Smart Contract

A smart contract is a computer program that runs automatically on a blockchain when the conditions defined in its code are met. In practice, it translates an agreement of the form “if X happens, then execute Y” into instructions the network can execute.

Smart contracts were popularised by Ethereum and underpin many decentralised applications, decentralised finance and NFTs. Once published, they operate autonomously and, generally, cannot be modified.

It is precisely this automatic nature that involves specific risks: an error or a vulnerability in the code can produce unintended effects that are difficult to reverse, with possible losses of the crypto-assets involved. For this reason, smart contract code is often audited, but these audits do not entirely eliminate the risks.

Disclaimer: This entry is for information purposes only and does not constitute investment advice, a recommendation or a solicitation to invest.