Smart contract.
In plain English
A smart contract is a program deployed to a blockchain, where its code and its stored balances are public and every node runs it identically. Once deployed, it executes exactly as written whenever someone calls it and the stated conditions hold, with no person deciding whether to honor it. That removes the need to trust a counterparty and replaces it with a need to trust the code, including its bugs. Many contracts are immutable after deployment, so a flaw can be permanent, while others include admin keys that let the creators change or drain them. Audits reduce risk without eliminating it, and calling a contract usually costs a network fee.
01Why it matters
Approving a smart contract from your wallet can grant it standing permission to move your tokens, which is why reviewing what you are signing matters more than the project's marketing.
02The math, step by step
Say a contract is written to release $10,000 of tokens when a price feed reports a threshold. If the feed is manipulated for one block, the contract still pays out, because it follows the input it receives. The code did what it was told, and the money is gone.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
A legal contract is enforced by courts, can be interpreted, and can be voided for fraud or mistake. A smart contract is enforced by execution. If the code contains an error, the error is what happens, and there is no judge to appeal to.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice