What is a smart contract?

A smart contract is a coded agreement designed to automatically carry out instructions, which will occur only if certain conditions are met. These digital contracts are stored on the blockchain, making them secure, immutable, and trustless.

In Ethereum, smart contracts are fundamental and are key in launching decentralized applications (Dapps) like decentralized exchanges (DEXs) and NFT marketplaces. They enable trustless and decentralized execution of various functions, such as token launches.

How do smart contracts work?

Smart contracts operate on a simple principle: "if this, then that." When written as code on a blockchain, these agreements are executed by a network of devices (nodes) once conditions are met and confirmed. For example, when an order is confirmed, smart contracts verify it, releasing funds accordingly. Once completed, the blockchain is updated, and the unalterable smart contract data is visible to everyone with permission.



Smart contracts can be simple or complicated depending on the conditions specified in the mechanism.

Key features of smart contracts

There are four main benefits of using smart contracts in blockchain. Here’s a list of all of the smart contacts’ main benefits:

  • Accuracy, speed, and efficiency: Smart contracts are written into code and entirely digital and executed automatically, these remove any requirement for paperwork that needs to be manually executed.

  • Trust and transparency: Smart contracts use blockchain technology, which removes the need for a trusted third party to verify and validate the data. Once the smart contract has been completed and stored, all the data will be visible to everyone with permission.

  • Security: Smart contracts use blockchain technology, which is incredibly difficult to hack. This makes smart contracts very secure.

  • Cost saving: Smart contracts are fully digital and automatically executed by the system. This efficiency helps cut operational costs since there's no need for third-party involvement or additional steps to execute the contracts.



For more information on smart contracts, please see our article about Smart Contracts.