What Is a Smart Contract?
A smart contract is a program on a blockchain that can hold coins and run when someone calls it. Uniswap's pools are smart contracts. So is an NFT collection. So is the little wrapper that turns ETH into WETH. There is no court inside the contract. There is only what the code does when poked, plus whatever the admin keys can still change.
How It Actually Works
- A developer deploys bytecode to an address. Users send transactions that call functions: swap, mint, borrow, approve. The chain's nodes all run the same code and agree on the result.
- Because the program can hold value, a bug is not an error message. It is a withdrawal. Reentrancy, broken math, and hostile upgrades have each been nine-figure events.
- Many contracts are upgradeable behind a proxy and a multisig. "Immutable" is a claim you verify, not a vibe from the website.
Risks and Common Mistakes
- Signing a call you cannot read. This is the drainer business model. Simulation wallets such as Rabby exist because raw hex is not a user interface.
- Depositing into unverified source. If Etherscan cannot show the code, you are funding a black box.
- "Code is law" as comfort. When the code does something awful, communities still fork, sue, or freeze via admin keys. Law, it turns out, remains law.
When It Matters
Every dapp, every token, every approval. Treat contracts as unattended employees with the keys to the till. The Security page and the DeFi page are the two rooms this lives in.
Related Terms
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