Smart Contract

A smart contract is a program stored on a blockchain that runs automatically when its conditions are met, holding and moving funds according to its code without requiring a company, bank, or court to execute it. Once deployed, the code lives at an address on the chain, anyone can call its functions by sending a transaction, and every node executes the call identically — so the outcome is enforced by the network itself rather than by trust in a counterparty.

Ethereum popularized the model, and smart contracts now underpin most of what happens on programmable blockchains: tokens (each ERC-20 token is a contract tracking balances), decentralized exchanges, lending markets, NFTs, and DAOs. For example, Uniswap is a set of smart contracts that lets anyone swap tokens against pooled liquidity — you send tokens to the contract, its code computes the price from the pool's reserves, and it returns the other asset in the same transaction, with no order book or intermediary.

A common misconception is that smart contracts are legally binding agreements or somehow intelligent; they are neither — just deterministic code, and "the code is the contract" means bugs are enforced as faithfully as intentions. Deployed contracts are typically immutable, which is a double-edged sword: no one can quietly change the rules, but a vulnerability can be catastrophic and unpatchable, as repeated multi-million-dollar exploits have shown. This is why serious projects undergo audits, and why some contracts include upgrade mechanisms that themselves introduce trust trade-offs.