If you have been paying attention to the crypto world, you have probably heard about smart contracts without even realizing it. Projects that use NFTs, Defi, or Dapps are all built upon the foundation of smart contracts.

What is a smart contract?

A smart contract is any contract that is automatically executed upon certain conditions being met. If we create a smart contract together whereby you pay me upon completion of a project, I would automatically get paid after I completed the work without any third party.

Smart contracts are not inherently blockchain related. However, when most people refer to smart contracts they are specifically referring to smart contracts built on the blockchain. What is it about the blockchain that makes running a contract better?

By utilizing the blockchain to execute a smart contract, you remove the need to trust a third party (like a cloud hosting service). This is because a smart contract running on the blockchain is publicly executed on thousands of machines all around the world.

This gives a couple of key advantages:

  1. Fraud or theft is nearly impossible, as the bad actor would have to convince nodes all around the world to work against their best interests.
  2. The code running these contracts is open source. Since all code has to be executed globally anyone can audit and check the smart contract
  3. Removes the need to trust a third party to maintain their side of the deal. This means that you can create smart contracts that enable complete strangers who don't trust each other to work with each other.

Uses for smart contracts

Decentralized Exchanges

A self-executing code or smart contract enables the creation of exchanges where no one business or entity is behind it. This means that anyone can not only trade on the exchange but to also provide the liquidity and get rewarded with the trading fees

Non-fungible tokens or digital receipts

Blockchain-powered smart contracts give users the ability to link a digital file to a contract and then send that contract to different wallets (other users). This is the backbone of NFTs. Smart contracts that link typically a digital image to the permanent unalterable blockchain ledger, giving someone ownership rights


Why limit yourself to a single non-fungible (unique) tokens? smart contracts give you no limit to the amount of tokens you can create. Anyone can create a token in around 15minutes. You now have your cryptocurrency token. Seeing how easy it is, this makes it very easy for scammers to create tokens and use it as a way to steal from trusting people

Smart contracts takes the ideas of Bitcoin (miners, nodes, wallets) and says "what if we could program money". The weight of this technology has not and will not be truly felt for decades. Almost every day a new application or use for smart contracts is being discovered.

Who knows what is next!