# Smart Contracts 101 By [Timi Does Web3](https://paragraph.com/@timi-does-web3) · 2025-03-14 --- Smart Contracts are self-executing programs or coded contracts that eliminate the need for intermediaries or third parties for faster and instant transactions. **Let’s do a bit of history** ----------------------------- So I learned from this [book](https://www.amazon.com/Bitcoin-Cash-UNDERSTANDING-HISTORY-FUNCTIONS-ebook/dp/B0B574NXJN?ref_=ast_author_mpb) by Nathaniel Luz that the idea of smart contracts dates back to 1994, thanks to computer scientist / cryptographer / law scholar [Nick Szabo](https://en.wikipedia.org/wiki/Nick_Szabo). He proposed the concept of smart contracts, describing them as self-executing agreements written in code rather than enforced by humans. ![Nick Szabo](https://storage.googleapis.com/papyrus_images/145793414340824d619175741c6ffbb43285bc2936721c0381688b0cf23f95fc.jpg) Nick Szabo The breakthrough for his idea did not fully develop until 2015, when [Ethereum](https://coinmarketcap.com/currencies/ethereum/) introduced Solidity, which is a programming language specifically designed for smart contracts (…follow me for more on Solidity). At the time, [Bitcoin](https://coinmarketcap.com/currencies/bitcoin/) was already about six years in, and while it introduced basic scripting for transactions, that was not fit for complex agreements. Today, smart contracts power decentralized digital interactions. How do Smart Contracts work? ---------------------------- The rules are coded and deployed on [Blockchain](https://mirror.xyz/0x1b5E817ef85595ED6D01E9D8C094E6C1db600733/Q-h4iPfL19PnRJJhWC9B1N7i-jteAQI-qg0EgxaZN3Q) >>> when the conditions of these rules are met, the contract executes automatically >>> the blockchain verifies the outcome with no third parties needed. A good instance is buying an NFT; * You send crypto to make your purchase * The smart contract verifies payment and transfers ownership * The seller automatically receives crypto, and this transaction is recorded on the blockchain. The Challenges of Smart Contracts --------------------------------- Improvement goes hand in hand with [Web3](https://mirror.xyz/0x1b5E817ef85595ED6D01E9D8C094E6C1db600733/AitH0Us0jDLwianFaG685lHSO9lQNwWMUC7REJ6Lsd4) and its concepts as the future of decentralization becomes more real. Smart Contracts are only as good as the code written, meaning bugs or vulnerabilities can lead to exploitation (for example, [the DAO hack of 2016](https://www.coindesk.com/consensus-magazine/2023/05/09/coindesk-turns-10-how-the-dao-hack-changed-ethereum-and-crypto)); plus high gas fees on Ethereum makes transactions pretty expensive. Thankfully, improvements like the [Layer 2 scaling](https://www.investopedia.com/what-are-layer-1-and-layer-2-blockchain-scaling-solutions-7104877#:~:text=Layer%202%20scaling%20solutions%20are%20typically%20any%20solution%20created%20to,and%20permanently%20stored%20on%20it.) and alternative blockchains like Solana, are making smart contracts faster and cost-friendly. As Web3 grows, we expect even more real-world adoption across industries. If you’re excited to learn more about Web3 & Decentralization in a simplified way, please hit the **SUBSCRIBE** button! ### **WAGMI!** > _Thanks for reading. My name is Timi Lawani — I am a_ **_Data Analyst & Tech Content Creator_** _passionate about simplifying Web3 and technical concepts._ > > _You can connect with me on_ [**_LinkedIn_**](https://www.linkedin.com/in/hellotimilehin/) _and via_ [_Email_](http://hellotimilehin@gmail.com/)_; I would love to hear from you!_ --- *Originally published on [Timi Does Web3](https://paragraph.com/@timi-does-web3/smart-contracts-101)*