One of the fundamental technologies that underpins the Ethereum network is the development of “Smart Contracts”. Whereas Bitcoin and other cryptocurrencies were developed for the sole purpose of being a Peer-to-Peer digital currency, Ethereum was developed as a concept for running decentralised applications.
In their simplest forms, smart contracts are pieces of computer code that have built in logic and conditions that define their outcome. They are also run in a decentralised manner by all the computers on the network (nodes) and are stored and replicated on the ledger (blockchain).
They are nothing more than relatively simple programs that will execute “if this then that” functions. Hence, unlike simple blockchains that will store data in a decentralised manner, smart contracts will be run as decentralised calculations. They were first theorised by Nick Szabo in 1994 as a way of digitizing contracts that could be run as computer code.