An Overview of How Ethereum Smart Contracts Work

Ethereum Smart Contract

Thanks to the support of Blockchain technology, many common activities such as agreement and contract enforcement can be performed automatically using Ethereum smart contracts. So, what is the Ethereum smart contract? All information about Ethereum Smart Contracts will be provided by CoinMinutes in the article below.

What Are Ethereum Smart Contracts?

Ethereum Smart Contracts are programs that run on the blockchain. A smart contract is like a digital contract that is enforced by a specific set of rules. These rules are predetermined by a set of computer codes that all nodes in the network must copy and enforce.

In essence, a smart contract is just a piece of code running on a blockchain system, allowing the creation of permissionless protocols. That means two parties to a contract can make commitments through the blockchain without having to know each other’s identities or trust each other. Additionally, they can ensure that if the conditions of the contract are not satisfied, the contract will not be enforced.

Although smart contracts can be written in a number of programming languages, Solidity has become the top choice for many smart contract developers. Solidity is a powerful and complex programming language that takes time to master. However, getting started with Solidity is not difficult, especially for developers with a background in object-oriented programming (OOP).

How Do Ethereum Smart Contracts Work?

Smart contracts serve as the foundational elements of Ethereum’s application layer. These are software programs that reside on the blockchain and operate on a “if this happens then that should happen” principle. They are programmed to execute based on the rules established by their code, which remains immutable after its creation.

Pros and Cons of Smart Contracts Work? 


  • Smart contract applications can be used in many different fields: Logistics, banking, real estate, elections,…
  • Not under the management of any agency.
  • Minimize risks from third parties.
  • Safe and transparent.
  • Economical and fast.


  • Can be attacked or exploited by hackers if important information is revealed.
  • May not be protected because there is no policy.
  • High requirements on implementation qualifications of programmers and systems. From there, the cost to pay them and the infrastructure is not small.

What Can Smart Contracts Be Used For?

In today’s life, Ethereum Smart Contracts in particular, and other smart contracts in general are being applied in many fields. Many large businesses have researched and applied smart contracts in their operations.

Application in international trade: Businesses around the world can participate in financial ecosystems to implement smart contracts. For example, the trade finance network operated by IBM Blockchain allows businesses to carry out standardized and simplified smart transactions.

Connect retailers and suppliers: Disputes between suppliers and retailers can be quickly resolved through smart contracts. Home Depot is an example. The company has applied smart contracts in transactions with suppliers. Thanks to that, they make the agreement transparent, shorten the time, and build a more sustainable relationship with the supplier.

Application in crypto transactions: Smart contract helps virtual currency transactions become smoother, avoiding third-party intervention. Thanks to that, the exchange avoids problems of fraud and poor security. At the same time, it helps limit legal troubles. The advent of smart contracts has made the process of buying and selling digital currencies faster and less labor-intensive.

How Are Smart Contracts Deployed?

Simply put, a smart contract is deployed similarly to a vending machine. When you put money in and choose a drink, it will automatically give you what you need. Or if the item is out of stock, the machine can notify you to change your choice or receive a refund. It can be seen that purchasing from this water vending machine is completely automatic without the intervention of a third party.

The smart contract is the same, it helps the execution of a contract take place automatically. To write a smart contract, many types of programming languages can be used. Such as Solidity, Web Assembly, or Michelson. Solidity is the main language used to create an Ethereum Smart Contract.

Based on the statements “if/ when … then …” and encoded on Blockchain, the smart contract will perform actions when the given conditions are met. It could be the act of sending a notification, registering a vehicle, paying money, etc. Finally, it will update the data about the completed transaction.

When implementing a smart contract, the parties will not be able to arbitrarily change the transaction. At the same time, only authorized parties can view the results. Therefore, clauses must be carefully considered and take into account all possible exceptions and disputes.


The birth of the Ethereum Smart Contract has overcome many limitations of traditional contracts. The rapid development of this type of contract will help international trade activities take place more effectively and safely. Hopefully, CoinMinutes has partly provided you with useful information about smart contracts.

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