Note: This blog post is meant for beginners. If you have experience with web3 and blockchain, you might not find this as useful, but I encourage you to maybe stick around anyway.

Hello, all! This is the seventh blog of the series and today we’re going to talk about smart contracts

What is Smart Contract?

A smart contract is an agreement or set of instructions that is deployed on a decentralized blockchain. Once it’s up there, it can’t be changed. It automatically executes, and everyone can see the terms of the agreement. This means no one can tweak or alter the agreement, helping to prevent fraud and manipulation, which can sometimes happen with traditional contracts. Smart contracts offer trust-minimizing, unbreakable promises.

In Indian rupees note there is a agreements stating, “I promise to pay the bearer the sum of 500 rupees” but does the value of 500 rupees stay the same over years? Well, that’s a topic for another day (hint: inflation 🚀).

Much like this, everything we do is based on contracts—whether buying land, renting a property, or taking a loan. However, these can sometimes be forged or broken. With smart contracts, the agreement is unbreakable because they are transparent, decentralized, and immutable.

You heard it right: once a smart contract is deployed on a blockchain like Ethereum, no one can change it. But I always wondered, then how is Ethereum updated and new Ethereum Improvement Proposals (EIPs) added? Well, the answer lies in the difference between the blockchain itself and the smart contracts it hosts. The Ethereum network can be updated through a consensus process where proposed changes (EIPs) are voted on by the community. If agreed upon, these changes are implemented in the form of network upgrades or forks, allowing Ethereum to evolve while keeping existing smart contracts unchanged and secure. So, while the contracts themselves remain immutable, the underlying rules of the platform can adapt and improve over time.

Smart contracts are:

• Censorship-resistant: They provide a decentralized store of value that cannot be easily manipulated or controlled.
• Transparent and Efficient: Sending money internationally is usually slow and expensive. With blockchain, you can send money anywhere in the world—even into space!—in just minutes. Plus, blockchain never sleeps; it’s available 24/7, 365 days a year.

They are essentially a program stored on a blockchain, is written in code. The most popular language for writing smart contracts on platforms like Ethereum is Solidity, which is designed to be readable and relatively straightforward.

Here’s what a simple smart contract might look like in Solidity. This example is a basic contract for a decentralized voting system:

pragma solidity ^0.5.16;

contract Voting {
    bytes32 public candidate;
    constructor(bytes32 _candidate) public {
        candidate = _candidate;
    }

    function getCandidate() public view returns (bytes32) {
        return candidate;
    }
}

Don’t worry if you don’t understand it, we are going to discuss this in future blogs of the Solidity series. This blog focuses more on understanding the basic terminologies in the blockchain world and how they work.

What issues does it actually solve? 

Smart contracts help reduce fraud, enforce agreements without the need for middlemen, and ensure operations are executed as programmed without downtime, censorship, fraud, or third-party interference.

Other benefits of smart contracts include:

• Decentralization: No single individual owns or controls the blockchain. Thousands of users run nodes, and their combined efforts keep the network decentralized.
• Speed and Efficiency: In traditional setups, sending money overseas is slow and costly. With blockchain, you can send money globally in seconds at a much lower cost.
• Transparency and Flexibility: Since all nodes run the same software, everyone can see what’s happening on the network, making it very transparent.

Smart contracts are revolutionizing how we think about agreements in our digital and increasingly interconnected world. They not only simplify transactions but also provide a level of security and trust that traditional contracts can’t match.

That’s it for today. I want to keep the blogs short and easy to read. In the next blog, we are going to discuss about L2s and rollups.