What are Smart Contracts?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today, we talk about Smart Contracts: What they are and how they work.

Remember that blockchains like Ethereum are “programmable money”. They allow makers to create their own financial instruments, for example crypto currencies.

Smart contracts are the blockchain equivalent to real world laws, but they are impossible to violate.

In order to achieve that, these blockchains define what the functional building blocks are, so that the computers executing them are all talking the same language. Think of it like Lego: You can build anything with it, but the Lego company provides you with a bunch of literal blocks that you can put together any way you want.

A smart contract takes these building blocks and builds with them whatever the developers want to achieve. That could be simply moving money around between wallets, or also creating new money, or destroying some. A smart contract defines exactly how a crypto currency or any other financial instrument work.

And because the smart contract is executed on the blockchain, all instructions it carries are public and readable by anyone. They are also set in stone by design, meaning that everyone executing a transaction on a specific smart contract can expect the correct outcome.

So, that’s what a smart contract does. And next time we’ll debunk the myth that crypto is great for criminals, and you might be surprised to hear why.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.