Ethereum Smart Contracts Ultimate Guide


Do you want to learn about Ethereum smart contracts? If you do, then you have come to the right place. In this article, we will explore smart contracts in the context of Ethereum. In fact, it was Ethereum that brought the concept of automation via smart contracts. It changed how blockchain technology evolved and helped shape the future of blockchain as a whole.

The rise of blockchain in recent years can also not be denied. Projects like Hyperledger and Corda are at the forefront of bringing blockchain technology to businesses all around the world.

Clearly, the blockchain concept devised from the release of the first cryptocurrency, i.e., bitcoin was not enough to meet the demand of the current generation business. With smart contracts, the new generation of blockchain technology is using different distributed ledger technologies to better suit the demands of different sectors.

Ethereum Smart Contracts

Let’s get started by understanding what Ethereum smart contracts or smart contracts in general are.


What is a Smart Contract?

Smart contracts are designed to work as a computer protocol that can digitally verify, enforce, and facilitate a contract without the need to do any paperwork. It is similar to paper contracts but is managed more efficiently and effectively compared to them. The smart contracts are viable to manage transaction performance between parties.

Smart contracts are possible because of the true nature of blockchain, i.e., decentralization. There is no doubt that without the need of the intermediaries, the tasks or transactions carried out by parties can be automated as well.

With no possibility of conflict, blockchain has always been the number one choice for businesses that prefer complete transparency and credibility.

All of these means that smart contracts can be used to share value in the form of shares, property, or money through a conflict-free, transparent, and decentralized manner. As there is no middle man, the process is also secure and is tamper-proof thanks to the use of blockchain’s immutability feature and cryptography.


A Simple Context

A simpler way to understand it is to compare it with a weight machine. To use the machine, all you need to do is give the machine the necessary input and wait for it to calculate it for you.

There is no middle-man here and is accurate without being tampered. It is a simple contract between you and the machine.

Smart contracts also work the same way. With it, you do not have to be wary of any third party. In a smart contract, the rules are properly defined along with the penalties or other clauses that the two parties have agreed upon.

This is similar to that of a normal agreement that is done through a traditional contract. However, in smart contracts or Ethereum smart contracts, everything is automated.

Want to read more about smart contracts? Read our ultimate guide on it here: Smart Contracts: The Ultimate Guide for the Beginners.


Who Created Smart Contracts and Ethereum Smart Contracts?

The concept of smart contracts came into existence in 1996. It was first introduced by Nick Szabo. He was a computer scientist. With time, he released better versions of it and released multiple publications.

But, the real implementation of smart contracts happened with the release of bitcoin — the cryptocurrency that was released in 2009.

However, the true use was first done in Ethereum where Vitalik Buterin where he worked on the proper implementation of smart contracts.

According to him, a smart contract is a program that utilizes code to determine the owner of the asset and automates the process to do it. If the assets are not assigned to a person, then the refunds are made according to the conditions that are set within the smart contract. This is a step forward compared to decentralized ledger technology, where the core idea is to replicate and share data without the need for centralized authority.

Nowadays, smart contracts are utilized in almost all cryptocurrencies.


Why Do We Need Ethereum Smart Contracts?

In this section, we will learn why we need Ethereum smart contracts. Just like any smart contract, Ethereum smart contracts come with its own benefits.

  • Trust

Smart contracts instill trust into the whole deal or agreement that is set by parties to do transactions. With smart contacts, no one can modify the documents or change the terms of the contract. The documents are also stored safely with proper encryption methods without the need for a centralized authority. The use of smart contracts also brings in trust among the participants without the need to know the other party completely.

  • Autonomy

The use of smart contract brings in autonomy as it doesn’t need any third-party intermediary party to facilitate the transaction or the agreement.

  • Savings

The use of smart contracts also brings in savings for the parties involved in the exchange. The savings are done by removing the unnecessary estate agents, notaries, assistance, or any other form of intermediaries. In simple words, the smart contract removes the extra fees associated with most of the services out there. 

  • Safety

Smart contracts are safe compared to other forms of traditional methods of contract management. Smart contracts are difficult to hack if implemented correctly. After all, they utilize cryptography to do nothing that can be hacked or changed.

  • Accuracy

All the transactions done using smart contracts are accurate and do not have errors considering that the smart contract at the time of creation was well-reviewed before making it live.

How Does Ethereum Smart Contract Work?

In this section, we will go learn how Ethereum smart contracts or smart contracts, in general, works.

Before we get started, we need to understand that in the most basic way, Bitcoin supported smart contracts. It did it by providing the network as a way to transfer value from one peer to another. The nodes in the network take care of the validation process.

However, the use of smart contracts is way more than just cryptocurrency.

Let’s take a look at Ethereum. It introduced scripting language and the idea of configuring smart contracts to do more than just transferring values or assets among peers.

It allowed developers to create their own programs via smart contracts, which are also known as autonomous agents according to Ethereum white paper.

Ethereum made it possible to support a wider scope of computational instructions because it is a “Turing-complete.”

So, what do smart contracts are capable of in an Ethereum network? Let’s check it out below.

  • The Ethereum smart contracts offer multi-signature features. This means that an account(s) can be created using smart contracts where the expenditure is done based on the people’s agreement in a group.
  • It can also be effectively used to provide contract utility, i.e., providing it to other contracts.
  • Smart contracts can be used to manage agreements among users.
  • Lastly, it can act as a way to store information such as membership records.

