Smart Contracts Blockchain Explained and Use Cases

Today’s post is based on smart contracts.

Nowadays most of the people are aware of Bitcoin and its Blockchain. These two terms are the main support in the evolution of Cryptocurrency digital market. After Bitcoin various Altcoin (derivatives of Bitcoin) has been created. Most them used the same Blockchain method but some of them used their own developed Blockchain such as Ethereum.

Blockchains are a very powerful technology capable of performing complex operations, understanding much more than just how many bitcoins you have currently have in your digital wallet. Here the idea of smart contracts come in. Smart contracts are already becoming a heated topic for enterprise blockchain applications and in future, it will become one of the pillars of blockchain technology.

So in this post, we will understand that ‘what are smart contracts?’

What are smart contracts ?

Smart contracts are a key underpinning of blockchain technology, yet they are still misunderstood in many ways.

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Smart contracts are the properties which help to exchange money, properties, shares, or anything of value in a transparent, competition freeway avoiding the need of a mediator.

This contracts are the piece of codes which are stored in the blockchain network. Smart contracts define the conditions to which all parties using contract agrees to the term. As the smart contracts are stored on every computer in the network, they all must execute it and get to the same result. In this way, users can be sure the outcome that has been found is correct.

Sounds complicated ?

Smart Contracts Blockchain Explained

It is not really that much complicated as it has been considered through the origin of smart contracts.

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Let us understand by an Example:

Suppose Mahesh rent a shop from Fakre. He can do this by blockchain method by paying in cryptocurrency. He will receive a receipt in a virtual contract form. Fakre gives the key to the shop as digital entry key comes to Mahesh on a specified date. If the Digital entry key does not come on time the Blockchain will release the refund.

Smart Contracts Blockchain Explained and Use Cases

If fakre sends the digital key before the rental date the function will hold it releasing both the fee and key to Mahesh and fakre respectively when the date arrives. The system works on if-then condition, witnessed by hundred peoples. So the results will be faultless delivery. If Fakre giving the key to Mahesh than he is sure that he will receive the payment.

The document is automatically canceled after some time and the code cannot be interfered by either of them without the other knowing since all participants are simultaneously alerted.

You can use smart contracts in your day to day life from financial to business, property law, credit enforcement etc.

How smart contracts work in Blockchain ?

Smart Contracts Blockchain Explained and Use Cases

Step 1: what goes into a Smart contract?


  • In order to understand how smart contracts work, it is important to understand the difference between the smart contract code and how the code is being applied to.
  • Smart contract words are like computer programmes.
  • It is very important that the coding is doing exactly the same operation for which they are designed to do.
  • You can achieve the proper results by inputting the proper logic when writing the smart contracts.

Step 2: how the smart contract is sent out?

Distributed Ledgers

  • When the code writing is done than they are encrypted and sent out to other computers via a distributed network of Ledger.
  • If this is done by without the permission of public included in the contract it would be same as the network updates the Bitcoin transaction.

Step 3: how it is processed?


  • One of the computers in the distributed ledger network will receive the code.
  • Each comes on individual agreement on the results of the code execution.
  • Then the network will update the distributed ledgers to record the execution of the contract.
  • After that, it will monitor compliance with the terms of the smart contract.
  • Execution of the smart contract is no longer possible because execution is no longer in the hands of a single party.

Blockchain smart contracts use cases

Smart Contracts Blockchain Explained and Use Cases

  • Accuracy

As it is done by a number of solutions, so the accuracy remains high always in terms of group percentage.

  • Speed

Talking about huge Business contracts they are the complexed paperwork. Using a smart contract format just applies some coding. So using that you can make all complex format easy in less time.

  • Savings

Since in the smart contracts there is no need of mediator all is done on the distributed ledger network. So smart contract saves individuals money.

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  • Trust

Your documents are kept on the shared ledger. So now one can say that they lost your documents.

  • Backup

In the blockchain system, each partner of your contract is your backbone. Your copies are being duplicated every time over and over.

  • Autonomy

Making of smart contract does not require and mediator in terms of Business and financial works such as lawyer, broker, etc.

  • Safety

As in the smart contract technology cryptographic encryption are used so your documents are kept safe. No one can hack it.

Security issues in Smart Contract 

The smart contract is computerized transaction protocol. It executes the terms of the contract. A Blockchain based smart contract is visible to all users of the blockchain. Sometimes bugs, including security holes are visible to all and cannot fix quickly.

A similar attack was successfully executed on the DAO in June 2016 where DAO faced difficulties to fix it quickly. The attack drained US$50 million in Ether. The DAO programme had a time delay in place before the hacker could remove the fund, an ethereum software hard fork was done to claw back the funds from the attacker before the time limit expired.

Blockchain where you can process Smart contracts ?

  • Side chains.
  • Ethereum

Some Myths about smart contracts and the truth ?

  • Smart contacts have the same characteristic of a normal contract. The Truth is they are different from each other
  • Smart contracts are like Ricardian contracts. The truth is these are the contracts with the semantic representation that can track the liability. So they are totally different.
  • Smart contracts are legally enforceable. It’s not true as Smart contracts are not law (yet), but they could represent pieces of a legal agreement.
  • Smart contracts include Artificial intelligence. No Smart contracts are software codes that run on a blockchain and triggered by some external data, that lets them modify some other data.
  • Smart contracts are for developers only. Actually Somewhere it is a little bit true at present but in future, it will be used on a day to day life of a common man.

  • Smart contracts are easy to program. Sometimes yes or sometimes writing a smart contract for a simple purpose is easy but for the complexed purpose, the coding becomes tough.
  • Smart contracts are Blockchain applications. No, they are the part of the decentralized application.
  • Smart contracts are not safe. It’s not true. The smart contract is very much safe as compared to the normal contracts.


Smart contracts are not only for tech users. They can also be made usable for all the people in most conditions. At present they are famous but less implemented. In future, it has the power to overcome the limitation and can be used for several conditions of contracts.

That’s all for smart contracts. finally I hope this post will help you to understand smart contracts.

If you still facing some issues write it down in the comment section. Also, please like and share this comment with your friends and family.




Mahesh Chaube

Hey, This is Mahesh Chaube, computer Engineer by Education and Crypto Blogger by Profession From Mumbai. Here at coinraja i write about money making and Reviews on Cryptocurrency Related Thing. I hope you are enjoying My post. cheers !!

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