To define with simple terms, a smart contract refers to coded agreements that execute themselves automatically once the conditions are met. Of course, there is so much more than that, which is why today we are here.

By the end of this article, you will understand smart contracts in Blockchain regarding the definition, how they work, their use areas, and the advantages of using them. Without further ado, let’s get started!


  • Smart contracts belong to Blockchain technology, which can be used in many different areas.
  • In essence, smart contracts are self-executing contracts coded in a way that will be executed only if the predetermined conditions occur.
  • Smart contracts make it possible for transactions to take place around secure and agreed terms without any central authority. With this feature, it offers a crypto-focused transformation opportunity in many areas such as import-export, money transfers, finance service development, etc.
  • EOS, Neo, Tezos, Tron, Polkadot, and Algorand are some of the popular blockchains that allow smart contract development.
  • Governments can use smart contracts in healthcare, voting systems, and supply chains.

Smart Contracts Defined

The software that ensures that the transaction is completed securely in case of predetermined conditions in any network, dApp, or protocol is called smart contracts. The important point here is that the conditions in smart contracts cannot be hacked with any security vulnerability, smart contracts are equipped with high encryption technology and can work in harmony with blockchains.

Today, there are many platforms where you can develop and execute smart contracts. The most popular of these is Ethereum. Besides Ethereum, numerous blockchains including EOS, Neo, Tezos, Tron, Polkadot, and Algorand operate DeFi services with smart contracts.

How Do Smart Contracts Work?

You can think of smart contracts as codes written in the formats of “if, when, then”, and so on. All of those statements are linked through conditions, which plays a role in the contract’s condition. Then the Blockchain system will be updated after the conditions are met. That is, it will be inevitable for the transaction to be released, and everybody can ensure that the process is nice and smooth. Moreover, in these conditions, only the parties involved and those who have the permission can review their status of them. In other words, there is no need or permission for a center to monitor or approve the process, nor for spies to violate privacy terms.

The same applies to new contracts to occur. That is, if you are involved in something that includes reoccurring contracts, the smart contracts can automatically begin in the defined periods, again without the need for the involvement of a third party; hence no time or effort loss is observed.

For further clearance, let’s review how does a smart contract works once again:

  • Involved parties must decide on the terms.
  • The terms are needed to be translated into programming code, in which the code contains various “conditional statements,” which determine what will happen in the following transactions.
  • As the code is created, it will be stored in the Blockchain network and copied across all network devices (remember when we briefly described how Blockchain works).
  • After, the code will be executed by every device in the network. That is, if the contract meets all the prerequisite conditions and every member of the network can see it, the contract will be executed.

As you can understand from the working principle above, every program developer can write and execute a smart contract. The key is to be able to do a job with the security features and functionality that people will want to use.

Benefits of Using Smart Contracts in the Crypto World

Understanding the benefits of using smart contracts will help you to understand how they work great because, at the end of the day, each benefit we will talk about is linked to the nature of smart contracts, and you will inevitably understand it better.

  1. Time-saving: Since some of the processes are automated by computer technologies (remember the self-executing nature of smart contracts we discussed earlier), the processes will speed up a lot and save you a lot of time.
  2. Accuracy: Smart contracts benefit many people and businesses by astronomically decreasing the possible human mistakes made. Remember that this does not mean that there will never be any problems at all; at the end of the day, defining terms and translating them into code are made by humans as well. However, it is impossible to overlook the fact that a self-executing system decreases mistakes a lot. Once the terms are met, the contract will execute itself, end of the story.
  3. Safety: All the transactions and every other thing involved in the smart contracts will be encrypted, in which the cryptography will keep every single thing that is happening out there (which makes it almost impossible to manipulate the terms or change the predetermined rules). Moreover, with smart contracts technology, you don’t need to worry about losing your documents because it will be impossible to delete them from the system in the first place. They are duplicated multiple times, so they will not go anywhere even if you want to.
  4. Autonomy: The fact that any transaction can be performed without third-party involvement means that resources are not unnecessarily distributed, as well as reducing the risk of manipulation. A more free and problem-free transaction process dependent on fewer variables.

Risks of Using Smart Contracts in the Crypto World

Unfortunately, not everything is rosy pink in smart contracts environment. There are some risks and disadvantages you need to be aware of about this technology, which can be listed as follows:

  • Vague Terms: It may not always be possible to translate some terms into the codes, especially if we are talking about vague terms.
  • Loopholes: When fair benefits are on the table, smart contracts might not be enough to give parties what they deserve, but instead, it will be the case where what is written on the contract is given. This is an exceptional loophole problem, but it still might happen.
  • Changes: The concept of making changes can be described both as a benefit and disadvantage. As we mentioned earlier, it is nearly impossible to make changes in smart contracts, but what if you really need to make a change?
  • Third parties: We have mentioned that you will eliminate the involvement of third parties with smart contracts, but they will come into play in different forms. Even though they will not be part of the contract, the third party involvement might look like getting a lawyer to define and translate the codes.

