Smart contracts are self-executing programs stored on a blockchain that automate actions when predefined conditions are met. They form the backbone of Web3, enabling decentralized applications (dApps), token creation, and complex blockchain operations beyond simple transactions.
How Do Smart Contracts Work?
Development:
- Written in programming languages like Solidity (for Ethereum).
- Rules define actions (e.g., token swaps, payments).
Deployment:
- Once live on the blockchain, contracts are immutable (unchangeable).
Execution:
- Users trigger contracts via transactions (e.g., swapping ETH for USDC on Uniswap).
- Contracts verify approvals, calculate rates, and execute trades autonomously.
👉 Discover how smart contracts power DeFi platforms
Key Concepts
Token Approvals
- Grants a smart contract access to spend tokens from your wallet.
- Risks: Malicious contracts can drain approved funds.
- Safety Tip: Review approvals regularly and revoke unused ones.
Smart Contract Audits
- Always verify audits before interacting. Audits ensure code security and legitimacy.
Smart Contract Examples
NFT Sales on OpenSea
- Buyer’s funds are locked.
- NFT ownership transfers automatically.
- Seller receives payment upon confirmation.
👉 Explore NFT marketplaces using smart contracts
Blockchains Supporting Smart Contracts
| Blockchain | Smart Contract Language | Use Cases |
|------------|--------------------------|-----------|
| Ethereum | Solidity | dApps, DeFi |
| Solana | Rust | High-speed transactions |
| Cardano | Plutus | Scalable solutions |
Note: Bitcoin supports smart contracts but is rarely used due to technical limitations.
FAQ
1. Are smart contracts legally binding?
While enforceable in some jurisdictions, they primarily rely on code-based execution rather than traditional law.
2. Can smart contracts be hacked?
Poorly coded contracts are vulnerable. Always use audited contracts.
3. What’s the difference between dApps and smart contracts?
dApps are user-facing applications built atop smart contracts, which handle backend logic.
4. How do I revoke token approvals?
Use tools like Etherscan Token Approval Checker to manage permissions.
Smart contracts revolutionize trustless automation, but caution is essential. Stick to audited projects and stay informed!
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