Smart Contracts

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25 Feb 2026

Introduction

Every time you connect your wallet to a website, approve a transaction, or mint an NFT, you are interacting with a smart contract.
It may feel like clicking a simple button.
But behind that click is a self-executing program running on the blockchain.
Understanding smart contracts helps you:

avoid costly mistakes
protect your assets
recognize scams
understand how Web3 actually works

Let’s break it down in simple terms.

1. What Is a Smart Contract?

A smart contract is a program stored on a blockchain that runs automatically when conditions are met.
Unlike traditional agreements:

No lawyer is required
No middleman enforces it
No central authority controls it

The code enforces the rules.

2. Why Smart Contracts Exist

Smart contracts remove the need for trust between strangers.
They allow people to:

trade assets
lend and borrow funds
buy NFTs
play blockchain games
earn yield

All without intermediaries.

3. Where Smart Contracts Live

Smart contracts run on blockchains such as:

Ethereum
BNB Chain
Solana
Avalanche

Once deployed, they cannot be altered unless designed to be upgradeable.

4. How Smart Contracts Work (Simple Example)

Imagine a vending machine:

You insert money
You press a button
The machine delivers your snack

No cashier required.
Smart contracts work the same way:

send funds
trigger the contract
receive the outcome automatically

5. What Happens When You Approve a Transaction

When you click “Approve” in your wallet:

your wallet signs a message
you grant permission to the contract
the contract gains limited access to your tokens

This permission can sometimes be unlimited.
That’s why approvals should be reviewed carefully.

6. Gas Fees: Paying to Run the Code

Smart contracts require computation.
Gas fees:

pay for network processing power
compensate validators
prevent network spam

More complex actions = higher gas fees.

7. Popular Uses of Smart Contracts

Smart contracts power most of Web3:

DeFi (Decentralized Finance)

lending & borrowing
yield farming
decentralized exchanges

NFTs

minting digital assets
royalty distribution
ownership tracking

Gaming

asset ownership
play-to-earn rewards

DAOs

voting systems
treasury management

8. Why Smart Contracts Are Trustless

Smart contracts replace trust with transparent code.
Anyone can inspect the contract and verify:

rules
permissions
token flows

Trust shifts from people → mathematics.

9. Risks of Smart Contracts

Smart contracts are powerful but not risk-free.
Common dangers include:

buggy code exploits
malicious permissions
rug pulls
phishing websites

Even secure code can be misused through social engineering.

10. Smart Contract Audits Explained

Audits are security reviews conducted by experts.
They check for:

vulnerabilities
logic flaws
exploit risks

An audit improves safety but does not guarantee perfection.

11. How to Stay Safe When Using Smart Contracts

Before interacting:
✔ Verify the website URL
✔ Revoke unused token approvals
✔ Use trusted platforms
✔ Avoid signing unknown messages
✔ Start with small test transactions
Security is a habit, not a feature.