What are Smart Contracts and why are they so important?

Explore the intricacies of Blockchain and Smart Contracts with our insightful blog post. Learn their function, benefits, and pivotal role in the Web3 universe.

The world of Blockchain has many facets to discover. We know that its use promotes security, transparency, and a decentralized ecosystem without intermediaries. But, how is the fulfillment of all these characteristics ensured? This is where Smart Contracts come into play.

To understand their meaning, we can take it to the plain and simple and begin by thinking about what a contract is. These are characterized by defining what can be done, what cannot be done, and how to proceed in case of irregularities. Contracts agree on positions between the parties and are there to ensure that there are no deviations. Starting from this definition, it will be easier to understand their use in the world of Web3.

How do Smart Contracts work?

Smart contracts are pieces of code that have the ability to self-execute according to a series of predefined parameters and conditions. Their instructions are stored on the blockchain, which is why they are transparent and completely secure.

They are programmed using the principles of 'if', 'when', 'then', typical of programming. Then they execute themselves and are activated taking into account the conditions created previously. They are generally used to automate the execution of an agreement where all parties involved ensure results without intermediaries.

Smart Contracts enforce themselves autonomously and automatically, without intermediaries or mediators

Characteristics and benefits

Smart contracts are decentralized, immutable, and transparent. This is because they exist on the blockchain and it is a code visible to all that cannot be changed. Let's look at other features:

  • Being self-executing, Smart Contracts offer lower operational and bureaucratic costs.
  • They are ideal for managing assets or funds where there is more than one user involved due to their transparency.
  • They have a wide variety of uses: decentralized exchanges, NFTs, voting systems, games, cryptographic wallets, and mobile applications.

Smart Contracts in Ethereum

This type of contracts are composed of two public keys and a contract code. One of the public keys is from the contract creator and the other represents the contract itself. This means that it acts as a unique digital identifier.

Any address different from them is an EOA (Externally Owned Account). That is, EOAs are controlled by users, while smart contracts are controlled by code. However, the initial activator will always be a user. In other types of deployments, they may also be activated by other Smart Contracts.

One of the most interesting features that Ethereum's Smart Contracts have is that they are immutable. They can only be deleted, but not modified. This means that their code is tamper-proof, as it is impregnable. In addition, they are customizable. As they can be coded in many ways, they can be used to create all types of decentralized applications (Dapps).


Smart Contracts are the ones that interact with the blockchain and can modify it. They are public and anyone can see the content of each contract which is a great benefit for transparency in monetary transactions. It is very important to audit them before their implementation, which is why this step is one of the most important in the development of a solution.

At GM2 we configure and program the Smart Contracts indicated for your business logic. We work from the beginning of your project to lay the foundations of its operation and ensure that it is safe and transparent. We audit the Smart Contracts and use best practices to ensure quality, security, code integrity, detect improvements, and certify the work done.

Get to know all the solutions we can offer you within Web3 and contact us!