Crypto

What does a smart contract look like? Smart contracts on blockchain

digital contracts

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. 

solidity smart contract

Most smart contracts are built using the Solidity programming language

People can build smart contracts using Solidity for Ethereum, Avalanche, Binance Smart Chain, Fantom, Moonbeam, Polygon, and other blockchains. This allows Solidity to be more cross-chain compared to other programming languages such as Plutus (used for the Cardano blockchain) and Rust (used for the Solana blockchain).

 

SMART CONTRACTS- Code

All Smart Contracts require some coding. – This code is offered as an example only. There is no warranty offered as to suitability or soundness.

The main takeaway here is that a smart contract is nothing more than some code used to execute certain transactions when certain criteria are met or when specific interactions with the smart contract are made. Since smart contracts are coded, they cannot be easily changed once deployed.

This means that it is essential for smart contracts to undergo the proper audits before deploying to make sure that there are no inefficiencies in the code that could be exploited or hacked at a later date.

New to Crypto? Here’s a Complete Guide! 

What are the necessary elements of smart contracts?

The only necessary element of a smart contract is that the code must be compiled properly. If the code compiles, then it can be deployed on the blockchain and become live. Beyond that, there are technically no necessary elements that dictate what needs to be in a smart contract.

However, certain standards were made to help the community have a consensus on certain transactions and types of smart contracts. Let’s talk about the two biggest standards:

  • ERC-20: This is the standard used for tokens. The code is available on OpenZeppelin, so that everyone can easily adhere to this standard. This token standard allows all EVM-based tokens to have the same format, eliminating future debates about how a blockchain-based token should be coded on EVM.
  • ERC-721: This is the standard used for NFTs. Having every NFT adhere to this standard makes it easier for programmers to define an NFT and what is not an NFT. It also makes it simpler to swap between NFTs since every NFT is coded on the same standard.

Therefore, although any smart contract that compiles can technically be deployed, having certain standards in place allows a much smoother flow between transactions and interactions between smart contracts.

How to deploy a smart contract

So, let’s say that we have written the code for a smart contract and had it properly audited. We are now ready to deploy the smart contract to the blockchain, effectively making the smart contract “live”. How do we “activate” the smart contract?

Surprisingly, this is maybe the easiest step. The tough part of a smart contract is writing the code and having it properly audited, ensuring that there are no flaws in the code. Deploying the code is just a few clicks.

If you deploy on any EVM-based blockchain, you can deploy the smart contract using Ethereum Remix. Other tools exist nowadays to deploy smart contracts, such as Truffle or Hard Hat, but those tools tend to be used for more complex applications that may involve multiple smart contracts simultaneously.

After the code is compiled on Ethereum remix, you click on the “deploy” button, approve the transaction, wait for it to be confirmed on the blockchain, and voila! Your smart contract is live.

deploy a smart contract

Now that the code is written, you can now deploy the smart contract!  –  This code is offered as an example only. There is no warranty offered as to suitability or soundness.

Once the smart contract is live, you could interact with it. You can send some funds to the smart contract, see how it reacts, or attach the smart contract to other smart contracts in order to execute a chain of transactions. 

The Bottom Line

Smart contracts could be useful because they are automatic, cost-efficient and autonomous. It’s rather cheaper considering the price of hiring financial contracts, lawyers and intermediaries for a transaction.

Smart contracts could be set up for a small gas fee and handle the entire process better than humans. Using smart contracts might eliminate human error and allow transparency. Anyone has the option to build a smart contract, reducing the reliance on lawyers and qualified intermediaries when handling money.

The issue about smart contracts is that they are still a new technology and can be exploited. We have seen many hacks in the past, and they might still be around in the future.

Although smart contracts differ from traditional contracts in its decentralization and lack of third parties like lawyers, there might always be intricate parts in every contract. At the end of the day, a contract is an agreement, and some smart contracts agreements could still need some extra intervention. 

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