{"id":6541,"date":"2019-07-10T11:23:52","date_gmt":"2019-07-10T11:23:52","guid":{"rendered":"https:\/\/qa-front.dev.techhub.cloud\/blog\/?page_id=658"},"modified":"2025-12-17T11:19:25","modified_gmt":"2025-12-17T11:19:25","slug":"what-are-smart-contracts","status":"publish","type":"glossary","link":"https:\/\/paybis.com\/blog\/glossary\/what-are-smart-contracts\/","title":{"rendered":"Smart Contracts"},"content":{"rendered":"

In the context of cryptocurrency, when one hears about Smart contracts, Ethereum is usually the first thing that comes to mind. But what exactly are those contracts and how do they help cryptocurrencies become a viable payment method worldwide?<\/span><\/p>\n

What Are Smart Contracts?<\/span><\/h2>\n

Smart contracts are self-executing contracts that contain the terms of an agreement between two parties directly included into the contract\u2019s code. The contents of such contracts exist within a distributed, decentralized <\/span>blockchain<\/span><\/a> network, such as Ethereum.<\/span><\/p>\n\nhttps:\/\/paybis.com\/blog\/wp-content\/uploads\/2019\/10\/5-What-are-Smart-contracts-and-why-should-you-know-about-them.mp3<\/a><\/audio>\n

How do smart contracts work?<\/span><\/h2>\n

Smart contracts operate on<\/span> blockchain<\/span><\/a> networks. They are self-executing programs that automatically enforce agreements when specific conditions are met. Here’s how the process works:<\/span><\/p>\n

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  1. Agreement Creation:<\/b> Two parties define the terms and conditions in code – such as “if X happens, then do Y.” For instance, “if payment of 1 ETH is received, transfer ownership of digital asset.”<\/span><\/li>\n
  2. Deployment to Blockchain:<\/b> The contract gets deployed to a blockchain network like<\/span> Ethereum<\/span><\/a>, where it becomes publicly visible and unchangeable. Once deployed, no one can modify the contract’s rules, not even the creators.<\/span><\/li>\n
  3. Automatic Execution:<\/b> When someone interacts with the contract and meets the specified conditions, the contract executes automatically without requiring intermediaries. The blockchain network verifies the transaction and updates all participants’ records at the same time.<\/span><\/li>\n
  4. Transparency and Trust:<\/b> All transactions are recorded on the blockchain. It makes them traceable and fully transparent. Anyone can verify that the contract executed correctly, which eliminates the need for trust between parties.<\/span><\/li>\n<\/ol>\n

    For example, a freelancer could create a smart contract to receive payment automatically once they deliver completed work. The client deposits funds into the contract, and when the freelancer submits the deliverable (verified by predetermined criteria), the contract releases payment instantly – no payment processor or escrow service needed.<\/span><\/p>\n

    Smart Contract Applications in Crypto<\/b><\/h3>\n

    Smart contracts power a wide range of cryptocurrency applications beyond simple payments:<\/span><\/p>\n