What is a smart contract?

For Beginners

What is a smart contract?

Smart contracts are on the cutting edge of crypto technology at the moment. Introduced way back in 2015 by Ethereum’s founder V. Buterin, these algorithms are self-executing orders that have the potential to automate a lot of processes in the crypto industry.

In turn, this enables the creation of various streamlined systems based on decentralized networks, including decentralized applications (dApps), decentralized finance (DeFi), etc. It’s now a well-entrenched part of the crypto world, but what are they and how do they work?

Defining Smart Contracts

Smart contracts are digital agreements, as the name suggests. They can carry out automated decisions activated when the necessary requirements are met by both parties. It’s a flexible solution with a transparent, simple structure that is largely immune to tampering. That’s what made them so popular.

How Smart Contracts Work

Smart contracts are pieces of algorithm, created in a programming language supported by the underlying blockchain (usually Ethereum). It contains several requirements and the action, which the contract will carry out if the requirements are met. A contract can stay in the network autonomously, with an action that will also be performed in a fully automated fashion. After the operation is complete, the proof of its existence is recorded on the blockchain.

Benefits of Smart Contracts

There are several advantages that a system like this can bring to the table:

  1. Automation
  2. Lower cost of transactions
  3. Transparency
  4. Higher security.

Smart contracts are currently one of the most advanced pieces of crypto technology, capable of delegating many important processes to algorithms. This, in turn, allows for a much larger degree of scaling.


Smart contracts are a very effective way to grow and scale for many crypto networks. They simplify the processes, allow users to delegate a lot of simpler tasks to contracts, and improve the flow of data. It’s a pivotal piece of technology, and an ever-increasing number of decentralized projects continue to adopt it.

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