers retain control of the blockchain collectively, rather than any single user, the shared nature of the record makes it immutable and decentralized.