Smart Contracts: What are are and how they work?

Here we tell you everything about smart contracts, their operation, the advantages and how to make one. Join us!


What are Smart Contracts?

Smart Contracts are computer programs that are designed to perform one or several tasks according to instructions that are added in advance.

Smart Contract are stored in a blockchain and are being widely used today due to the growth of digital operations and currencies such as cryptocurrencies.

So, this new alternative will allow the automation of workflow so that users who are part of this kind of digital document are guaranteed and ensuring the outcome that will be obtained.

Now, if you want to know how Smart Contracts work, keep reading that we have all the details in this article.

How do Smart Contracts work?

Smart Contracts have a very simple way of working, they are carried out through the execution of a kind of formula: “if/when … then …”, which will be written in codes within the blockchain that we already commented.

It is a network that executes digital actions always fulfilling and verifying that the added conditions are the ones already described and the correct ones.

Among the actions that these programs can do are the following: releasing funds or capital, registering vehicles or sending notification of ticket issuance. The work of the Smart Contracts is not only to execute the procedure but also to update it once the operation is completed.

In each operation you can manage the amount of stipulations that are necessary, the important thing is that the rules of the transaction are clear between the participants, this guarantees the security of the whole process.

For a natural person or company to choose Smart Contracts to perform some operation is of great benefit. If you want to know more, now we tell you the advantages of using this type of tools, do not stop reading.

Benefits of Smart Contracts

The benefits of smart contracts are varied; however, the main advantage is that it provides the possibility of safeguarding data into information within a 100% encrypted network.

  Ethereum vs. Bitcoin: Which is better?

In addition, it brings together another series of positive points, pay attention:


When the parties involved agree with the entire transaction, the contract is managed quickly, efficiently and accurately because these digital programs are automated, which means there are no documents to process or papers to sign.


Operations are clear, this is because there is no presence of an intermediary. At this point, the stipulated is encrypted and only shared between the users participating in the transaction, thus generating greater trust and tranquility about the whole process.


As we already told you, all transactions carried out through blockchain are 100% encrypted, this means that it will be very difficult for the process to be compromised or violated by cybercriminals.


Another attractive feature of these operations is the economic issue since, by not handling intermediaries in the operation, the costs of the process, delays and associated fees are lower, generating a significant percentage of savings.

Uses of Smart Contracts

Smart contracts have a great number of uses that we present to you below:

  1. You can generate automated payments with the required amount, at the requested time and to the indicated people.
  2. You can enter documents of a property or also change its ownership. Countries like Sweden and the Netherlands are opting for this alternative.
  3. You can exchange energy since they are considering designing a digital ecosystem so that some sources such as electricity or fuel are connected to smart contracts between people and organizations involved.
  4. You can share the distribution of income from a product or service for intellectual propert.y
  5. You can automate payment processes for insurers in case of vehicle incidents.
  6. You can secure conditions in bets, avoiding the participation of third parties.
  7. You can configure platforms for the purchase of stocks and cryptocurrencies within a specified period. You can guarantee results in areas such as surveys and votes.
  Video game mechanics: what are they and what types are there?

As you can see, there are multiple possibilities that these programs offer for everyday life. It is time to put it into practice but, how do you make a smart contract? Keep reading because we still have more information to offer you.

How to make a smart contract?

If we have explained one point throughout this article it is that smart contracts are written under a computer language and, in that sense, it is necessary for you to know this type of technology to assume such an important commitment.

Smart contracts are based on two layers: the first is the Smart Contracts Platform (SCP), which is the infrastructure that allows the creation of this program.

And the second is the Smart Contracts Management System (SCMS) which consists of a protocol that helps anyone manage the program without having many knowledge of the area.

However, it is necessary to know programming to write successfully. The important thing is that nowadays there are platforms that provide this service for a cost. The creation of these contracts is based on Bitcoin and Ethereum.

¿Son legales los contratos inteligentes?

Para saber si los contratos inteligentes son legales es necesario conocer en cuál jurisdicción ha sido ejecutado el contrato ya que estos se escriben en blockchain que se pueden consultar en cualquier parte del mundo.

Si bien este tipo de programas no son ilegales, sí es cierto que aun quedan consideraciones generales y legales por resolver, aunque su tratamiento ha sido más enfocado hacia las monedas digitales o criptomonedas teniendo el éxito mundial que se conoce en la actualidad. 

Los contratos inteligentes cada vez más dan pasos agigantados para obtener la confianza de diferentes industrias del mundo, esto ayudará a los desarrolladores a crear un amplia variedad de aplicaciones descentralizadas para el uso cotidiano. El futuro es ahora.