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šŸ³ What are smart contracts?

  • Thread starter Thread starter Bored Ape Crypto Club
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Bored Ape Crypto Club

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A smart contract is a set of functions and conditions that are executed in a certain order.

A simple example is a coffee machine. When you top up the required amount of money and press the button for the coffee you want to buy, the program (smart contract) activates the machine to dispense the selected coffee.

You need to know 2 things about smart contracts:

āž– Accuracy.

When the specified conditions are met, the contract will perform the action for which it was created. Smart contracts always have a condition: if... then...:

Let's say I want to buy an NFT on Open Sea.
To do this, I sign and send a transaction to the Ethereum network. The smart contract begins to process it: if I have enough USDC in my wallet for the purchase, then USDC will be debited from me and I will receive the NFT, and the seller will receive funds. If there are not enough funds, the contract will not be executed and will return an error.

āž– Independence and transparency.

Contracts free the user from intermediaries for concluding transactions and fulfilling conditions. There are no contradictions in smart contracts. This is actually signing an agreement on certain conditions. You can't hire a lawyer and say that my money was stolen from my wallet. I signed this scam contract myself. That's why my money was withdrawn. All users in the blockchain can view this contract and see how I interacted with it and what I signed.

āž– Disadvantage of a smart contract:

Human factor - errors.

When writing a contract, a developer can make an error in the code that will lead to hacking. So recently, the decentralized exchange Velocore was attacked. As a result of the exploit, the hacker withdrew about $6.8 million in Ethereum (ETH) from pools in L2 networks Linea and zkSyncEra. Smart contracts do not guarantee security. Nothing prevents an attacker from creating a smart contract, inserting malicious functions and imposing it, just so you sign it.

Be extremely careful in what you sign.

Today, everything in DeFi is built on smart contracts.

šŸ§¾ They are used for:

ā€” creating new tokens, protocols;
ā€” exchanging and providing liquidity on exchanges;
ā€” managing protocols;
ā€” insuring your assets, etc.

This is a big advantage compared to traditional finance.
 
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