Smart Contracts in Layman’s Terms

In this post I’ll tackle the challenge of explaining smart contracts without using any technical jargon and once we are done we will take a deeper dive into technicalities behind a smart contract and also get you to write your first smart contract. This is part 1 of a series of upcoming posts on smart contracts.

“A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.” so says Wikipedia

But frankly speaking reading that (↑) confuses some more than even learning something about smart contracts . So what the heck is smart contract ? I’ll say smart contract is just like a coin locker since the way it works is in principle similar to a smart contract.

Source and credits (Unsplash)


Smart contracts are a guarantee of set number of things , simply being a logical (coded) promise that states X will happen provided Y happens and so on. So in case of our coin locker example either coin will be accepted and you’ll be given with a space to store your luggage or it wont be accepted (if amount not reached or false coins are used)and the coin will be returned to you .

So where does the difference lie between smart contracts and the example given above ? It’s in the degree of trust and transparency . Now if there was a coin locker that uses a 100$ bill as a deposit to let you store your luggage would that not raise any questions ? All the smart contracts are encrypted on the publicly available shared ledger and are tamper-proof because of being on blockchain network which makes it immutable , so once created it cant be changed or deleted . Now this doesn’t always comes as an advantage but also as a snag , imagine having a bug in a smart contract which could result in losing a fortune.

So there is nothing smart at all about smart contracts (sorry Nick) , I like to believe that the only reason they are called smart is because they are run and stored on computers which are smart . A smart contract is logical code (if then condition based) which is understood by computer . It’s a self executing code which runs once any condition is met. They are stored on blockchain to make sure they are autonomous , trustable , secure , transparent , traceable , accurate , quick . It also removes the need for an intermediary.

Use cases

Assuming you are still reading this post and have understood everything (not just wikis definition) then lets proceed further and see how smart contracts can help us.

For over more than a decade social media has been on rise , the big world we once knew has shrunken and everything brought more closer . The Digitalisation of world and our lives is amazing but has also created issues in finding confidence with the consumption . It’s hard to create presence of online trust.

“Last Decade has been about social media but the next will be about establishing trust and privacy.”

With smart contracts stepping in we are entering into the intermediary-less world which could work more quicker and efficiently with unlimited possibilities of where they could be applied :

Financial services
Government (Voting System , Identification)
Health Sector (Health records , insurance)
Real Estate

Apart of these use cases smart contracts could be applied to make the exchange possible of currency , asset , share and anything of value in most secured and trusted way.


Im not saying that smart contracts are perfect , they are flawed as comes with any technology . It’s still unclear how would the government regulate, enforce or tax these. Imagine using the right coin(amount) but still ending up getting a faulty coin locker . In the traditional contract world it would be easier to solve this problem but with smart contracts being on blockchain how will these issues be addressed and solved ? Experts are being challenged everyday to crack these problems and make the use of smart contracts bullet proof .

Now as I promised that I wont go into any ‘behind the scenes’ and inner workings of a smart contract in this post i’ll stop right here.

In next post we will unravel about EVM , Solidity , ERC20 and other smart contracts standard and see where it’s going in 2020.

Akshat Jain

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