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Before the rise of web3 and blockchain, the world relied heavily on banks and institutions to manage transactions. From transferring money to confirming ownership of legal assets, these centralized entities set their own rules—sometimes transparent, often not—and stored records in databases accessible only to a few.

But what if code could replace bureaucracy? What if agreements were self-executing, requiring no middleman and governed solely by logic and transparency?

Welcome to the world of smart contracts.

What Is a Smart Contract?

At its core, a smart contract is a self-executing program that runs on a blockchain. It automatically enforces the rules and terms of an agreement, without the need for human intermediaries.

Instead of relying on institutions, smart contracts allow parties to interact directly. The contract’s rules—like cost, payment, and authorization—are written into code. Once conditions are met, the code runs automatically.

Smart contracts are central to the functioning of:

• Non-fungible tokens (NFTs)

• Decentralized applications (dApps)

• Decentralized finance (DeFi)

\Where Did the Term Come From?

The term “smart contract” was coined in the 1990s by Nick Szabo, a computer scientist and cryptographer. He described them as:

“A set of promises, specified in digital form, including protocols within which the parties perform on these promises.”

Today, those “promises” are encoded into blockchain systems, enabling everything from NFT ownership to complex DeFi transactions.

How Smart Contracts Work

Smart contracts operate on “if this, then that” logic. Nick Szabo famously compared them to vending machines:

• A vending machine releases a snack only when the correct buttons are pressed and the right amount is paid.

• Similarly, a smart contract executes its programmed action only when specific inputs or conditions are fulfilled.

  Automation with Purpose

             Once deployed, smart contracts run without external input. They execute automatically and cannot be          changed without consensus on the blockchain.

          However, like most blockchain operations, interacting with smart contracts typically requires gas fees—a small payment made to compensate the network validators who process and confirm transactions.

Where Smart Contracts Live

Smart contracts are hosted on blockchains, which are decentralized networks of computers (or nodes) that validate and store transactions. These contracts are:

• Immutable: Once deployed, their code and history cannot be altered.

• Publicly accessible: Anyone can view and verify the contract's code and history.

Popular blockchains that support smart contracts include:

• Ethereum

• Base

• Avalanche

Key Benefits of Smart Contracts

• Transparent and Secure

Smart contracts are public and inherit the security of the blockchain. Anyone can verify what the contract does and how it operates. On platforms like OpenSea, users can even trace NFT smart contract details by viewing the “Contract Address,” which links to blockchain explorers like etherscan.io.

• Speed and Efficiency

Smart contracts automate complex tasks with purpose-built code. As a result, related transactions (like NFT transfers) can be processed quickly and reliably on-chain.

• Immutable Record

All activity involving a smart contract—including NFT ownership changes—is permanently recorded on the blockchain. Updates can only occur once validators reach consensus, making tampering virtually impossible.

What Are Smart Contracts Used For?

Smart contracts have a wide range of use cases, especially in the web3 space. Two of the most prominent include NFTs and dApps.

NFTs (Non-Fungible Tokens)

NFTs are unique digital items—artwork, collectibles, digital real estate, and more—whose ownership is tracked via smart contracts. These contracts ensure:

• Proof of ownership

• Seamless transfers

• Enforced royalties and permissions

dApps (Decentralized Applications)

dApps are applications built using blockchain protocols. Unlike traditional apps owned by a single entity, dApps can be:

• Operated by peer-to-peer networks

• Built on decentralized infrastructure

• Controlled by communities rather than corporations

What makes an app a “dApp” isn’t its interface—it’s how it uses smart contracts to manage logic and functionality on-chain.

NFTs and Smart Contracts: A Symbiotic Relationship

Smart contracts are the foundation of NFTs. They handle everything from minting and ownership tracking to transfer logic and resale royalties.

Take Seaport, for example—a smart contract protocol that enables NFT transactions based on signed instructions. Validators process those instructions using the rules defined in Seaport’s smart contract—allowing for efficient, trustless trades between parties.