What is a Smart Contract?
A Smart Contract is a program that runs on the blockchain, automatically executing transactions or actions when specific conditions are met. It operates based on predefined terms, ensuring transparency and security, allowing parties to transact without the need for trust or intermediaries. Trust is replaced by reliance on the blockchain and programmed code.
Benefits:
- Fast, automated transactions without manual intervention.
- No need for third parties, reducing intermediary costs.
- Ensures transparency, minimizing the risk of errors.
Challenges:
- Cannot be modified once deployed; if there are errors or changes needed, a new contract must be created.
- Security depends on the programming code; vulnerabilities in the code can pose risks.
- Legal frameworks are not yet globally synchronized, making dispute resolution challenging.
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Question 1: Why can Smart Contracts function without trust between participating parties?
A: Because Smart Contracts automatically execute based on predefined terms, and the blockchain ensures transparency and security.
B: Because Smart Contracts require the parties to trust each other before transacting.
Question 2: What happens if a Smart Contract has errors or needs to change its terms?
B: The contract cannot be modified; a new contract must be created.
