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Smart Contracts: The Ultimate Guide
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Although the concept of smart contract has become widespread in the technology world with the concept of Bitcoin and the blockchain born with Bitcoin, it is an expression that emerged in the 1990s. The smart contract term, coined by Nick Szabo, is a model that secures and formalizes agreements between internet users and web protocols. In the crypto money world, the concept of smart contract is considered as a protocol in applications developed on the blockchain. Smart contracts, which define certain protocols within the framework of certain rules, are defined by computers and all components of a network must comply with the smart contract. This concept, which is expressed as a smart contract in English, is used in the development of trust-oriented protocols.
The use of smart contracts is a guarantee that all parties will abide by the rules in all applications and services built on the blockchain. If one of the parties does not comply with the rule, the commitment under the smart contract will not be realized. This is the most important condition for the blockchain ecosystem to create an environment of trust without the need for third-party approval. The development of smart contract structures and their use in different areas have led to a significant reduction in transaction costs as it eliminates the need for third parties.
The concept of smart contract in cryptocurrencies emerged with Bitcoin. The Bitcoin smart contract has secured the rights of all parties with the Proof of Work mining - consensus model. However, the widespread use of smart contracts and their use in blockchain technology has occurred with the Ethereum network, which is defined as the layer 1 blockchain. The Ethereum network has created an environment where different smart contracts can be developed. In all decentralized applications, smart contracts present the rules that must be followed for both the project and the investors, with a code law model. The answer to the question of how to make smart contracts can be given by preparing a contract on a related blockchain and uploading this contract to the chain. For example, the process of creating a token on the BSC or Ethereum network is also creating a smart contract. In this contract, the token name, supply, token, burning features and other details are included in the smart contract. Transmitting the smart contract to the blockchain ensures that all parties can access and interact with this contract.
What is a Smart Contract?
Smart contracts have a code-based structure. The answer to the question of what a smart contract means, refers to the set of rules set by these contracts, and all parties must comply with the rules of the smart contract. If the smart contract rules are not followed, the relevant transaction will not be executed. Hosting the rules of the contract on the blockchain, on the other hand, brought smart contracts to the fore, as their modification and interference made censorship impossible. On a blockchain, all important technical details such as asset transfers between wallets, coin rewards that miners will receive, and new supply are included in the smart contract. Another advantage of smart contract structures is that they are transparently accessible. All smart contracts are located on the blockchain and a user can view the contract structure.
The most important item among the features of smart contracts is that the contracts are distributed and decentralized. This means that the contract can be found on millions of different computers around the world at the same time. Smart contracts hosted on nodes cannot be modified. Since smart contracts are a code, the implementation process is completely logical. In case the conditions in the contracts are not met, the result in the code structure is applied, which is also expressed with the philosophy of "code is law". Smart contracts are autonomous, meaning they are self-executing. Smart contracts with a customizable model can be redesigned for different conditions and situations.
How to Create a Smart Contract
Smart contract is one of the most important structures of the blockchain world. Creating a smart contract is an action that any blockchain developer can do. In order to make a smart contract, first of all, which blockchain to use must be chosen. Options such as Solana smart contract or Tron smart contract should include steps to create smart contracts on Solana and Tron networks. In smart contracts, it should be noted that each blockchain has a different language, that is, it is necessary to know the relevant code structure to create a smart contract. When speaking for the Ethereum blockchain, the Solidity programming language is used in the Ethereum network. In the process of creating smart contract nft or ERC-20 on Ethereum, the necessary parameters are created with the Solidity language.
Creating tokens with smart contracts is possible in all blockchains with moderate software knowledge. To create a Cardano smart contract or Binance smart contract, the contract must be uploaded to the Cardano or BSC blockchains. Creating tokens with a ready-made smart contract is also among the models that entrepreneurs can choose. It is possible to create a smart contract by specifying the token name, token and supply.
Why Use Smart Contracts?
Token smart contract options have the purpose of creating an environment of trust between users and digital services in the internet ecosystem without the need for a third party. Although smart contracts are a concept that has been used since the 1990s, the spread of blockchain technology with Bitcoin and the prominence of Ethereum and EVM concept have brought smart contracts one step forward.
Smart contracts are hosted on blockchains and can be accessed by anyone with their transparent structure. The fact that the source codes are unchangeable provides confidence for all parties. An exchange or a different transaction between two people who do not know each other normally requires a third party. This could be a third-party bank or a payment system such as PayPal. In a smart contract on the blockchain, the two parties are secured, the blockchain and the node structures on it ensure that all transactions are correct. In addition to being decentralized, customizable smart contracts are used to develop Dapps on the blockchain.
How Does a Smart Contract Work?
Smart contracts are autonomous programs that can be coded in different ways and for different purposes. Self-executing smart contracts with their immutable and uncensorable nature depend on code integrity. With the code is the law principle, it offers a structure where users can interact in the blockchain, where it is built on a prepared smart contract. Smart contracts can think like a software program. But the main difference between a centralized program and smart contracts is that smart contracts do not reside on a central server. Therefore, a smart contract can never be paused, it can continue to operate autonomously. Smart contract is a concept underlying crypto money technology, which is included in many coins as well as Bitcoin. Issues such as the supply of a coin, burning details, information about mining and halving are specified with the smart contract. For example, Bitcoin's maximum supply of 21 million is contained in the BTC smart contract. Even if all investors around the world demand that this supply increase to 42 million, the code structure does not allow it.
Working Structure of Smart Contracts
Each of the smart contracts has been developed for a different purpose. Smart contracts on Ethereum, Solana or Bitcoin Lightning networks approve the transaction if certain conditions come into play, depending on the code structure. All terms and conditions regarding Dogecoin are specified on the Doge smart contract and users must abide by it.
Smart contract structures remain immutable after the coding process is finished and uploaded to the blockchain. Smart contracts, which can be considered as autonomous software, only look at whether certain conditions are met and apply the transaction with their deterministic structure. Smart contracts are also structures that can be accessed by all users as they are developed on the blockchain.
Advantages of Smart Contracts
Smart contracts have created an important area of use with the innovations brought by blockchain technology. This area is to develop customizable Dapps in all blockchain projects and to perform transactions securely without the need for a third party. Smart contracts, which offer a reliable concept for everyone with their decentralization, can be used for different services and solutions. A smart contract prepared on the Ethereum blockchain is immutable, accessible at any time, since it is located in thousands of computers in the world at the same time. It has a structure that can be used for smart contract whitelist and other crypto money services, securing the interests of all parties. Being a self-executing program, smart contracts are always working and reliable for blockchain users. Projects that can be created through smart contract platforms also ensure that many transactions are carried out inexpensively by eliminating third parties.
Disadvantages of Smart Contracts
Although smart contracts offer important advantages, they also contain various risks when considered from certain aspects. NFT smart contract and other smart contracts all consist of codes. This shows that smart contracts can be abused if there is a flaw in the codes. In large investments or significant transactions, a deficit in smart contracts poses a risk to many. Among the disadvantages of smart contracts, major hacking events in the past come to the fore. The attack of an autonomous organization called The DAO in 2016 caused millions of ETH to be stolen. The reason for this attack is a code vulnerability in the contract. Smart contracts, which stand out with their transparent, reliable and deterministic structure, have a structure that continues to expand. It is possible to access smart contract forecasts and smart contract news from cryptocurrency platforms.