Hopefully you’ve found my explanations about DeFi and Blockchains so useful that you’re still here!

In this lesson, I’m going to explain Smart Contracts so simply that an 8 year old could understand.

So by now we know that a blockchain stores data…

We also know that DeFi copies financial tools and makes them available for everyone…

but Smart Contracts are the technical part that allows that.

Smart Contract: An agreement written in code that follows rules set up by all the parties involved.

Basically, smart contracts are programmed agreements.

We can write things like this:

• “If Theodore gives us $100, give him 7% interest each year”
• “If John gives us $5, select a random number and if it’s odd, give him $9 back”
• “If Susan gives us 5 Ethereum, give her back 1200 Uniswap tokens”

That is a very basic smart contract.

If we hire a bunch of really smart people, we can write smart contracts that literally offer us automobile insurance.

We can create borrowing and lending platforms, gambling games, and even “safer” margin trading platforms!

Smart contracts are the very basis of every “decentralized application” out there.

In fact, Decentralized Applications, or dApps (for short), in the next lesson.

– Theodore