Quick Summary
Smart contracts are programs stored on blockchain that automatically execute actions when predetermined conditions are met without intermediaries.
Smart contracts are self-executing programs stored on a blockchain that run when predetermined conditions are met. They automatically enforce and execute the terms of an agreement without the need for intermediaries.
How Smart Contracts Work
- Parties agree on terms and encode them into the contract
- The smart contract is deployed to the blockchain
- When conditions are triggered, the contract executes automatically
- Results are recorded on the blockchain
Advantages
- No intermediaries needed
- Automatic execution
- Transparent and traceable
- Tamper-proof
- Cost reduction
- Speed and efficiency
Use Cases
| Industry | Application |
|---|---|
| Finance | DeFi, automated lending, insurance claims |
| Real Estate | Property transfers, escrow |
| Supply Chain | Automated payments on delivery |
| Gaming | NFT transactions, rewards |
Platforms for Smart Contracts
- Ethereum: Most popular platform
- Solana: High speed, low cost
- Cardano: Research-driven approach
- Hyperledger: Enterprise-focused
Limitations and Risks
- Code bugs cannot be easily fixed
- Legal status uncertain in many jurisdictions
- Scalability challenges
- Oracle problem (connecting to real-world data)
- Requires technical expertise
Key Points
- Self-executing code
- Runs on blockchain
- No intermediaries needed
- Automatic enforcement
- Ethereum is popular platform
- Used in DeFi and NFTs