A Primer on Smart Contracts

The building blocks of decentralized finance

In the field of cryptocurrencies, smart contracts are pieces of code that can run on a blockchain and enforce certain rules or logic, much like real-world contracts. However, due to the inherent programmability provided by blockchain technology, smart contracts can go much further than that, acting as a foundation to build decentralized applications and concepts such as DeFi, while eliminating the necessity of "trust" usually provided by a third-party on a traditional real-world contract.

Although a fairly old concept in theory, smart contracts in practice have been popularized by the Ethereum blockchain and its implementation of a virtual machine - the "Ethereum Virtual Machine", or EVM - that made it possible to deploy and interact with them. Other coins such as Avalanche, Tron and Bitcoin Cash have followed along with their own implementations as time went on.

Ethereum's website has a good explanation of smart contracts in EVM and most major scaling solutions for Ethereum use the same unsustainable technology, introducing the same issues of scalability in every deployed layer.