Understanding the Role of Smart Contracts in Web3 A Beginner’s Guide

Web3, or the decentralized web, will change a lot about how apps are produced and used online. Smart contracts are the driving force behind this change. They are programmable, self‑executing agreements that work on blockchain networks. Beginners might not be able to understand the words and ideas. This article explains what smart contracts are, how they work in Web3, and gives you the essential information you need to comprehend, analyze, and even start developing your own decentralized applications (dApps).

You will know by the end of this article:

• What are Web3 and smart contracts?
• How smart contracts function behind the scenes
• Common programming languages and platforms
• Important uses and advantages
• Things to think about and do to stay safe
• How to get started as a fan or developer

What is Web 3?

Web3 is the next step in the growth of the internet. It is a decentralized environment that puts users first and uses blockchain technology. Web3 is different from Web2 because it gives users ownership over their own data, lets them transact business with one other, and uses protocols that don’t need trust.

• There is no single point of control in a decentralized network; instead, nodes are spread out.
• Anyone can see transactions and code on‑chain, which is called transparency.
• It is resistant to censorship since no one central authority can edit or censor the data.
• Native Digital Assets: Tokens and cryptocurrencies make it easier to trade value.

You may find the Web3 Primer, a detailed guide from the Web3 Foundation, at https://web3.foundation/what_is_web3/.

What are contracts that are smart?

A smart contract is a program that runs on a blockchain and only executes when certain things happen. Nick Szabo, a cryptographer, came up with the term “smart contracts” in 1994. They are like contracts, but you don’t need a third party to make them work.

• Self‑execution means that the code executes precisely as it was written, thus no one needs to make sure it works.
• Once the contract is launched, the code and state cannot be altered.
• People can do business with each other without having to know or trust each other.

There is a lot of information on smart contracts in the Ethereum whitepaper that started it all:
https://ethereum.org/en/whitepaper/

How to Write a Smart Contract

1. Developers employ languages like Solidity (for Ethereum), Vyper, and Rust (for Solana) to create functions, variables, and conditions.
2. Putting together
   • Ethereum calls the low‑level bytecode that the source code turns into EVM bytecode.
3. Deployment
   • Deployment is a blockchain transaction that saves the bytecode at a certain address.
4. Interacting
   • Users or other contracts call functions by submitting transactions with the proper amount of gas, which is the price for execution.
5. Execution and Agreement
   • The nodes in the network check the logic of the contract and then carry it out, which changes the status of the blockchain.
6. Keeping
   • For auditing and openness, important events and variables are stored on‑chain.

To learn more about the Ethereum Virtual Machine (EVM) in technical terms, visit:
https://ethereum.github.io/yellowpaper/paper.pdf

The most crucial aspects of smart contracts are

Variables of the State: Store information on‑chain, like balances and who owns what.

.Functions: Set actions and conditions.

Checks that must be true before something may happen are called modifiers.

Events: Send logs to programs that don’t run on the blockchain, such as analytics and front‑ends.

The OpenZeppelin library of secure contracts is an example of a library of code that can be used again.

For example, Solidity:

pragma solidity ^0.8.0;

import “@openzeppelin/contracts/token/ERC20/ERC20.sol”;

contract MyToken is ERC20 {
    constructor(uint256 initialSupply) ERC20(“MyToken”, “MTK”) {
    _mint(msg.sender, initialSupply);
    }
}

Well‑Known Smart Contract Platforms

One notable use is decentralized finance (DeFi).

• Aave is a lending protocol, Uniswap is a decentralized exchange, and yield aggregators are some additional examples.
• You can’t trade NFTs for anything else.
• Digital art, games, and collectibles like CryptoKitties and OpenSea.
• DAOs, or Decentralized Autonomous Organizations: group decision‑making and governance on the blockchain, like MakerDAO.
• Managing the supply chain: watch where products come from and make sure they are legitimate, like IBM Food Trust.
• In the real world, tokenized assets: part ownership of property and things.
• Insurance and markets for making forecasts: automated claims processing and risk pools between peers.

The Good Things About Smart Contracts

• Trustlessness: Not using any middlemen to get things done.
• Cost‑effectiveness: You don’t have to pay as much for paperwork and middlemen.
• Transparency: A public record of codes and contracts.
• Automation: No more waiting and no more having to perform things by hand.
• Promises provided by cryptography and means for people to agree on security.

Problems and Risks: Smart Contracts Have Bugs

• Reentrancy and integer overflow are two kinds of security holes that can cost you money.
• Code that can’t be modified: Audits are necessary because once problems are out in the wild, they can’t be corrected.
• Ability to get bigger: The main Ethereum network is busy, thus gas rates are high on it.
• Regulatory uncertainty: Changes to the legislation concerning issuing tokens and DeFi.

