An Introduction to Smart Contracts for Beginners

A smart contract is a protocol for regulating contracts.

A smart contract is a special protocol that’s intended to contribute, verify, or implement the deal or perform the contract.

Smart contracts enable the performance of credible transactions without third parties. These transactions are trackable and irreversible. Smart contracts contain all the information about the contract terms and execute all determined actions automatically.

How do smart contracts work?

They execute only according to the instructions given to them automatically. Initially, the assets and contract terms are coded and put into the block of a blockchain. This contract is distributed and copied multiple times between the nodes of the platform.

After the trigger takes place, the contract is performed according to the contract conditions. The program checks the implementation of the commitments automatically.

Applications in Real Life

Smart contracts can apply to different areas:


The voting results will be put in the blockchain and distributed among the nodes of the network. All of the data is encrypted and anonymous. This method gets rid of any possibility of manipulation with the ballot.


The supply chain is in general long and includes a lot of links. Each link has to receive a confirmation from the previous one, hold up its end of the contract and send the information further.

It takes a lot of time and is unproductive, while with a smart contract each participant can see the progress and do the work in time.

Smart contract guarantee transparency in the contract terms, fraud protection. It can also offer shipment tracking with the integration of the Internet of Thing (IoT).

Other possible applications include management, bank system, insurance, estate, IoT, and others.

Smart Contracts Benefits

Smart contracts use the benefits of the blockchain technology.


The smart contract is encrypted and distributed among nodes. This ensures that it will not be lost or charged without your permission.

Economy and Speed

Most processes are automated and most intermediaries are gotten rid of.


There exists a wide range of different kinds of smart contracts nowadays. You can choose one and change it based on your needs.

Smart Contract Weaknesses

Here are some smart contract weaknesses that you should definitely consider.

Human Factor

The code is made and written by people and obviously people can make mistakes. Once the smart contract is in the blockchain, it couldn’t be changed. One classic example of this is The DAO. The developers’ mistakes in the code were costly for the users and the company. Some hackers exploited errors and stole about $60 million.

Legal Status

At present, smart contracts are not regulated by any government. So there is a potential issue of governmental institutions decide to make a legislative framework for smart contracts.

Implementation Costs

Smart contracts cannot be performed without programming. It is essential to have an experienced order on the staff to create a fail-proof smart contract and adopt the internal structure of the company for blockchain technology.

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Sophie Green: Sophie's blog focuses on e-commerce strategies and trends. Her background as an e-commerce entrepreneur informs her insightful posts.

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