Quick take: Why are smart contracts smart?

OVEX
2 min readOct 25, 2022

A smart contract is a self-executing contract defined by a computer program, in which the terms and execution of the agreement are built into immutable code and recorded on a blockchain (Ethereum being the most popular). But other blockchains are quickly poaching Ethereum’s market share as protocols choose to home their projects in new habitats — like Solana or Binance Smart Chain. The native tokens for these alternative blockchains can be found on OVEX.

There can be many terms of contracts that dictate an exchange — from timing to circumstances in which the contract becomes void. These ‘clauses’ can all be hard-coded into a smart contract.

Arguably the first instance of a smart contract was the vending machine. You put $1 into the machine, then it dispenses a snack for you. The entire transaction is pre-determined by the machine’s programming without external influences.

💡So why are smart contracts superior to their traditional counterparts?💡

When engaging in a traditional agreement — think of what is necessary besides the piece of paper and the two (or more) parties signing the agreement?

  1. Lawyers are often essential, first to write the contract’s language (perhaps even translate it) and then to ensure it is executed accordingly.
  2. If a contract is breached, you often need a judge, a courtroom, and other costly resources.
  3. In large financial exchanges such as buying a house, it is common to use an escrow, which is a third party who holds funds until both parties meet the agreed-upon conditions.

All these intermediaries and resources required to make traditional binding agreements come at a cost, not to mention the trust you must put into these external institutions to carry out their parts faithfully and in a timeous manner.

Smart contracts remove the middle men, you don’t have to pay, trust, or wait for third parties to execute them. This is what makes them so attractive.

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