Smart contract is a self-executing digital contract whose terms are embedded in code and stored on a blockchain. Smart contracts are used to automate the execution of contracts, making them more secure, decentralized and transparent.
Overview
Traditional contracts require intermediaries such as lawyers, banks, or notaries to ensure that the terms of the agreement are upheld. Smart contracts eliminate the need for these intermediaries by automating the execution and enforcement of contractual obligations. They achieve this through the use of decentralized blockchain networks, which provide transparency, immutability, and security.
Functionality
Smart contracts enable a wide range of applications, from simple to complex. Here are some key features and functionalities of smart contracts:
1. Automation
Smart contracts automate the execution of contract terms by encoding them into computer code. Once the conditions specified in the contract are met, the contract automatically executes the predetermined actions or transfers assets accordingly. This automation reduces the need for manual intervention, saves time, and minimizes the risk of errors or fraud.
2. Transparency
Smart contracts operate on public blockchain networks, making the code and transaction history visible to all participants. This transparency ensures that all parties have access to the same information, promoting trust and accountability. Additionally, the immutability of blockchain technology prevents tampering or unauthorized changes to the contract once it is deployed.
3. Trustless Interactions
Smart contracts enable the participants to engage in transactions without relying on trust or reputation. The predetermined rules and conditions written into the contract code ensure that all parties’ interests are protected. By removing the need for trust, smart contracts open up new possibilities for peer-to-peer transactions and disintermediation.
Ethereum Virtual Machine (EVM)
The Ethereum Virtual Machine (EVM) is a runtime environment that executes smart contracts on the Ethereum network. The EVM enables developers to write smart contracts in various programming languages, such as Solidity, and deploy them on the Ethereum blockchain.
