What is a Smart Contract?

Smart contracts are codified sets of instructions which allows dynamic and interesting applications to be built on top of the underlying blockchain. With smart contracts, the development of cryptocurrencies could move beyond just a pure user-to-user financial transaction instrument.

Smart contracts are not directly controlled by a user, instead once published they run independently on the network with transparent contract terms. Users can then interact with a smart contract through transactions that trigger certain desirable events in the contract.

The two greatest advantages of smart contracts is the transparency and their automatic execution without the need for central intermediaries. In the past, if a consumer wanted to interact with any financial institution or company, they would have to heavily trust or rely on the reputation of such institutions or other intermediaries. Smart contracts on the other hand run without a central intermediary, can be accessed by anyone on the public network (transparent) and can be relied on since it is codified (trustless).