Best practices:

• Only employ libraries that have been tested in battle and had security audits done on them (CertiK, OpenZeppelin).
• Check that the libraries you use are safe.
• To make sure you meet ERC criteria, use OpenZeppelin’s contracts.
• Set up access control (role‑based).
• Follow the pattern of checks, effects, and interactions.
• Update the state to cease reentrancy before you call other contracts.
• Don’t use a lot of gas; utilize data structures that utilize less gas instead of loops that never finish.
• Do a bunch of tests: write both unit tests (using Truffle or Hardhat) and integration tests.
• For a complete list of security best practices, go to ConsenSys: https://consensys.github.io/smart-contract-best-practices/

Writing smart contracts tools

• Frameworks:
  • Hardhat: flexible Ethereum development environment.
  • Truffle: suite for writing, testing, and deploying contracts.
• Libraries for Testing:
  • Chai and Mocha for assertions.
  • Waffle for fast, simple tests.
• Security:
  • MythX and Slither for static analysis.
• Putting the Front End Together:
  • Web3.js and Ethers.js let dApps talk to Ethereum nodes.

How to Start as a Developer: Get the Environment Ready

1. Install npm, Node.js, and Ganache (a local blockchain).
2. Learn the basics of Solidity. Visit CryptoZombies’ interactive lesson: https://cryptozombies.io/.
3. Make a simple dApp: create a “Hello World” contract, compile it, and then deploy it.
4. Connect the front‑end: use Ethers.js with either Vue or React to call contract functions.
5. Testnet: go live on Ropsten, Kovan, or Mumbai (Polygon) before mainnet.

Questions and Answers (FAQs)

Q1: How is a smart contract different from a regular contract?
A: A third party, such as a lawyer or a court, has to enforce a traditional contract. These contracts are usually written on paper. Smart contracts are written in code and work on blockchains. They do what they claim they will do when the right conditions are met. They don’t need anyone else in between.

Q2: Once you put up smart contracts, can you update them?
A: No. Smart contracts can’t be changed. When developers want to update logic, they usually write a new contract and move users over, or they employ proxy patterns to make it possible to upgrade.

Q3: How much does it cost to make a smart contract?
A: The cost of deploying will depend on how busy the network is and how sophisticated the contract is. On the Ethereum mainnet, gas fees might be as low as a few dollars or as high as $100. Testnets are either free or not very expensive.

Q4: Do smart contracts have the force of law?
A: The law is not the same everywhere. They make it easier to sign contracts, but they may still need to be legally binding through traditional contracts or by following regulations.

Q5: What programming language should those who are just starting to learn?
A: Solidity is the language that most people use to write contracts on Ethereum. There is a lot of aid and information available from the community.

Q6: What should you do if you uncover a bug after it has been released?
A: You can’t address bugs directly since you can’t amend contracts. Developers can relocate user data, put out new versions, or employ emergency stop patterns.

Q7: What is the best technique to check smart contracts?
A: You can use testing libraries like Mocha and Chai with frameworks like Hardhat or Truffle. Use MythX and Slither, two static analysis tools, to uncover security gaps and see how your code performs in strange settings.

Q8: What is gas, and why is it important?
A: Gas tells you how much work it takes to keep Ethereum running. Users pay gas costs in ETH to get miners and validators to accomplish their work. Good code makes gas cheaper.

Q9: Are smart contracts able to use real‑world data?
A: Yes, oracles (like Chainlink) can provide off‑chain data (such as prices and weather) to contracts on the blockchain.

Q10: What are some frequent ways to get into smart contracts?
A: The hack of the DAO in 2016 cost $60 million because it took advantage of a weakness that let it reenter. These kinds of things highlight how crucial it is to follow best practices and have audits.

The end
The most essential thing about the Web3 revolution is that smart contracts let people form digital agreements that are explicit, automatic, and don’t need to be trusted. You may use them for a variety of different things, such as DeFi, NFTs, DAOs, and more. There are a lot of good things about the technology, but there are also certain problems that are specific to it that need to be fixed, like how it will be governed, how secure it is, and how it can’t be changed.

You can utilize the decentralized web with confidence if you know how smart contracts work, follow best practices, and keep learning by doing. The Web3 ecosystem gives both new and experienced developers a lot of opportunity to come up with new ideas and help define the future of the internet.

References

• Slither. “Static Analysis Framework.” https://github.com/crytic/slither
• Ethereum Foundation. “What is Ethereum?” https://ethereum.org/en/what-is-ethereum/
• Ethereum Foundation. “Ethereum Whitepaper” (Vitalik Buterin, 2013). https://ethereum.org/en/whitepaper/
• ConsenSys. “Smart Contract Best Practices.” https://consensys.github.io/smart-contract-best-practices/
• Web3 Foundation. “What Is Web3?” https://web3.foundation/what_is_web3/
• OpenZeppelin. “Contracts Library.” https://github.com/OpenZeppelin/openzeppelin-contracts
• Szabo, Nick. “Smart Contracts: Building Blocks for Digital Markets” (1994). http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html
• CryptoZombies. “Learn Solidity by Building Games.” https://cryptozombies.io/
• Chainlink. “Decentralized Oracles.” https://chain.link/
• MythX. “Smart Contract Security.” https://mythx.io/