Smart contracts are self-executing agreements written in code and deployed on blockchain networks. They automatically enforce the terms of a contract without the need for intermediaries. Popularized by platforms like Ethereum, smart contracts are transforming industries by enabling trustless, transparent, and automated transactions. However, like any software, they are not immune to bugs, vulnerabilities, and misuse, raising concerns about their security.
Smart contracts are pieces of code that execute predefined actions when specific conditions are met, such as transferring funds or verifying identity.
Once deployed on a blockchain, these contracts run on a decentralized network, ensuring transparency and resistance to tampering.
They eliminate the need for intermediaries like banks or brokers by relying on code logic, not third-party trust.
Smart contracts are the backbone of decentralized apps, used in finance (DeFi), gaming, supply chain, insurance, and more.
Once deployed, a smart contract cannot be changed—this immutability ensures trust but also means bugs cannot be patched easily.
Poorly written code can be exploited. Common bugs include reentrancy attacks, integer overflows, and unchecked call functions.
Security audits by experts help identify flaws before contracts are deployed. Companies like CertiK and Trail of Bits specialize in such audits.
Some smart contracts undergo mathematical verification to prove their correctness under all possible conditions.
Developers use proxy contracts and modular design to allow updates while maintaining decentralization and security.
Notable breaches like The DAO hack (2016) led to losses worth millions, highlighting the risks of unaudited or flawed code.
High gas fees during network congestion can delay execution or make the system vulnerable to front-running attacks.
Many smart contracts rely on external data sources (oracles). If an oracle is compromised, the contract can behave incorrectly.
In many jurisdictions, smart contracts lack clear legal enforceability, which can be problematic in disputes.
Imagine a freelance platform uses a smart contract to automate payments. A client agrees to pay ₹50,000 upon project completion. The smart contract is programmed to release the funds when both parties confirm completion.
But, if the contract has a bug or was written without checks for mutual confirmation, funds might be released prematurely or not at all.
To prevent such issues:
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