What is a Smart Contract

In this video by Whiteboard Crypto, you’ll be introduced to the smart contract concept.

Bitcoin has revolutionized the distributed ledger system that securely processes sent and received money to the blockchain. But, Bitcoin is only used for money exchange. With the programmability capability of Ethereum, it was possible to create applications other than only money exchange. 

While the transactions you can do with the Bitcoin system are limited, you can produce new systems and new altcoins using Ethereum. Many cryptocurrencies use the Ethereum system as infrastructure like BNB, Fantom, Avalanche, Cardano, Polygon, HECO etc. They’re able to do this because of the Ethereum Virtual Machine (EVM); so, they’re called ‘EVM compatible blockchains’.

Ethereum Virtual Machine (EVM) is a blockchain based computation engine that ensures the secure operation of thousands of nodes in the Ethereum network. EVM is the environment where all Ethereum accounts and smart contracts live. A metaphor from Messari analyst Ryan Watkins says that you can think of EVM as an Android operating system. A phone using Android can run some of your favorite apps.

Using EVM, Ethereum developers can deploy protocols on new chains easily and quickly without starting from scratch. Projects in the network have easier access to all EVM compatible chain users. 

Ethereum can compute with EVM and all transactions can be processed on the blockchain network. Each of these programs is called a ‘smart contract’.

Smart contracts are computer programs that can carry out transactions and agreements between anonymous parties in a reliable and consistent manner. The parties agree that a piece of code will be executed when certain conditions are met.

Some use cases mentioned in the video for smart contracts are as follows:

1. Flash Loans
2. Insurance
3. Token Switching (Decentralized Exchanges)
4. Buying and Selling real world representation