Imagine you could have digital contracts that can execute themselves whenever necessary, as the need arises. Well, these are Smart contracts. Since they already exist, you can stop imaging and let’s see the necessity, the features, and the working of a Smart Contract.
Let’s go!
What Is A Smart Contract?
A smart contract is a self-executing agreement with the terms of the agreement written as code lines.
The contract automatically deploys itself on the blockchain, implementing the agreement written within the contract.
Thus, enabling secure, transparent, and decentralized transactions without intermediaries.
Running on the blockchain network, the nodes store and replicate the data. Thus ensuring the tamper-proof and unalterable execution of smart contracts within the program.
Need for Smart Contracts In Web3
The need for smart contracts in Web3 arises from the desire to attain a decentralized, transparent, and secure digital environment for conducting transactions. In the centralized web, intermediaries such as banks, lawyers, and government agencies play a role in verifying and enforcing agreements. However, these intermediaries can be slow, expensive, and prone to censorship and fraud.
In contrast, Web3, powered by blockchain, creates a secure transactions environment between parties. An environment without intermediaries. Smart contracts automate agreements, increasing efficiency while maintaining security and reducing middlemen involved.
Furthermore, Smart Contracts in Web3 also offer the potential for creating new decentralized applications and services, such as prediction markets, digital identity systems, and decentralized autonomous organizations, that can operate in a trustless and transparent environment.
Features Of A Smart Contract
Some key features of Smart Contracts include:
- Automation: The terms of the agreement get automatically executed without any intermediaries.
- Transparency: The code and operations of the contract are publicly visible, ensuring greater transparency and accountability.
- Decentralization: Smart contracts run on a decentralized network, making them resistant to censorship, fraud, and downtime.
- Immutability: The terms of the contract are immutable post-deployment. Thus ensuring that the agreement remains fair and unchanging.
- Security: Utilization of cryptography in blockchain technology ensures that the execution of the contract is secure and tamper-proof.
- Self-executing: The contract automatically executes itself based on predefined rules and conditions without manual intervention.
- Cost-effective: Smart contracts reduce the need for intermediaries, reducing costs and increasing efficiency in transactions.
Working On A Smart Contract In DLT
A smart contract in a distributed ledger technology (DLT) environment works by implementing the agreement on a decentralized network of computers. The terms and conditions of the agreement are written programs and code lines. Upon meeting the predetermined criteria, the contract self executes and initiates the exchange of assets or data.
Furthermore, the terms of the contract and its execution are transparent and publicly visible on the decentralized ledger, ensuring that the agreement is secure and tamper-proof.
As smart contracts run on a decentralized network, they are resistant to censorship, downtime, and fraud, and they eliminate the need for intermediaries, making transactions more efficient and cost-effective. In a DLT environment, smart contracts provide a secure and transparent way to automate and enforce agreements.
Summary
Smart Contracts are pieces of automated code that is immutable once deployed. It is autonomous, secure, and verified by nodes while removing the middlemen or a central agency in between.
The merits of the Smart Contract are same as its features, which include: Transparency, Automation, Immutable nature, Security, and much more.
The functioning of the automated contract is the self execution occurs after meeting the set rules and criteria/ condition of transaction. Upon meeting the condition, the contract executes and carries the terms of the agreement.
Are you ready to deploy your smart contract? Well, the get to know the top 10 blockchain of 2023 and get coding now!
