Blockchain , Web3

Smart contracts What do they mean?

In the web3 world, smart contracts is a term thrown around a lot. Some even use it as one of the main differentiators between Bitcoin and Ethereum, but what does it really mean? Well, the time of not knowing shall be no more for you, as in this blog we’re going to break down what ...

In the web3 world, smart contracts is a term thrown around a lot. Some even use it as one of the main differentiators between Bitcoin and Ethereum, but what does it really mean?

Well, the time of not knowing shall be no more for you, as in this blog we’re going to break down what the hell smart contracts are!

Smart contracts are simply programs that run on a blockchain and execute when predetermined conditions are met. They can be used to automate the execution of an agreement so that all participants know the outcome immediately, without having to wait for any sort of intermediary. There are things out there in the physical world that go by this principle so let’s use it as an analogy.

If you were to go to the gym and in the public dressing room there are lockers for you to use. The predetermined condition using the locker is if you slot in the right coin, €1 for example, the door opens and you can use the storage for your bags and take the key to lock on your command. Now, if you didn’t have the right coin, the locker would not be able to open and that coin would be returned to you.

Using this principle and merging it with the security of blockchain, smart contracts create benefits and efficiencies for all parties involved.

Use cases

For over a decade, social media still remains to be on the rise but this rise has shown some issues with trusting consumption online. As it is quite difficult to create a presence of online trust, smart contracts play an important role in providing a top level of security.

Smart contracts (or called Programs in some blockchains) create this trustful process where no intermediary is necessary saving those involved time and money. Some use cases we see today are the following:

  • Financial Services
  • Government (Voting system, Identification)
  • Real Estate
  • Health Sector (Health Records, Insurance)
  • Management
  • Law

Anything where an exchange of currency, asset, or anything of value is involved, using a smart contract can now be the most secure way to go about it.

As we know, Ethereum is the smart contract platform with the highest number of users, but as the market increases, so does the number of transactions processed per second. Ethereum currently can process 30 transactions per second, if the number rises above, this costs energy and the participant will be charged gas fees. As the market grows, so does the price of gas fees which has become an issue for Ethereum. Other smart contract platforms have joined now competing well against this issue.

Cosmos is a layer 0 blockchain with the goal of creating an ecosystem of blockchains, so to speak, to help integrate different blockchain aiding the vision of a decentralised world. They allow the ability to process 10,000 transactions per second without the damage of gas fees. This efficiency is very attractive for those developing smart contracts.

Solana is another blockchain that have been rapidly growing due to its high-performing, permissionless, lightning fast, and cheap transactions. With the ability to process around 50,000 transactions per second, this blockchain is hosting +400 projects supporting smart contracts built on multiple coding programming languages like C, C++, and Rust.

As competition rises, so do partnerships. Polygon is a Layer 2 scaling solution for Ethereum. It doesn’t duplicate the functionality of Ethereum; it improves transaction speeds and lowers costs for developers. Other blockchains like Flow and Near Protocol are creating ecosystems for smart contracts to thrive which begs the question, what is so good about smart contracts?



Blockchain-based transactions are encrypted, making them very hard to hack. In addition, each record is linked to adjacent entries on the distributed ledger so a hacker would have to alter many ledgers at once.

Speed, Efficiency & Accuracy

Once a condition is met, smart contracts are automatically executed. Since they’re digital and automated, there’s no need for paperwork, which means no room for human error.

Trust & Transparency

Because there’s no third party involved, and because encrypted records of transactions are shared across participants, there’s no need to worry about altering information for personal gain.


Smart contracts eliminate the need for third parties to handle transactions and the delays that come with those transactions.

How can smart contracts work with real-world data & events?

One of the current issues with smart contracts is that they cannot inherently interact with data and systems existing outside their native blockchain. It’s commonly known that data within the blockchain is referred to as “on-chain” and data that’s stored in systems outside of the blockchain is referred to as “off-chain”. Thankfully there is something created to help bridge this gap of information and allow smart contracts to interoperate with on-chain and off-chain data and that is called “Blockchain Oracles”.

These entities have the ability to connect information between off-chain and on-chain networks, thus allowing smart contracts to do their job with infrastructure built in the off-chain world today. Let’s provide an easy example.

Tom and Jerry are betting on the outcome of a sports game.Tom bets €20 on team A, and Jerry bets €20 on team B. The smart contract holds their money until the game ends. The smart contract knows who wins by using an oracle to get the accurate score from another off-chain system . Without the oracle, the smart contract wouldn’t be able to do its job.


As technology continues to grow exponentially, there is certainly no doubt that more new innovations will come to aid in bringing blockchain technology to the off-chain world. If you enjoyed learning about smart contracts in this blog, be sure to check out the other blogs we have waiting for you!

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