Smart contracts also do not work in isolation. To make them functional and manageable, you can various ways to connect smart contracts and blockchain network together.

For instance, if a smart contract manages the number of admissions in a school — it will rely on other smart contracts that facilitate admissions, validate them and transfer admissions to the said subject.


Creating Your Own Smart Contract

Creating your own smart contract is easy. There are a plethora of online resources that you can use to create your own smart contract. One of those resources comes from the docs of Solidity — the programming language that is used to write smart contracts on the Ethereum platform. Let’s check out the Ethereum smart contract examples.

To access the tutorial, you can check their documentation here: Introduction to Smart Contracts — Solidity 0.6.7 documentation. Here, you can also find out Ethereum smart contract tutorial.

Solidity is one of the Ethereum smart contract languages that you can use to develop contracts. 

We will also go through an example below that is taken from the documentation.


Creating Your Own Ethereum Smart Contract

The above is a storage example where we initiate a variable storedData and then set it publicly using the set(unit x) function. The values are returned through the get() function.

Let’s take a look at the sub currency example.


SubCurrency Example

Here we have the Coin() contract. 

In the contact, we have defined the key functions including

  • Sent(address from, address to, uint amount) → Used to send amount from one address to another one.
  • constructor() → initiates the constructor
  • function mint(address receiver, uint amount) → Mints the cryptocurrency

Ethereum Smart Contract Use Cases

There are multiple use cases of Ethereum smart contract use cases. Let’s briefly go through them one by one.

  • Government

One of the best use-cases of smart contracts is in government. For instance, they can use it for voting purposes which is one of the leading issues in governance.

People want transparency and smart contracts can help the voting systems to provide that. This way, there will be no politics and conspiracy around voting. The ledger-based solution can easily trace votes and ensure that the results are as accurate as possible.

Smart contracts can also improve voter’s turnout as it can be made to work with digital identity which does not require to fill up forms. Voters can choose to vote through a secure online system — improving the chance to pick a fair government party to power.


  • Management

It can also automate their work processes using smart contracts.

Also, using smart contracts means that there is better trust among the management as the source of information is a single ledger that is constantly updated with new verifiable information.

Other benefits include transparency, accuracy, and automated systems. Clearly, there is no point in moving back and forth for approvals and discussions when you have a single source of information distribution that does not rely on a centralized approach.

It improves processing to a whole new level with no dependency on other processes and less chances of misinformation sharing and usage. It also takes care of settlements and lawsuits.


  • Supply Chain

Supply chain undoubtedly is the number one use-case for smart contracts. Any supply chain that utilizes Ethereum can take benefit of what Ethereum smart contracts can do.

For example, a delivery system that uses smart contracts to track the product, the state in which it is, and other key details that were not possible without the use of the smart contracts or ledger system. Also, smart contracts are capable of automatically ordering things if the supplies are running low.

This is a big thing for retailers or online supply chain markets as they do not have to always keep tabs on what to restock, enabling the partners to make the most out of the automated system. One more benefit of using smart contracts is dispute settlement in the supply chain. As everything is tracked, disputes are settled within minutes.


  • Automobile

Automobile is yet another use-case for smart contracts. The automobile industry can use smart contracts when it comes to self-driving.

The smart contracts can help to find out the faults during a crash or help understand the problems that occur within the car. This can help with automobile insurance and remove frauds from happening.

It can also genuinely help users who are affected by a car crash and get them their insurance settled really fast!

  • Real estate

Have you ever thought of buying a house and then decide to delay it because of the long process that takes to get one? If you do, then you are not alone.

Not to mention, there are verification processes that can take quite a while before you can get ownership of your new house!

All of these can be automated with the help of smart contracts that can govern the whole process of buying and transferring ownership from seller to buyer. The clause can be decided and then coded into a smart contract before it is made live.

Once done, the buyer needs to pay for installments or the payment. Once done, the ownership of the new house will be transferred automatically.


  • Healthcare

The last Ethereum smart contract use-case is healthcare. Healthcare currently suffers from a lot of problems and hindrances when it comes to providing service to the patients. One of those problems includes storing and maintaining the patient’s personal health records.

As each health provider has its own database and way of managing them, it is hard for service providers to gain access to previous records.

This leads to inconsistencies when it comes to serving patients. Also, without a proper decentralized network, getting insurance can also become a challenge.

Smart contracts running on the Ethereum network can solve the healthcare problems by creating a healthcare system where patients’ profiles can be accessed through a decentralized network. It also improves on testing results, regulation compliance, and supervising drug supplies!



Ethereum smart contract is here to stay. They enable blockchain technology to function and automate them without the need for a centralized authority.

The fact that there are plenty of use-cases out there for smart contracts makes it even more useful for the businesses out there. The next time you are going to buy the house, then look for a platform that is decentralized and make use of smart contracts.

This way you can automate your buying process by enabling you to automate loan and down payment. Once you complete your payment, the smart contract will automatically transfer the real estate ownership to you!

How amazing is that? Right!

So, what do you think about smart contacts in general? Comment below and let us know.

About Author

Nitish holds a BSc in computer engineering. He is a blockchain enthusiast and in spare time likes to read about the moon. His articles have published on Dzone, InfoWorld, and Hongkiat.

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