Smart Contracts Explained: Back to Basics with MacguyverTech

February 16, 2022

Smart contracts are an integral part of our future, but they’re intimidating and confusing for those still unfamiliar with blockchain technology. It has come to our attention at MacguyverTech that there is decidedly an audience for a more basic approach to smart contracts, blockchain, cryptocurrency, the Metaverse, Web 3.0, and related topics.

To that end, we’re writing a “Back to Basics” series that will hopefully be of use to our readers. “Blockchain Explained” was our first, and it can be read here. This article is about the basics of smart contracts. Keep in mind that what we’re presenting isn’t unlearnable; it only requires patience. At one point, everyone was a beginner.

So, what is a smart contract, really?

Unlike smart lights, doorbells, refrigerators, or other devices that inevitably find one standing in the middle of their kitchen bellowing “ALEXA” at the top of their lungs, smart contracts are far less likely to malfunction. They are, at their core, program codes that self-execute when conditions by two (or more) parties are met. The program not only executes the contract, but records it on a decentralized, automated network in a manner that cannot be altered.

The best example of this has been used repeatedly, but it’s still the best one we can find. Think of a smart contract as a vending machine. Let’s say that Party A is a gentleman named Fred. Fred has a hankering for some Flamin’ Hot Chee-tos, because…well, they’re delicious. However, Fred has neither the time nor the inclination to travel to his local convenience store to deal with an intermediary to take his money, process the transaction in a register, make change, print a receipt, bag the Flamin’ Hot Cheetos with said receipt, and hand him the bag.

Fortunately, Fred has access to a vending machine filled by Party B: Frito-Lay. So, Fred puts his dollar into the smart contract (the vending machine). The vending machine recognizes that a dollar has been received, automatically dispenses the Flamin’ Hot Cheetos, and everyone goes on with their day.

But what if something goes wrong?

Here’s the neat thing about smart contracts: They protect both the seller and the buyer. Let’s say in our previous example that the Flamin’ Hot Cheetos got stuck in the vending machine after being dispensed. What happens then? Well, the machine thinks that Fred’s received his snack, so he’s out a dollar. So, Fred does what most of us would do. He shakes and rocks the vending machine until a) the machine releases the product, b) he gets tired, or c) something bad happens.

With a smart contract, the buyer is protected. If payment is made and product is not received by the buyer in a predetermined period of time, the money is refunded. This is not only recorded as a fair, transparent and immutable transaction, but also far less likely to hurt Fred; toppling vending machines kill more people than sharks every year.

So that’s it? Smart contracts are vending machines?

They’re so much more. Smart contract technology can be used for virtually any sort of transaction. Real estate, health care, legal agreements, supply chain, insurance agreements, intellectual property rights, voting, literally anything that requires a record or exchange of services can be put into a smart contract.

Why is this important?

It’s important for a few reasons. First, smart contracts are built on a blockchain. Therefore, they’re decentralized and distributed on a peer-to-peer (p2p) network. There’s no hard drive or mainframe to be destroyed that will eliminate the record. If ever one were to question if Fred paid for his Flamin’ Hot Cheetos, there’s a record of it.

Second, smart contracts are virtually fraud-proof. As long as the smart contract wasn’t maliciously programmed, there’s a clear, immutable record of everything that ever occurred with an item. An excellent example of this is real estate. Real estate title fraud has become enough of an issue that “title insurance” has become a thing. With a smart contract, it simply becomes impossible to disprove ownership of a real estate property.

Finally, smart contracts can eliminate the need for an intermediary. While this can be scary with very large transactions, it’s far more convenient for other purchases. Notary laws, for example, are obscure, often unclear, vary by US State, and can be incredibly inconvenient even for small transactions. Eventually, smart contracts will eliminate the need for many of these types of transaction verifications.


Smart contracts aren’t scary or hard to understand, they’re just an evolution of technology and the next step in programming. Instead of being avoided, they should be embraced for their transparency and simplicity.

And while one might never need a smart contract to acquire Flamin’ Hot Cheetos, you never know.