Assets, Ethereum

What Is a Smart Contract in Ethereum?

A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties.

These transactions are trackable and irreversible. Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third party interference.

In the Ethereum blockchain, a smart contract is a piece of code that can be deployed on the Ethereum network. A smart contract is like a traditional contract in that it defines the rules and penalties around an agreement, but it is also self-executing, meaning that once the conditions of the contract are met, the code automatically executes the terms of the agreement.

For example, let’s say you wanted to buy a house. You could go through a traditional real estate agent, who would help you find a house and then draw up a legally binding contract between you and the seller. But you would have to trust that the real estate agent would actually find you a suitable house and that they wouldn’t rip you off.

With a smart contract, you could find a house on your own using a decentralized application (DApp) built on Ethereum, and then use a smart contract to draw up an agreement with the seller that would be executed automatically when certain conditions were met, such as when the deed was transferred to your name. This would all happen without the need for a third party, such as a real estate agent, and it would be much cheaper and faster than going through traditional channels. .

NOTE: WARNING: Smart Contracts in Ethereum are irrevocable and autonomous. Once they are deployed they cannot be reversed, edited or deleted. It is important to ensure that the code you write is correct and secure. Additionally, you should understand the legal implications of using Smart Contracts and be aware of any relevant laws or regulations that may apply. Finally, always remember to keep your private keys safe.

Smart contracts were first proposed by Nick Szabo in 1996 as a way to create “formal legal contracts [that] execute themselves.” Ethereum co-founder Vitalik Buterin built on Szabo’s idea when he created Ethereum in 2013, with the goal of giving developers a platform on which they could build decentralized applications.

Since then, numerous DApps have been built on Ethereum that allow users to do everything from buying and selling cryptocurrency to participating in decentralized exchanges and lending platforms. And because all of these applications are built on Ethereum’s blockchain, they can all take advantage of smart contracts.

A smart contract is like a traditional contract in that it defines the rules and penalties around an agreement. But unlike traditional contracts, which are written in natural language and enforced by courts, smart contracts are written in code and executed by computers.

This makes them much more enforceable than traditional contracts.

What’s more, because smart contracts are stored on Ethereum’s blockchain, they can be executed automatically when certain conditions are met. This means that users can interact with DApps without having to trust each other or rely on third parties.

This makes Etherum’s platform incredibly powerful and versatile. And it’s why many believe that Ethereum will eventually become the world’s computer – capable of running any decentralized application imaginable.

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