Breaking Down Smart Contracts

What is a contract?

A set of promises. Typically between two entities.

What is a smart contract?

A smart contract, as defined by Nick Szabo in 1996 [1] is

The classic vending machine example

A great example of a smart contract — also from Nick Szabo in 1996 — is a vending machine.

Mental models for contracts

Normal idea of contract in our heads: two people sign document, then go to work and don’t break the contract (keep their promises).

What is a smart contract in the context of blockchain?

At a high level, smart contracts on a blockchain are not much more than our established definition. In the case of a blockchain, the system that automates/ensures the execution of promises is code, and the promises are expressed/specified by the same code.

How is that possible on a blockchain?

Well, it’s only possible on a blockchain that supports this capability.

So is this how it works on real blockchains?

What we’ve established so far is not far off from how smart contracts work on Ethereum.


[1] Smart Contracts: Building Blocks for Digital Markets, Nick Szabo, 1996.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store