Smart Contract
A smart contract is self-executing code deployed on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met, without requiring a trusted intermediary.
Definition
A smart contract is self-executing code deployed on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met, without requiring a trusted intermediary.
Overview
Smart contracts run on programmable blockchains, most notably Ethereum, where they are typically written in a language such as Solidity, compiled to bytecode, and deployed to the network at a fixed address. Once deployed, their logic cannot be silently changed, and any interaction with them — sending funds, calling a function, updating state — is itself recorded as a transaction on the blockchain. Because execution is deterministic and verified by every node that processes the transaction, smart contracts let strangers transact according to agreed rules without relying on a bank, escrow agent, or other intermediary to enforce the terms. This is the foundation for decentralized applications and much of the Web3 and decentralized finance ecosystem, from token issuance to automated lending markets. The tradeoff is that bugs or oversights in a smart contract's code are also enforced exactly as written, which has led to high-profile exploits when contracts contained unintended logic errors — making rigorous auditing an essential part of smart contract development.
Key Concepts
- Code deployed on-chain that executes automatically when its conditions are met
- Immutable once deployed, barring specific upgrade patterns built in by the developer
- Deterministic execution verified independently by every validating node
- Removes the need for a trusted intermediary to enforce an agreement
- State changes and fund transfers are recorded transparently on the ledger
- Composable — one contract can call and build on another