How do smart contracts work? A Beginner's Guide.
Maybe you’ve just bought your first DC3 comic. Or adopted an adorable digital kitten. Maybe there’s a metaverse concert that you’re thinking about grabbing tickets for. What does it mean to buy something on the blockchain? And how does all that actually work?
Enter smart contracts.
TL;DR: A smart contract is a computer protocol that verifies, facilitates, or enforces the negotiation or performance of a contract. Smart contracts are similar to traditional contracts, but with two key differences. First, smart contracts are self-executing, meaning that once the conditions of the contract are met, the contract automatically executes itself. Second, smart contracts are tamper-proof, meaning that they cannot be altered once they've been created. This makes them much more secure than traditional contracts.
What is a smart contract?
A smart contract is a computer protocol that enforces the negotiation or performance of a contract. Smart contracts are often associated with blockchain technology, particularly the Ethereum blockchain.
The defining feature of a smart contract is that it is self-executing, meaning that once the conditions of the contract are met, the contract executes automatically. This is possible because a smart contract contains code that defines the conditions under which it will execute. The code is executed by a network of computers, typically a blockchain network.
Smart contracts have been used to create a variety of applications, including decentralized applications (dApps), decentralized finance (DeFi) applications, and non-fungible tokens (NFTs). Smart contracts have also been used to create DAOs, which are decentralized organizations that are managed by smart contracts.
The most popular programming language for writing smart contracts is Solidity; however, there are other languages that can be used, including Vyper, Yul, and Rust.
How do smart contracts work?
If you've ever made a deal with someone, you know that trust is essential. Both parties have to agree to the terms of the contract and then follow through on their promises. But what if there was a way to automate contracts so that you didn't have to worry about whether or not the other person would hold up their end of the deal? That's where smart contracts come in.
Smart contracts are basically if-then statements that are written into code. If someone agrees to the terms of the contract, then the contract is executed. This could be something as simple as sending money from one person to another or something more complex, like transferring ownership of an NFT. Once the contract is published on the blockchain, it cannot be changed. That means that everyone who agrees to the contract knows that it will be executed exactly as written.
What’s the benefit of using a smart contract?
Smart contracts are executed automatically when the contract's conditions are met. For example, let's say you want to buy an NFT from a marketplace, like DC. NFTs are created via a process called minting, which involves converting images, videos, audio, or other digital file types into crypto assets on the blockchain. When you purchase and mint your NFT, you are configuring the underlying smart contract that contains and determines the qualities of your asset. Once you’ve completed your purchase, the contract is stored on the blockchain. The blockchain then verifies that you’ve made the payment, and sends you the asset.
Smart contracts offer a few key benefits. Once a contract is stored on the blockchain, it can’t be changed or deleted without the consent of both parties. This creates greater security, and helps deter fraud. It also creates greater transparency. Because the information is stored on-chain, parties can easily view and verify the terms of the smart contract; streamlining transactions and reducing the chances of miscommunication.
At the same time, the immutability of smart contracts is a key consideration for projects and developers. The contract can’t be altered without the authorization of all parties. And once a smart contract is deployed, it’s not always easy to change or fix if something goes wrong.
Creating a smart contract
Creating a smart contract can actually be pretty simple, as long as you select the right network. For many people, that will be Ethereum or one of the Ethereum-compatible networks, like the Palm network. Once you've selected your network, all you need to do is find a smart contract development platform that meets your needs. There are a number of these platforms available, so take some time to research your options before making a decision.
In order to create a smart contract on Ethereum or one of the Ethereum-compatible networks, you'll also need to use Ethereum's development tools. The most popular Ethereum development tool is Hardhat, which enables you to develop, test, and deploy Ethereum smart contracts. Another popular tool is Truffle, which helps you manage your Ethereum projects and provides built-in tools for testing and debugging your code.
Understanding how smart contracts work is essential for anyone looking to get into the blockchain development space. Learn more or connect with other developers by joining our Discord. Ask questions, find resources, and collaborate with others who are passionate about web3 and blockchain technology. We’re here for you. ＼_ﾍ(ω｀●)