How are Smart Contracts Executed?
Smart contracts are self-executing contracts with the terms of the agreement directly written into code. Their execution occurs on a blockchain network, most commonly Ethereum, which provides a decentralized and secure environment. Here’s how the execution process works:
1. Deployment
First, a smart contract is created and deployed to the blockchain. This involves writing the contract code in a programming language like Solidity and submitting it to the network. Once deployed, the contract receives a unique address that users can interact with.
2. Triggering Events
Smart contracts execute when specific conditions or events are triggered. These triggers could originate from user interactions, such as sending cryptocurrency to the contract address, or from external data feeds (oracles) that relay information to the blockchain.
3. Consensus Mechanism
When a condition is met, the blockchain nodes validate the execution based on a consensus mechanism (like Proof of Work or Proof of Stake). This ensures that all participants agree on the state of the contract and prevents any unauthorized changes.
4. Execution
Once validated, the smart contract autonomously executes the predetermined actions, such as transferring tokens, updating records, or interacting with other contracts. This eliminates the need for intermediaries, resulting in faster and cost-effective operations.
5. Immutable Records
After execution, all transactions made by the smart contract are recorded on the blockchain, ensuring transparency and immutability. This allows participants to review the contract's history and ensure compliance with the terms.