What are smart contracts?

In digital transactions, they are the ones who guarantee security, even without the presence of intermediaries

Smart contracts are an essential part of actions carried out in platforms and applications that work on blockchain —such as those used to secure security transactions cryptocurrencies or of NFTs. After all, they are responsible for complying with the rules agreed upon by those who use these virtual networks.

The difference to paper contracts is that the terms of the smart contract are written in lines of code directly on the blockchain and are executed automatically whenever a programmed condition is met. This is because your code follows the logic “if x occurs, perform step y”. This way, the smart contract can, for example, automatically move a set amount of cryptocurrencies from one party to another when criteria are met.

By operating in this automatic way, smart contracts allow transactions and agreements to be carried out reliably between anonymous people, without the need to have a notary, a lawyer or any other authority supervising the process, as happens outside the web.

When the transaction is completed, the blockchain it's updated. This means that the transaction cannot be changed and only parties who have received permission can see the results.

In addition to being used to automate the execution of an agreement, smart contracts can also be used to automate a workflow, triggering the next action when the previous conditions are met.

Smart contracts do not perform very complex tasks, so as not to overload the network. Today, the two types of transactions they perform most are guaranteeing the payment of funds (when an action is triggered) and imposing financial penalties if certain conditions of the agreements are not met.

Benefits of Smart Contract


The contract is executed immediately, whenever one of the conditions set out in it is met. As they are digital and automated, there is no need to waste time filling out and processing paperwork (much less correcting errors that often occur when filling out documents manually).


This type of contract provides security against fraud, since there are no people involved in the process and transaction records are encrypted (and therefore cannot be changed for personal benefit).


Precisely because they are encrypted, transaction records in blockchain are very difficult to hack. Each record is connected to the previous and following records, so hackers they would have to change the entire chain to change a single record.


By eliminating intermediaries in transactions, smart contracts do not suffer from delays. And they also save money on fees.

Was this content useful to you?

Related posts