How Do Smart Contracts Work? A smart contract isn’t unlike its paper predecessor. It helps you exchange property, services, and currency. But unlike that hardly-enforceable paper stack just barely stapled together, this contract is a self-executing document.
In actuality, smart contracts aren’t exactly “new.” The term was invented by Nick Szabo in 1994.
Smart contracts are encoded into blockchains, so they’re also decentralized. This aspect is what simplifies the process and throws out the middleman. Because the enforcer is now the code, you don’t need a lawyer to ensure the contract is executed correctly.