“The term ‘smart contact’ is misleading and causes confusion because they’re actually more than just contracts,” explained Ryan Boder, core team lead at API3 DAO. “Smart contracts are ‘trustless’ computer programs that run exactly as programmed and, if done correctly, can’t be modified by anyone to cheat the system like traditional software managed by a central company can.”
“The biggest limiting factor for smart contracts is that they only exist on blockchains and are isolated from the rest of the world,” Boder added. “In order for these ‘trustless’ computer programs to be used to build non-cryptocurrency applications, they need to connect to the real world through what we call ‘blockchain oracles.’ Oracles are the most vital component for smart contracts to go mainstream.”