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What are smart contracts?

Smart contracts are like digital agreements that automatically execute and enforce themselves when certain conditions are met. They run on blockchain technology, which is a secure and decentralized digital ledger.

Imagine you want to buy a house. Instead of relying on a bunch of paperwork and intermediaries, a smart contract can be created on the blockchain. This contract contains all the terms and conditions of the deal. Once you meet the agreed-upon conditions, like making a payment, the smart contract automatically executes the transfer of ownership.

Smart contracts are self-executing and tamper-proof, meaning once they're set up, they run exactly as programmed without any possibility of fraud or interference. They're used in various applications, not just for buying and selling. For example, in decentralized finance (DeFi), smart contracts are used for lending, borrowing, and trading cryptocurrencies without relying on traditional banks.

In a nutshell, smart contracts automate and secure digital agreements, cutting out the need for intermediaries and adding a layer of trust to online transactions.

Updated on: 02/01/2024

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