Question

How does a smart contract differ from a traditional contract?

1) Smart contracts serve a different purpose than traditional contracts.
2) Smart contracts eliminate the need for a central authority.
3) Smart contracts guarantee that all parties are anonymous.
4) Smart contracts are more effective than traditional contracts.

Answer 1

A smart contract differs from a traditional contract in terms of purpose, decentralization, anonymity, and effectiveness.

Step-by-step explanation:

A smart contract differs from a traditional contract in several ways:

1. Purpose: Smart contracts serve a different purpose than traditional contracts. While traditional contracts are used to outline the rights and obligations of parties involved in an agreement, smart contracts are self-executing and automatically enforce the terms of the agreement.
2. Decentralization: Smart contracts eliminate the need for a central authority, such as a government or legal system, to oversee and enforce the contract. Instead, they are powered by blockchain technology and operate on a decentralized network.
3. Anonymity: Smart contracts do not guarantee that all parties are anonymous. The identities of the parties involved can vary depending on the implementation of the smart contract. In some cases, parties may choose to remain anonymous, while in others, their identities may be visible on the blockchain.
4. Effectiveness: Whether smart contracts are more effective than traditional contracts depends on the specific use case. Smart contracts can be more efficient in terms of automation and reducing the need for intermediaries, but they may not be suitable for all types of agreements.