CFA Level I · CFA Level I Exam · Introduction to Digital Assets
A smart contract on a distributed ledger is best described as:
A smart contract is a computer program on a distributed ledger that automatically executes agreed terms once predefined conditions are met. It is not merely an archived legal document, nor is it a private key, which only authorizes transactions from a wallet.
- Aa legal agreement drafted by a lawyer and stored in a digital archive
- Ba computer program that automatically executes terms when predefined conditions are metCorrect
- Ca private key used to authorize transfers from a wallet
Explanation
A smart contract is self-executing code on a ledger that carries out agreed terms when coded conditions occur. A digitally archived legal document does not execute itself, and a private key is a credential for authorizing transactions, not a contract.
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