Use Areas of Smart Contracts: How They Transform the Industries?

After the advantages and disadvantages, we hope that you have a clear image in your brain of how smart contracts work. To further clarify the issue and give you some real-life examples, it would be best to say a few words about the use areas of smart contracts.

Smart Contract Development for Governments: Voting

Many different governments use smart contracts to ensure a fair and smooth voting system. Indeed, the features of smart contracts make voting issues much safer secure. You should have guessed that votings are one area that is quite open to manipulation, so governments are eliminating this problem by using smart contracts technology. That is because once the voting data is encrypted to the Blockchain system, it will be impossible to change and hence will not be open for any kind of manipulation.

Smart Contract Development for Health Industry: Patients’ Data

Blockchain use in healthcare is something we are familiar with, and smart contracts are becoming more popular in this sector too. With an encryption key, blockchain can store patients’ recorded medical files. Due to confidentiality considerations, only selected people would have access to the documents. Another use of smart contracts in the healthcare sector is to conduct research privately and securely.

Who uses smart contracts for healthcare medical data protection? Well, here are some of them:

  • Avaneer Health
  • Akiri
  • burstIQ
  • Factom
  • Coral Health Research & Discovery
  • Medicalchain
  • Guardtime
  • ProCredEx

Learn more: Blockchain Top Use Cases – 2022

Smart Contract Development for Supply Chains: Tracking and Tracing

Blockchain technology improved the working mechanism of supply chains a lot and in the best way possible. Because there are lots of people and channels involved in supply chains, it is quite prone to mistakes and manipulation. Those can result in serious fraud and loss.

Luckily, smart contracts in supply chains provide an excellent solution to those issues. Because all the services given in the supply chain can be tracked through smart contracts, and since they are not open to change while it is open for everyone to see. In this context, smart contracts would be useful for inventory control as well as finance and job automation.

  • IBM, Walmart, FEDEX, and British Airways are some of the companies that employ smart contracts to empower their supply chain management processes.

Learn more: Blockchain for Supply Chain

Smart Contract Development for Gaming: NFTs

NFTs, the most enjoyable elements of in-game purchases, are ready to reshape an industry. The rapidly growing global gaming industry makes it possible to trade objects in a virtual world with NFTs, the concept of ownership of these objects, and the creation of a market that will emerge with an increased sense of reality. Gaming dApps developed on networks such as Ethereum, TRON, NEO, and Solana do not only offer fun games that allow players to buy NFT with powerful smart contracts. These games also allow players to earn assets, generate and develop NFTs in-game, and trade digital assets they acquire in-game, with the play-to-earn algorithm.

NFTs are tokens that work with smart contracts. Can you understand the relationship more easily now?

Smart Contract Development for Law: New Way of Creating Binding Agreements

Blockchain world continues to find its counterpart in the field of law. When the bindingness of legal contracts is accepted by governments for smart contracts, a wide legal application area can be opened. Moreover, the contracts are now drawn up by developers, not lawyers. For example, Arizona, a country where enforceable legal agreements can be legally drawn up with smart contracts. California, on the other hand, started to produce and track marriage licenses via blockchain. These pave the way for a future for governmental legal processes as well.

Smart Contract Development for Finance Services: Lending, Borrowing, Yield Farming

In the crypto money world, smart contract development is used especially for decentralized finance services. Many different protocols such as, Uniswap, Pancakeswap, that you use today and hosted on different blockchain networks consist of different smart contracts. In such platforms, the contract to which the lender and borrower will be bound determines many conditions, from APY rates to the amount of the asset to be received. In addition, the encryption methods used in the protocol also say how safe users are, who achieve yield farming by keeping their assets in liquidity pools.

Security audit tools such as CertiK, which gives platforms scores and audits on the software security and functionality actually examine smart contracts.

What are some examples of smart contracts?

There are many different applications of smart contracts. Some of the most popular examples can be given from government issues like voting, the healthcare sector, supply chain, and many other financial areas. Furthermore, all DeFi applications or dApps are basically smart contracts run on a certain blockchain network.

Which crypto has a smart contract?

Different cryptocurrencies use smart contract technologies, but Ethereum is the most popular one among them. The other ones include but are not limited to Neo, EOS, Polkadot, and Algorand.

What is special about smart contracts?

Smart contracts bring the agreement into the form of computer code, which eliminates manipulation and decreases human mistakes greatly. Since the transactions cannot be changed, it offers a safe and secure way of agreements in many different areas. Moreover, smart contracts eliminate the need for third parties as well.

Which software language must be used for smart contract development?

Solidity, Rust, Javascript, Vyper, and Yul are among the most popular and functional software languages to develop smart contracts.