Smart contracts on Ethereum and Lisk: how they work

Smart contracts are a crucial component of blockchain technologies. Their implementation in apps could be revolutionary for a wide range of reasons. In this article, we’re gonna explain the meaning of smart contracts in simple words and give some examples of the implementation.

What is a smart contract?

A smart contract is an agreement or rules which are encoded right in the application. To get a clear look, imagine a car to be paid for. If your bank didn’t get the payment, your car gets locked. This case shows a strict fulfillment of commitments on a digital level. No one can break them. This is what smart contracts stand for.

Firstly, smart contracts were mentioned by Nick Szabo in 1994 as some digital data that change the behavior of physical objects. This mechanism was forgotten until the advent of a blockchain. Now smart contracts can be used in finances, security, jurisprudence, internet of things and other cases to robotize the execution of certain terms.

Decentralized applications

Being built in a blockchain, smart contracts represent a code which is executed via so-called decentralized blockchain applications (DApps). The point of DApps is that they don’t need third-party servers or mediator to maintain their work. For this reason, DApps are more accurate, cost-effective, safer and faster than regular applications.


Despite smart contract technologies being on their early stage, these are widely spread in certain fields. To have a better understanding of smart contracts, let’s explore some implementation cases.

A financial market is quite interested in smart contract technologies as they provide error checking, calculations, fund transferring and many other accurate and robotized options. Smart contracts have been already implemented in coupon payments, trade clearing, and insurance.

In alternative finances, smart contracts are successfully implemented in crowdfunding. The most popular one is DAO, a Decentralized Autonomous Organization, uniting people with the same view to achieve common goals.

The public sector may use smart contracts for keeping records of private companies registries and other table records, and distribution of communication between shareholders.

Not only are smart contracts useful for government and economics, but also for charging electric vehicles. The system calculates a deposit and returns remaining funds after charging is finished.

In medicine, smart contracts allow to collect data and personal information, manage, transfer and access to health records, track procedures, and micro-payments.

Show business and media use smart contracts in royalty distribution to calculate royalty payments to artists and musicians.

Also, smart contracts are widely spread in peer to peer transacting, record keeping, documentation, product provenance, and voting.

About platforms

Smart contracts are supported by two crypto platforms, Ethereum and Lisk. Regardless both are about smart contracts, they have a lot of differences.  


Ethereum is a platform with a single public blockchain, smart contracts are mostly associated with. It is created by Vitalik Buterin, young Russian programmer from Toronto. The key aspect of Ethereum is in its universality and decentralization. Any developer can create smart contracts directly inside the Ethereum blockchain and build DApps based on them. Thus the Ethereum blockchain represents a powerful tool to create any DApp.

Despite this great idea of the all-in-one blockchain, Ethereum architecture is not scalable as block sizes continuously grow and ‘bloat’ the main chain, making operations with smart contracts take a long time and influence the speed of DApp.

Ethereum platform is associated with a cryptocurrency, named Ether (ETH), which you can buy/sell on Changelly.


Lisk is a new crypto platform based on sidechains. These are designed to solve the problem of scalability by attaching to the main blockchain without impacting its performance and speed. Sidechains take a load upon themselves leaving the main chain lean and streamlined. Lisk was launched on May 2016 by Max Kordek, a German programmer. For now, Lisk has a total market capitalization of $322.44 million and approximately $5.41 million worth of Lisk was traded on exchanges in the last day.

Lisk coins (LISK) are available on Changelly. You can buy/sell LISK at the best rate!

Stay tuned!


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