The Crypto Guide for Beginners – What is a smart contract?


A smart contract, also referred to as a crypto contract, is a computer protocol that directly controls the transfer of cryptocurrencies or assets between two parties under certain conditions. Like a traditional contract on paper, a smart contract defines rules and penalties around an agreement; however, a crypto contract can automatically enforce the stated obligations because the contracts are stored on the blockchain, a decentralized ledger that underpins cryptocurrencies.

Here is the definition from “A smart contract is a special protocol intended to contribute, verify or implement the negotiation or performance of the contract. Smart contracts allow [individuals] to perform credible transactions without third parties. These transactions are trackable and irreversible. Smart contracts contain all the information about the contract terms and execute all envisaged actions automatically.

So, why do we use smart contracts?

  • Security A smart contract is encrypted and recorded in the network so that it can’t be changed or get lost.
  • Efficiency Most of the processes are automated, and there are no intermediaries in between the two parties.
  • Standardization It is possible to choose an existing smart contract and change it to suit your needs.

For more information about smart contracts, check out these links: