Glossary: Smart Contract
A smart contract is a self-executing program stored on a blockchain that automatically enforces and carries out the terms of an agreement when predetermined conditions are met, without requiring a third party to oversee or authorize it.
What is a Smart Contract?
A smart contract is a self-executing program stored on a blockchain that automatically enforces and carries out the terms of an agreement when predetermined conditions are met, without requiring a third party to oversee or authorize it.
Smart Contracts Explained
Think about a vending machine. You put in money, press a button, and the machine gives you the snack. No cashier needed. No negotiation. The rules are built in.
A smart contract works the same way.
You write the rules into code and deploy it on a blockchain. When the conditions are met, it executes automatically.
No bank, no lawyer, no middleman. Just code running exactly as written, every single time.
What a Smart Contract Means For
Audience | Use Case |
|---|---|
Blockchain developers and engineers | Build the core logic of decentralized applications, from token transfers to complex financial protocols, using smart contracts as the execution layer |
Founders and product teams in crypto apps | Replace intermediaries and manual processes with automated, trustless contract logic that operates without human intervention |
Legal and compliance teams exploring blockchain-based apps | Understand how smart contracts encode and enforce agreements on-chain and where they intersect with traditional legal frameworks |
Examples
A freelancer and client agree to terms encoded in a smart contract. The contract releases payment automatically once the client confirms delivery, with no payment processor involved.
A DeFi lending protocol uses a smart contract to liquidate undercollateralized positions automatically when an asset price drops below a set threshold.
An NFT creator deploys a smart contract that pays them a royalty percentage automatically every time their token is resold on a secondary market.
A DAO uses a smart contract to execute a treasury transfer automatically once a governance vote reaches the required approval threshold.
Related reading
Explore Smart Contract Events, Application Binary Interface (ABI), Solidity, and Account Abstraction.
FAQs
Can a smart contract be changed after deployment?
Generally no. Most smart contracts are immutable once deployed. Some include upgrade mechanisms but these require careful design to avoid introducing new vulnerabilities.
What happens if there is a bug in a smart contract?
Bugs can be exploited to drain funds or break functionality. Since contracts are immutable, fixing them is difficult. This is why auditing before deployment is critical.
Are smart contracts legally binding?
A smart contract is executable code; whether its use also forms or performs a legally binding agreement depends on the parties, intent, facts, and applicable law. Code execution alone does not settle that legal question.
What is the difference between a smart contract and a regular contract?
A smart contract is code deployed to a blockchain that executes according to programmed rules. A legal contract is an agreement recognized under applicable law. One arrangement can involve both, but code does not automatically capture every legal term or remedy.
What blockchains support smart contracts?
Ethereum is the most widely used platform for smart contracts. Other chains including Solana, BNB Chain, Avalanche, and Polygon also support smart contract deployment.
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