Smart contracts are agreements between two or more parties that are stored on a blockchain like Ethereum or EOS. Every contract has a predefined set of rules and conditions and is automatically executed when those conditions are met. These contracts are guaranteed by the consensus of the whole blockchain network. They cannot be altered by anyone unless the whole network approves of the change. This makes smart contracts one of the safest and most powerful tools for creating agreements between different parties.
What can smart contracts do?
As mentioned above, smart contracts have a diversity of applications and developers are still coming up with new ways to utilize smart contracts to power decentralized applications. Good examples of smart contracts’ capacity to increase the utility of blockchain platforms and expand the reach of distributed ledger technologies, are the growing popularity of DeFi (decentralized finance) apps and last year’s NFT boom. Smart contracts can be used in many different industries like real estate, healthcare, automotive or gaming.
NFTs, or Non-fungible tokens, are a special type of tokens that can represent unique digital assets such as digital art, collectibles and so on. Smart contracts are typically used to mint NFTs. Often, NFT smart contracts include metadata that describes characteristics that make the token unique, information about the owner and more.
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A DAO, or “Decentralized Autonomous Organization,” is a community-led entity with no central authority. A DAO is governed entirely by its individual members who collectively make critical decisions about the future of the project. The rules of a DAO are written in a smart contract.
The benefits of smart contracts
- Automation: Once the conditions that have been agreed upon are met, the contract is executed automatically.
- Transparency: Blockchain technology is based on the principles of decentralization and transparency. This guarantees that the terms of the contract are visible to everyone on the blockchain and cannot be disputed.
- Security: The cryptographic security of smart contracts ensures that they cannot be tampered with. In addition, due to the distributed nature of these contracts, no data loss can occur.
- Speed: A smart contract executes/processes immediately, making them highly efficient.
- Safe: Smart contracts are highly trustworthy instruments that eliminate the possibility for manipulation or error.
- Independence / decentralized: Smart contracts do not rely on third parties or middlemen.
Create your own smart contract
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