What Are Blockchains with Smart Contracts? How Do They Work?

blockchains with smart contracts

Last Updated on April 11, 2024 by Team Experts


Blockchain technology has changed the world forever. The introduction of blockchain in smart contracts has significantly revolutionized how we do business. Blockchain technology provides you with an advanced database mechanism that you can use for transparent information sharing. With the application of smart contracts, doing business on the Internet has become easier and safer.

Blockchain enables you to store data on interconnected blocks, earning its name “blockchain.” Since the data is stored chronologically, you cannot delete or modify it without the consent of the network. This makes sharing information more secure and creates an environment of trust and transparency among participants. 

The next section will delve further into blockchains with smart contracts. So, if you are interested in implementing smart contracts for your business, keep reading the next section.

What are blockchains with smart contracts?

Smart contracts resemble digital contracts, but their primary distinction is that they are stored on the blockchain. When the participants meet the preexisting condition, the contracts execute automatically. These self-executing programs automate the action required to fulfill a contract or agreement, thus saving you a lot of time. 

Once the transaction has been completed, all the participants can be immediately certain of the outcome. Blockchains with smart contracts are trackable and irreversible. Therefore, you can use these to conduct transactions and agreements among anonymous parties without a central authority or legal system.

Since smart contracts execute agreements, you can use them for various purposes. Most of the time, they ensure transactions between two parties occur when predetermined requirements are fulfilled. For example, if a manufacturer needs new material, they can simply set up payments using smart contracts. In this way, funds could automatically transfer when the supplier meets the condition of delivery.

However, creating a smart contract is difficult; blockchain differs greatly from traditional applications. Hence, rigorous blockchain app testing is required to approach specific requirements and criteria. Once implemented, you can’t reverse the execution of the smart contract. Check out the section below to further understand how blockchains with smart contracts work.

How do Blockchains with smart contracts work?

Blockchains with smart contracts follow simple “if/when..then…” statements written in codes. So, when the participant meets the conditions of the contract, it will automatically execute specific actions. This action could be registering property, releasing funds, etc. When the transaction successfully completes, the blockchain updates.

Following are the three key features of a blockchains with smart contracts:

Self-executing code

Smart contracts, as you know, are made up of code. The blockchain stores and replicates these codes, so when deployed, they run automatically.

Runs on Blockchain

The blockchain acts as a decentralized infrastructure; smart contract uses their inherent security and automation to complete action.

Triggers when conditions are met

Smart contracts only take action when the parties meet their predefined conditions. The blockchain records these actions, making them traceable by the parties involved.

Although smart contracts lack a legal basis, their accuracy in executing agreements is guaranteed by the logic they employ. Every aspect of the contract and actions is clearly written to avoid any dispute and fraudulent actions. Once it has been updated, you can no longer change it. In addition, only parties with permission have the right to view the results. 

The following section will discuss the various types of blockchains with smart contracts; therefore, keep reading.

Types of smart contracts in blockchain

The types of smart contracts can be primarily divided into three categories. These are:

Smart Legal Contract

A smart legal contract follows the same semantics as a traditional legal contract. However, smart legal contracts offer better transparency than traditional contracts because they use blockchain technology

Although not all smart contracts are legally enforceable, such is not the case for smart legal contracts. These types of blockchains with smart contracts can carry out contractual obligations. 

Decentralized autonomous organizations

Smart contracts have the potential to transform the corporate world. Blockchains with smart contracts, especially decentralized autonomous organizations, can change how businesses are built. Now, shareholders can build businesses collaboratively without the need for a CEO. 

As its names suggest, these smart contracts are autonomous and self-sustaining. Here, no centralizing authority exists; instead, blockchain-based tenets within the smart contracts code decide how the organization will function. However, there is one small drawback: these types of smart contracts are open source; therefore, they are more vulnerable to cyber-attacks.

Application logic contracts

As technology develops, more and more products around us are becoming smarter. Thanks to the application logic contract, we can now communicate smoothly with the different devices surrounding us. These types of blockchains with smart contracts consist of application base code that remains synced with various other blockchain contracts. Here, unlike other smart contracts, a machine signs the contract with another contract.

Different types of contracts have different uses. However, the bottom line is that these contracts make things more convenient and easy for us. But these are not the only benefits of smart contracts. Read the next section to find out how the application of smart contracts benefits businesses.

What are the benefits of smart contacts?

Following are some of the key benefits of using blockchains with smart contracts:

They are speedy and efficient

Smart contracts save time and effort because they automate processes and operate digitally. Unlike the prepared contract, the smart contract makes the execution process very easy.

Accuracy and immutability

Blockchains with smart contracts leave no room for any sort of forgery. Because the computer code on the blockchain is fixed, no one can alter the record. Once you have created the code, the contract will only execute the agreement as you coded it, thus leaving no scope for inaccuracies.

Reduce contract clause exploitation

Since all the participants will have the same data, the scope of exploitation will be significantly reduced. Further, it will enhance trust and safety among the involved parties.

Cost Saving

Blockchains with smart contracts are cost-saving because they do not require third-party verification.


The blockchain stores encrypted transaction records. Therefore, it becomes very difficult for hackers to hack smart contracts. Moreover, connecting every record with the previous and subsequent blockchains makes it very difficult for hackers to alter the record. So, the hackers would have to change the entire sequence in order to alter a single record. 

Built in backup

Blockchains with smart contracts can accurately capture essential transaction details. The smart contracts will automatically store your data in the blockchain without needing any sort of human intervention. This makes it easier for you to retrieve lost data.

Prevention of errors

Any smart contract’s primary requirement is that it meets its conditions. The smart contract executes only after these conditions are reached. This leaves no space for eros; in addition, it also improves the workflow.


Smart contracts have proven to be extremely useful for business. Blockchains with smart contracts have the potential to fully transform digital transactions. Therefore, if you are interested, using smart contracts in your project is a great idea. Using them will make things a thousand times easier for you and your business.

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Anil is an enthusiastic, self-motivated, reliable person who is a Technology evangelist. He's always been fascinated at work especially at innovation that causes benefit to the students, working professionals or the companies. Being unique and thinking Innovative is what he loves the most, supporting his thoughts he will be ahead for any change valuing social responsibility with a reprising innovation. His interest in various fields and the urge to explore, led him to find places to put himself to work and design things than just learning. Follow him on LinkedIn

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