What is a Smart Contract on the Ethereum Blockchain?
Smart contracts power the Ethereum Blockchain. Let us take a look at smart contracts and the different types of smart contracts.
Web3 and the Blockchain are the future. Smart Contracts are the principal aspect that is driving this change.
Bitcoin was extraordinary in that it offered the store and exchange of value in a decentralized manner. But the Ethereum Blockchain was revolutionary because it offered smart contracts.
A smart contract is just code that runs on the Ethereum Blockchain(or a different one like Solana) that consists of logic and data.
They have to be deployed to the network. Since they are a type of Ethereum account, they have a balance and can receive ETH.
Anyone with an Ethereum account can interact with the smart contract by executing a function on it. This is done by submitting a transaction to the smart contract.
Basic Working of a Smart Contract
In 1990, Nick Szabo, a computer scientist, proposed the concept of a smart contract. He believed smart contracts were computerized transaction protocols.
You can use a smart contract with anything that involves promises. Your Spotify subscription is an example of a promise. You do not get any advertisements if you pay your monthly fee.
Smart contracts are written in solidity for the Ethereum network. The smart contract code is stored on the Blockchain publically. Anyone can see the logic by using something like Etherscan.
No one cannot alter smart contracts after they are deployed to the network.
You must pay gas fees to execute a function on a smart contract. You will have to pay more if the function uses the modifier payable.
Why smart contracts are important
You might have heard of a decentralized app. These apps are powered by the Blockchain using Smart contracts.
They let developers build dApps with real-life applications. Any app that uses NFTs or tokens uses them. They define the function of mint and send.
We’re seeing many games launching to capitalize on the metaverse. Smart contracts define all the outfits and other aspects.
DeFi was huge in 2020 and 2021 and still is. It allows people to get interested in their crypto holdings without any third party, like a bank.
A good example is Uniswap. This decentralized exchange allows people to trade crypto without any central authority.
Another example is stablecoins. These tokens are pegged to the US dollar(or some other currency) and are mostly used when trading on exchanges.
The Blockchain makes finance easy, simple, and decentralized.
Applications of Smart Contracts
- DAOs — a decentralized autonomous organization is a community defined by the rules set in the Blockchain using a smart contract. A traditional organization has a board that oversees decisions. In a DAO, every member has a vote in the governing process.
- dApps use them to authenticate and log users in. All the user information is stored on the smart contract using a mapping.
- NFT marketplaces are dApps that have used multiple smart contracts to create an efficient system. Examples are OpenSea and Rarible.
- They have great potential in real estate, finance, and law. Anything that involves an agreement can use smart contracts.
You are viewing an NFT