Understanding Smart Contracts
Smart contracts are self-executing programs stored on a blockchain that automatically enforce agreements when predetermined conditions are met. They form the foundation of all DeFi applications.
Think of smart contracts as vending machines for financial services – deposit the right inputs, and the contract automatically executes the promised action without requiring trust in any intermediary.
Key Takeaways
- Smart contracts are code that executes automatically when conditions are met
- They enable trustless, transparent financial transactions
- Once deployed, contracts cannot be changed (immutability)
- Bugs in smart contracts can lead to permanent loss of funds
- Audits help identify vulnerabilities but don’t guarantee safety