What are smart contracts and how do they work on the blockchain?

Smart contracts are a revolutionary concept in the world of blockchain technology. They are self-executing contracts with the terms of the agreement directly written into code. These contracts automatically execute when the conditions specified in the code are met.

Sep. 01, 2023
What are smart contracts and how do they work on the blockchain?


Smart contracts are self-executing contracts written in code that automatically execute when certain conditions are met. They eliminate the need for intermediaries, increase efficiency, and provide transparency and security. Smart contracts are deployed on the blockchain and cannot be altered or tampered with, ensuring trust. They can be used in various industries, such as supply chain management and finance. Smart contracts are written in programming languages like Solidity or Chaincode and have real-life applications, such as in decentralized finance and intellectual property. They are revolutionizing industries and shaping the future of blockchain technology.

Now, let us explain in details what are smart contracts and how do they work on the blockchain, but first let's start with an example

Imagine a scenario where Alice wants to sell her car to Bob. Traditionally, they would need a middleman, such as a lawyer, to ensure the transaction goes smoothly. However, with smart contracts on the blockchain, this process becomes automated and trustless. In this example, Alice and Bob would create a smart contract on the blockchain. The smart contract would contain the terms of the agreement, such as the price of the car, the payment method, and the conditions for the transfer of ownership. The contract would also include the addresses of both Alice and Bob on the blockchain. Once the smart contract is deployed on the blockchain, it becomes immutable and transparent. It cannot be altered or tampered with, ensuring a high level of security and trust.

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Characteristics of smart contracts

Here are the key characteristics that make smart contracts so unique and valuable:

Immutable and Tamper-Proof

Once a smart contract is deployed on the blockchain, it becomes immutable and tamper-proof. No single party can alter its terms, ensuring a transparent and secure environment for all participants.

Automatic and Efficient

Smart contracts automate contract execution, eliminating the need for manual intervention. This automation streamlines processes, reduces costs, and ensures accurate and timely execution of contractual obligations.

Autonomy and Trust

Smart contracts operate autonomously, meaning they execute automatically based on predefined conditions. This removes the need to rely on intermediaries, enhancing trust among parties by minimizing the risk of fraud or human error.

Transparency and Auditability

The blockchain's inherent transparency allows all participants to access and verify the terms and execution of a smart contract. This feature ensures auditability and promotes accountability, creating a fair and trustworthy ecosystem.


Smart contracts are revolutionizing the way we transact and interact with digital assets. Their characteristics of immutability, automation, autonomy, transparency, and trust make them invaluable in a wide range of industries. By eliminating middlemen and enhancing efficiency, smart contracts pave the way for a more secure, transparent, and decentralized future.