Differences between Smart Contracts and Blockchains: A Complete Guide

Zebpay
4 min readDec 4, 2023

What are smart contracts?

Smart contracts are self-executing computer programs that automate actions when pre-agreed conditions are met. The transactions are irreversible and trackable once these programs are executed. They allow trusted transactions to be carried out without intermediaries.

How do smart contracts work?

Nick Szabo, a computer scientist, first proposed Smart contracts in the 1990s and famously compared them to vending machines. He said to imagine a vending machine selling fizzy drinks for $2. If you put $5 into the machine and select a drink, the vending machine is programmed to produce your drink and $3 in change, prompt you to choose another drink, or give your $5 back. This is a simple way to explain smart contracts. Just like the vending machine can automate a sale without human intervention, Smart contracts can automate many transactions or processes.

Today, Ethereum is the most popular platform for Smart contract development. Other crypto platforms, like Tezos, Tron, and Polkadot, can build and run them. Any user can create and deploy a smart contract on a blockchain. They are transparent and any user can see the logic it follows to execute a function.

They can be written in many programming languages. On Ethereum, each code is stored on its blockchain, allowing anyone to inspect the code and verify its functionality. Each validator node stores a copy of all Smart contracts data and their current state. The code is executed by all nodes to reach a consensus when a smart contract receives user inputs. This feature makes the Smart contract secure enough to operate without intermediaries.

You pay a gas fee to interact with a smart contract on the Ethereum blockchain. Once executed, smart contracts cannot be edited or altered.

What are blockchains?

A distributed ledger shared among a network of nodes is called a blockchain. They are known for their role in crypto coins, where they maintain a decentralized record of transactions. Their use case is not limited to crypto tokens and coins. They can be utilized to make data from any industry immutable, a state that cannot be altered.

A blockchain block cannot be altered or edited, so the only point of trust needed is when a user enters data. This feature eliminates the need for intermediaries, who add costs and errors. Since its introduction in 2009 through Bitcoin, blockchain use cases have exploded through DeFi applications, NFTs, crypto tokens, and smart contracts.

How do blockchains work?

A blockchain stores transaction data in blocks and is linked together to form a chain. The blockchain grows as more transactions are added to it. A block records the sequence of transactions that are logged into the blockchain. Each block contains a hash (a unique digital identifier), new timestamped transactions, and the previous block hash. The hash of the previous block links the blocks together and prevents them from being altered or manipulated. This technically makes the blockchain tamperproof. The four main components of a blockchain are a shared ledger, permissions, Smart contracts, and consensus.

A shared ledger is an append-only distributed system of records. Blockchain transactions are recorded only once and eliminate duplication. Permissions ensure crypto transactions are secure and verifiable. Smart contracts are programs that execute when certain conditions are fulfilled. They act as a set of rules that govern a crypto transaction. Blockchain transactions are approved through consensus among users. Blockchains can deploy many consensus mechanisms, such as proof-of-work (PoW) and proof-of-stake (PoS).

Blockchain vs. smart contract

Similarities

  • Many applications: Smart contracts and blockchains have versatile tools that can be applied to many industries, such as finance, art, supply chain, and healthcare.
  • Decentralized: Both innovations operate in a decentralized manner and do not require intermediaries, making them highly efficient.

Differences

  • Ease of use: You need a crypto wallet and tokens to start using blockchains. You may need to research and gain some knowledge before using the advanced features of a smart contract.
  • Dependence: Smart contracts are programs built on blockchain networks, making them dependent on a blockchain, whereas blockchains are independent networks.

Conclusion

Blockchain is the underlying technology that enables Smart contract development. Both Smart contracts and blockchain have proven to be disruptors in many industries, such as finance, healthcare, supply chain management, and the art world. A blockchain is a digital ledger that provides verifiable and transparent access to crypto data, while smart contracts automate systems and eliminate intermediaries.

As crypto receives more attention and adoption, so will its underlying technologies, such as smart contracts and blockchain. Future upgrades will further improve the adoption and scalability of these technologies.

Visit ZebPay blogs and stay up to date with all the latest crypto news. You can now trade more than 100+ cryptos on ZebPay.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

--

--