3.2.5.1. Session: Introduction to Smart Contracts

Automatic Contracts (15 minutes)

Begin by recapping the key ideas from the previous modules (focus on keeping records of transactions in a chain of blocks).
Narrate a situation in the real world where two parties enter into a contract, e.g., a lease agreement between a landlord and a tenant.
Describe the complexities such as terms of payment, maintenance responsibilities, breach penalties, etc. Mention the common challenges faced: Delays in payment, disputes over terms, or ambiguities in the contract's wording.
Pose questions (allow a minute for students to discuss in pairs before sharing their thoughts):
- “What if these contracts were not just on paper but coded and automated?”
- “Can data records in the blockchain hold more information than just information about transactions?”
- “Can our current understanding of blockchain support such complex operations?”
Encourage students to explain what would be necessary for a blockchain network to enable the implementation of “automated” contracts.

Defining Smart Contracts (15 minutes)

In this phase provide a concise explanation of the smart contracts. ⇒ using slides (2.5-smart_contracts.pptx)
Explain that data records in a blockchain network can be more than just transactional, they can be also executable code ⇒ smart contract
Provide a simple definition, e.g., "A smart contract is a self-executing contract where the terms of agreement or conditions are written into lines of code.”
Use an analogy: liken smart contracts to a vending machine, where you input a specific amount (the condition), and you get a snack (the execution) automatically. Emphasize that, unlike traditional contracts, smart contracts operate in a decentralized environment.
Explain the state-machine perspective of the blockchain, highlighting that every block represents a 'state' of the network. Illustrate the concept with a visual representation: Show a diagram of the blockchain as a sequence of blocks, with each block representing a state of the network. Describe how transactions,
including the execution of smart contracts, transition the network from one state to another.
Highlight that the contract's actions only execute when predetermined conditions are met and verified.
Delve into the advantages of smart contracts:
- Transparency ⇒ all parties can see the contract
- Security ⇒ tamper-resistant due to blockchain's properties
- Cost savings ⇒ reducing intermediaries
- Automation ⇒ automatic execution
Highlight that while smart contracts promise several advantages, they're not without challenges. Emphasize issues like the permanence of blockchain (errors in a smart contract can't be easily rectified) and the importance of thorough code verification.
Pose a thought-provoking question like, "Given the irreversible nature of blockchain, what happens if there's a bug in a smart contract code?”
Conclude by suggesting that these challenges emphasize the importance of proper design, testing, and validation before deploying a smart contract.