October 05, 2022
One of the main innovations in the cryptocurrency and blockchain space is the implementation of smart contracts. The finance industry is estimated to be worth roughly $22.5 trillion, and most finance transactions involve intermediaries who take a small commission on the transaction.
On the other hand, in smart contracts, transactions can be executed autonomously when certain conditions are met, removing the need for an intermediary or external influence to execute the transaction (or chain of transactions).
Smart contracts enable the execution of transactions by code so that they cannot be tampered with or changed by an external party.
The one downside that smart contracts can cause is that once they are deployed to the blockchain, they cannot be changed or tampered with. Some very smart “hackers” can try to exploit the code of these smart contracts, spotting flaws and sometimes managing to steal the funds held in the smart contract. This is exactly what happened with the wormhole hack.
How are smart contracts built, what do they look like, and how do they work?
This article will explain the main programming language to build smart contracts, the necessary elements of a smart contract, and finally how smart contracts become active.
What are smart contracts?
A smart contract is simply a piece of code that handles the transactional flow of a certain item or chain of items. A great example of this is, of course, a decentralized swapping smart contract; one of the significant innovations of Defi is the fact that people can trade (or swap) assets between one another anonymously.
This is unique to a smart contract and is automatically executed once the interested party pays the necessary gas fee to run the transaction.
Depending on the blockchain used, the programming language needed to develop the smart contract varies. That being said, a large majority of smart contracts are built using the Ethereum Virtual Machine (EVM) and the Solidity programming language.
Solidity is one of the most popular programming language for smart contracts because of the many blockchains that are EVM-compatible.