2025-08-24 14:05 Tags:Web3
Smart contracts are the fundamental building blocks of Ethereum’s application layer. They are computer programs stored on the blockchain that follow “if this then that” logic, and are guaranteed to execute according to the rules defined by its code, which cannot be changed once created.
Trust in conventional contracts
One of the biggest problems with a traditional contract is the need for trusted individuals to follow through with the contract’s outcomes.
A digital vending machine
A simple metaphor for a smart contract is a vending machine, which works somewhat similarly to a smart contract - specific inputs guarantee predetermined outputs.
- You select a product
- The vending machine displays the price
- You pay the price
- The vending machine verifies that you paid the right amount
- The vending machine gives you your item
The vending machine will only dispense your desired product after all requirements are met. If you don’t select a product or insert enough money, the vending machine won’t give out your product.
Automatic execution
The main benefit of a smart contract is that it deterministically executes unambiguous code when certain conditions are met. There is no need to wait for a human to interpret or negotiate the result. This removes the need for trusted intermediaries.
Predictable outcomes
Traditional contracts are ambiguous because they rely on humans to interpret and implement them. For example, two judges might interpret a contract differently, which could lead to inconsistent decisions and unequal outcomes. Smart contracts remove this possibility. Instead, smart contracts execute precisely based on the conditions written within the contract’s code. This precision means that given the same circumstances, the smart contract will produce the same result.
Public record
Smart contracts are useful for audits and tracking. Since Ethereum smart contracts are on a public blockchain, anyone can instantly track asset transfers and other related information. For example, you can check to see that someone sent money to your address.
Privacy protection
Smart contracts also protect your privacy. Since Ethereum is a pseudonymous network (your transactions are tied publicly to a unique cryptographic address, not your identity), you can protect your privacy from observers.
Visible terms
Finally, like traditional contracts, you can check what’s in a smart contract before you sign it (or otherwise interact with it). A smart contract’s transparency guarantees that anyone can scrutinize it.
My thoughts
Trust
This is the core reason why Web3 is so valuable to me.
Trust is the foundation of modern society. With trust, we can trade with each other. If we had to constantly worry about whether we should trust a company or an individual, we wouldn’t have achieved the society we live in today.
Smart contracts eliminate the human factor that can lead to cheating. You don’t have to worry about being deceived at all.