Chapter 2

Smart Contracts

Programs that can't be stopped

12 min read
Beginner

The Vending Machine Revolution

Smart contracts are like vending machines: you put in coins, and they automatically give you what you paid for. No human needed, no one can interfere, and it works exactly the same every time.

“You put in $2, press 'Coca-Cola', and the machine automatically gives you a Coke. Smart contracts work the same way - you send cryptocurrency, and the contract automatically executes the programmed action.”

The difference is that smart contracts can handle much more complex logic than a vending machine. They can manage financial transactions, ownership transfers, voting systems, and much more.

Code is Law

Smart contracts follow the principle of “Code is Law” - they execute exactly as programmed, without any possibility of:

Traditional Systems

  • • Human error or bias
  • • Corruption or manipulation
  • • Central authority control
  • • Downtime or maintenance

Smart Contracts

  • • Execute automatically
  • • Cannot be changed once deployed
  • • Run 24/7 without interruption
  • • Transparent and verifiable

Smart Contract Benefits:

  • Trustless - no need to trust a middleman
  • Immutable - code cannot be changed
  • Transparent - all code is public
  • Automatic - no human intervention needed

Real-World Examples

Smart contracts power many of the applications you might have heard about:

DeFi Lending

Smart contracts automatically manage loans, interest rates, and collateral without banks or intermediaries.

NFT Marketplaces

Smart contracts handle the buying, selling, and ownership transfers of digital collectibles and art.

Key Insight:

Smart contracts are the building blocks of the decentralized web. They enable applications that can run without any central authority, making the internet more open, fair, and resilient.

Quick Check: Do you understand?

What are smart contracts?