Source: Blockgeeks

Self-executing contracts, or smart contracts, have the conditions of the contract explicitly encoded into the code. When certain requirements are satisfied, these contracts automatically enforce and execute themselves, negating the need for middlemen like notaries or attorneys. Smart contracts are an essential part of decentralized applications (dApps) and decentralized finance (DeFi) protocols, and they operate on blockchain platforms like Ethereum, Solana, or Binance Smart Chain. The following summarizes the main features of smart contracts:

1. Code: Smart contracts are written in programming languages specifically designed for blockchain platforms, such as Solidity for Ethereum or Rust for Solana. The code of a smart contract contains the rules and logic that govern the agreement between parties.

2. Decentralization: Smart contracts are executed and stored on a decentralized network of computers (nodes) that collectively maintain the blockchain. This decentralization ensures that the execution of the contract is transparent, immutable, and censorship-resistant.

3. Automation: Once deployed on the blockchain, smart contracts automatically execute when predetermined conditions, often referred to as "if-then" statements or conditions, are met. For example, a smart contract governing a crowdfunding campaign might automatically release funds to a project if a funding goal is reached by a certain deadline.

4. Trustlessness: Smart contracts operate in a trustless manner, meaning that parties can interact and transact with each other without needing to trust a central authority. The trust is instead placed in the code and the consensus mechanism of the blockchain.

5. Security: Smart contracts are designed to be secure, with rigorous testing and auditing processes to identify and mitigate potential vulnerabilities. However, vulnerabilities or bugs in smart contracts can lead to security breaches and financial losses, as seen in high-profile incidents like the DAO hack on Ethereum in 2016.

6. Immutability: Once deployed on the blockchain, smart contracts are immutable, meaning that their code and execution cannot be altered or tampered with. This immutability ensures that the terms of the contract are enforced as intended and provides a reliable record of transaction history.

7. Cost Efficiency: Smart contracts can significantly reduce transaction costs and eliminate the need for intermediaries, such as lawyers or escrow agents, which are typically associated with traditional contract execution. This cost efficiency is particularly beneficial for microtransactions or complex financial agreements.

8. Use Cases: Smart contracts have a wide range of use cases across various industries, including finance, supply chain management, real estate, healthcare, and more. Examples include tokenization of assets, decentralized exchanges (DEXes), decentralized lending platforms, supply chain tracking, and identity management.

Overall, smart contracts represent a groundbreaking innovation in digital contract execution, offering increased efficiency, security, and transparency compared to traditional contracts. They form the foundation of many decentralized applications and play a vital role in the advancement of blockchain technology.