To understand the concept of ``what is a smart contract?`` consider the purchase of a chocolate bar from a vending machine.

To understand the concept of “what is a smart contract?” consider the purchase of a chocolate bar from a vending machine. The buyer deposits change then presses the button corresponding to the selection. That button, mapped against that particular slot, activates a lever in the machine to push out the candy. The transaction occurred without the need for a cashier or clerk. A smart contract is similar to a vending machine in that it eliminates the need for an intermediary. In this case, the vending machine is replacing a direct seller and allowing the consumer to make a purchase without a middleman.

Smart contracts are self-executing contracts containing the terms and conditions of an agreement among peers. The terms and conditions of the agreement are written into code. The smart contract executes on the Ethereum blockchain’s decentralized platform. The agreements facilitate the exchange of money, shares, property, or any asset.

There are two widely-used programming languages for writing Ethereum smart contracts – Solidity and Serpent. Solidity is a high-level programming language used for implementing smart contracts on the Ethereum blockchain platform. It enables blockchain developers to check the program at runtime rather than compile-time.

Traditionally, when two parties enter into a contract, they utilize the services of a trusted third party to execute the agreement. It’s been done this way for centuries. However, the introduction of smart contracts and its related technologies is automating what has been a laborious manual process.


Let's understand some of the key advantages of smart contracts over traditional contracts


Traditional contracts are expensive when compared to smart contracts simply because all those middlemen must be paid.


The sheer number of middlemen and intermediate layers involved in the execution of a traditional contract slows the process, often taking days or even weeks.

Accuracy and Transparency

Smart contracts, however, are 100 percent transparent, available online 24*7*365.

Flight Insurance

How? The smart contract is linked to the database recording flight status. The smart contract is created based on terms and conditions.


Security is maintained through cryptography, public key, and private keys when using smart contracts.

Blockchain Implementation

Ethereum-based smart contracts may be used to create digital tokens for performing transactions.


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