Simply:
A smart contract is a program on the blockchain that automatically executes when conditions are met.
Without an intermediary.
Without a bank.
Without 'trust me'.
How does it work?
Imagine it as a digital contract:
When A sends money, B automatically receives the product.
And it all runs on the blockchain.
Once the smart contract is activated:
no one can change it
no one can stop it
no one can bypass it
Example from practice
1️⃣ NFT purchase
You send cryptocurrency → smart contract automatically sends you an NFT.
2️⃣ DeFi loan
You deposit collateral → the smart contract releases the loan to you.
3️⃣ Staking
You unlock tokens → the smart contract pays you rewards.
Why are they important?
✔️ Automation
✔️ Transparency
✔️ No intermediary
✔️ Lower costs
Ethereum was the first blockchain that popularized them on a large scale.
Risks
⚠️ If there is an error in the code → funds may be lost
⚠️ A smart contract cannot be easily 'reversed'
⚠️ Hacks often target mistakes in smart contracts
That’s why auditing is important.
In one sentence:
A smart contract is an automatic digital agreement running on the blockchain without the need for a third party.
