Smart Contracts – Explained with Examples (Animation)

A Smart Contract is a set of computer codes built on the blockchain, which executes only when its predetermined conditions are met.

It operates according to a set of rules based on IF THEN.

That means that the contract’s function will be executed only when its predetermined conditions are satisfied and without interference of a third party or intermediary.

Imagine you’re interacting with a vending machine.

When you put your money into the vending machine, it immediately provides you with your desired choice.

Thus the need for an intermediary between you and the machine has been removed, since the logic was programmed into the machine itself.

In this situation your money is the required “if” condition, and the drink you received was the execution.
This is the same way smart contracts operate.

This is what enables developers to build a near limitless range of applications and protocols on the blockchain.

Smart contracts were first introduced on the Bitcoin blockchain, but were very limited in their functionality.

Then a revolution occurred when Ethereum introduced its platform for developing smart contracts, which has opened limitless possibilities of use cases and applications.

The main benefit of smart contracts is that they are permissionless, meaning anyone can build a contract and deploy it to a blockchain network.

They are also very secure, as blockchain cryptography leaves almost no possibility of successful hacking attempts.

In addition to that, security is fortified through contract immutability, meaning that once deployed, its code cannot be changed nor interfered with