Smart contracts are programs deployed on the blockchain network. When the preset conditions are met, the smart contract will automatically execute. For example, Bob uses a smart contract to create a trust fund for his daughter Alice. The fund remains locked until Alice turns 18, and when Alice turns 18, the fund will be automatically unlocked and transferred to Alice's account without manual intervention. .

The term "smart contract" was first coined in 1994 by American computer scientist Nick Szabo. Nick writes: "A smart contract is a computerized transaction agreement that enforces the terms of the contract. The goals of smart contract design are to meet common contract requirements, minimize exceptions and malicious interference, and minimize the need for intermediaries. ."

Bitcoin is the first blockchain to technically implement smart contracts (Source: Gemini). It allows developers to set conditions for the execution of transactions. For example, a multi-signature transaction needs to be signed by a certain number of addresses before it can be executed. However, due to limitations of the Bitcoin programming language (Script), it only supports simple smart contracts.

In 2015, Ethereum was launched, promoting the widespread use of smart contracts. Ethereum's programming language Solidity supports complex smart contracts, and various decentralized applications can be built. As the popularity of blockchain grows exponentially, the technology is constantly updated and iterated. Today, smart contract platforms are booming, forming a situation where Ethereum is the leader and other platforms are blooming. Common smart contract platforms include: BNB Chain, Solana, Avalanche, Aptos, Sui, Arbitrum, Optimism, zkSync, etc.

What are the characteristics of smart contracts?

Smart contracts are built on the blockchain platform, so they meet the core characteristics of blockchain technology, such as decentralization, difficulty in tampering, and openness and transparency. In addition, smart contracts have two significant characteristics: predictability and trustlessness.

Predictable

Smart contracts are automatically executable codes that strictly follow the logic of "if..., then...". For example, if Alice is over 18, the trust funds will automatically be transferred into Alice's account. For smart contracts, specific inputs can only produce a fixed and known result. Therefore, one can infer what the output of a given value will be by looking at the logic of the contract.

No trust required

Smart contracts are similar to traditional contracts in that they stipulate the terms of the agreement. But the difference is that the execution of smart contracts does not rely on legal terms. It is self-executing computer code that only follows preset rules. Therefore, smart contract execution neither requires trust in the counterparty nor the need to seek help from a third party (such as a lawyer).

What are the use cases of smart contracts?

Smart contracts are currently mainly used in the development of decentralized applications. At present, smart contracts have been widely used. In addition to simple transaction payments, they can also be used to build more complex financial products, or be applied to traditional industries to solve some problems in traditional industries.

• DeFi: Through smart contracts, developers can transfer traditional financial products and services to the blockchain, such as lending, exchanges, insurance, options, etc. Through blockchain technology, these financial products can be conducted in a more transparent and intermediary-free environment.
• Art transactions: Through smart contracts, artists can cast their digital collections into NFTs. The ownership and transaction information of the collections will be recorded on the blockchain, making them open, transparent and non-tamperable. The application of smart contracts can also help authors better manage copyrights.
• Supply chain management: Smart contracts can be used to automatically track the entire process of goods in the supply chain, from factory to storage to delivery, ensuring transparency and accountability.