Smart Contracts

Automated and programmable entities that perform operations on a blockchain.

In very simple terms, a smart contract is a contract that is written in computer code and stored on a blockchain. When the conditions of the contract are met, the contract automatically executes the terms of the contract. This means that there is no need for a third party, such as a bank, to act as an intermediary to make sure that the contract is executed. They are usually automated so that all participants can be sure of the outcome of the contract.

Benefits of Smart Contracts

- The code cannot be changed once it has been deployed (tamperproof)

- All parties can see the code and the transactions that have been executed (transparent)

- No third party is needed to oversee the execution of the contract (trustless)

- Transactions can be executed quickly and automatically (fast)

Downsides of Smart Contracts

- Once a transaction has been executed, it cannot be undone (irreversible)

- The code can be difficult to understand and debug (complex)

- Transactions can be publicly visible on the blockchain (public)

Since deploying a contract is a transaction "Gas Fees" are required to pay, meaning the deployer will need enough Ether in their wallet to deploy. The Gas cost for deploying a contract is far higher than a normal ETH transfer.

For example, Smart contracts are used by NFT projects to automate the minting, sale, and transfer of ownership of NFTs.