What is a smart contract?

Cryptocurrencies: Smart Contracts

A smart contract, are like any other contract, just like any contract, smart contracts lay out the terms of an agreement or deal.. But unlike a traditional contracts, a smart contract’s terms are executed as code running on a blockchain like Ethereum. Smart contracts allow developers to build apps that take advantage of blockchain security, reliability, and accessibility while offering sophisticated peer-to-peer functionality, everything from loans and insurance to logistics and gaming.

Smart contracts are written in a variety of programming languages (including Solidity, Web Assembly, and Michelson). On the Ethereum network, each smart contract’s code is stored on the blockchain, allowing any interested party to inspect the contract’s code and current state to verify its functionality.

Each computer on the network (or “node”) stores a copy of all existing smart contracts and their current state alongside the blockchain and transaction data.

When a smart contract receives funds from a user, its code is executed by all nodes in the network in order to reach a consensus about the outcome and resulting flow of value. This is what allows smart contracts to securely run without any central authority, even when users are making complex financial transactions with unknown entities.

To execute a smart contract on the Ethereum network, you will generally have to pay a fee called “gas” (so named because these fees keep the blockchain running).

Once deployed onto a blockchain, smart contracts generally can’t be altered, even by their creator. (There are exceptions to this rule.) This helps ensure that they can’t be censored or shut down.

What is a smart contract?

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