What Are Smart Contracts?
Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically execute when predetermined conditions are met, eliminating the need for intermediaries.
Key Features of Smart Contracts
- Automation: Execute automatically when conditions are met
- Transparency: Code is visible on the blockchain
- Immutability: Cannot be changed once deployed
- Cost-effective: Reduce need for intermediaries
How Smart Contracts Work
Smart contracts operate on blockchain networks, most commonly Ethereum. When specific conditions coded into the contract are fulfilled, the contract automatically executes the agreed-upon actions.
Real-World Applications
Smart contracts are revolutionizing various industries:
- Insurance claims processing
- Supply chain management
- Real estate transactions
- Decentralized finance (DeFi)
Benefits and Limitations
While smart contracts offer numerous advantages, they also have limitations including potential bugs in code and the challenge of handling complex legal scenarios.
