Smart Contracts

Smart contracts are self-executing programs deployed on a blockchain that automatically enforce the terms of an agreement when predetermined conditions are met. The term was coined by Nick Szabo in 1994, long before blockchain existed, to describe computerized transaction protocols that execute contractual clauses.

The blockchain implementation changes the trust model: instead of trusting a counterparty or a legal system to enforce a contract, participants trust the code. This is not trust elimination but trust translation — from legal institutions to software developers, auditors, and the governance mechanisms that can upgrade or patch the contract. The history of smart contract exploits, from The DAO hack to numerous DeFi vulnerabilities, demonstrates that code is not law; code is code, and code has bugs.

The genuine innovation of smart contracts is not in replacing law but in creating enforceable commitments in environments where legal institutions are absent or unreliable. Their value is contextual, not universal.