Smart contracts are self-executing programs on a blockchain that automatically execute transactions or operations based on predefined conditions (e.g., paying USDT). First proposed in 1994 by legal scholar and cryptographer Nick Szabo, smart contracts are now widely used on blockchain platforms like Ethereum, supporting complex decentralized finance (DeFi) and non-fungible token (NFT) applications. They are coded with “if/when…then…” logic on the blockchain, ensuring transparency and immutability. For instance, after paying a set amount of cryptocurrency, asset ownership transfers automatically and is recorded on the blockchain, unalterable by any party. Smart contracts reduce reliance on intermediaries, lowering transaction costs and increasing efficiency, with applications in financial services, supply chain management, intellectual property protection, and voting systems. For example, in trade finance, smart contracts can verify documents, track shipments, and resolve disputes automatically. However, vulnerabilities in their code can lead to irreversible losses, as seen in the 2016 DAO hack, necessitating careful coding and auditing. Smart contracts enhance trust through blockchain’s decentralized nature, forming a cornerstone of the Web3 ecosystem. As blockchain technology evolves, their applications will likely expand, potentially transforming more industries.
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