A smart contract is a computer program or transaction protocol that automatically executes or documents events whenever certain conditions are met. People use smart contracts to reduce the need for third parties and lower costs. The most common place to deploy smart contracts is on the Ethereum blockchain.
How do smart contracts work?
Smart contracts are included in certain transactions on the blockchain and stored in an initial block. Byzantine fault-tolerant algorithms protect the smart contract in a decentralized way. This means that nobody can tamper with the smart contracts and that they cannot be updated once deployed. Users interact with the smart contract through transactions on the blockchain. These transactions can trigger other smart contracts. Developers write smart contracts in the Solidity coding language.
Are smart contracts safe to use?
Smart contracts are vulnerable to bugs and security leaks. A blockchain-based smart contract is visible to all users of the blockchain. Cybercriminals can take advantage of this and attack the smart contract. A good example of a hacked smart contract is that of the DAO, where hackers stole $50 million in Ethereum.
Is a smart contract legal?
No, a smart contract doesn’t constitute a valid binding agreement by law. Although it contains the word ‘contract’, a smart contract is a secured stored procedure of data that uses cryptographically signed transactions on a blockchain network.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorised and regulated by the Cyprus Securities and Exchange Commission.
Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.