Explain how smart contracts work on a blockchain, and discuss some of the major risks associated with these contracts.

Smart contracts are self-executing contracts with the terms of the agreement directly written into lines of code. These contracts are stored and executed on a blockchain, and they automatically enforce the terms of the contract when the pre-defined conditions are met. This eliminates the need for intermediaries, such as lawyers or traditional financial institutions, to facilitate and enforce agreements. They are the fundamental building blocks of decentralized applications (dApps) and decentralized finance (DeFi). Smart contracts operate on a deterministic basis, meaning that given a set of inputs, they will always produce the same output. When a smart contract is deployed, it is assigned a unique address on the blockchain. Any interaction with the contract is made by sending a transaction to this address. The smart contract code specifies how the transaction will be processed. If a transaction satisfies the conditions specified in the contract, the contract will execute its code and update its state on the blockchain, which means, the outcome of the transaction will be recorded on the blockchain. These state changes and the contract’s code are recorded immutably on the blockchain. The process starts when a developer writes the smart contract in a specific programming language such as Solidity (for Ethereum). The smart contract is compiled into bytecode which is then deployed to the blockchain. Deployment of a smart contract involves sending a transaction to the blockchain with the compiled code. The blockchain network then stores the smart contract at a specific address, and anyone can then interact with the smart contract by sending....