← Crypto · lesson 4 of 12
By the end of this one you'll know what Ethereum is, what a smart contract actually does, and why people call it a vending machine made of code.
Ethereum is a crypto network that does more than move coins, it can run little programs called smart contracts. A smart contract is a deal written in code that carries itself out, and the easiest picture is a vending machine. You put in a dollar, press B4, and the machine drops the chips, no clerk, no manager, no 'let me check with my boss'. The machine can't play favorites and can't be sweet-talked, it follows its rules every single time. Smart contracts work like that, if this happens, then do that, automatically, in front of everyone. At my farm stand I use an honor box because I trust my neighbors, a smart contract is what you build when the whole world is your neighbor and you can't trust everybody. One warning worth keeping, a vending machine only does what it was built to do, so if the builder made a mistake, or built it crooked on purpose, the machine runs the mistake too.
Same lesson, told by a hundred dollar bill. Tap to walk it one step at a time.
In this example, someone uses $100 through a smart contract app on Ethereum.
The network charges a fee to run the code, about $3 on a normal day in this example, so $97 actually goes through the machine.
That fee is the cost of the gears turning, and it changes with how busy the network is.
In the breakroom, a coworker slides his phone across the table to show an app where a piece of code pays out automatically when certain things happen, no company involved. He says the machine can't cheat because it's just code. You've got $10 and 20 minutes of lunch left.
Pick your move. Then peek at the other roads if you're curious.
A smart contract is a vending machine made of code, and it runs its rules exactly as built, mistakes and all.