What is a Smart Contract?
Quick Definition
A smart contract is a self-executing program that runs on a blockchain and automatically enforces the terms of an agreement when specific conditions are met.
Full Definition
Smart contracts are one of the most important innovations to come out of blockchain technology. They are programs stored on a blockchain that run exactly as written, without intermediaries, downtime, or the possibility of censorship. When its functions are called, the smart contract checks whether the conditions defined in the code are met and, if they are, executes the requested action automatically.This makes smart contracts ideal for handling financial agreements, asset transfers, governance decisions, and any other process that benefits from automated, tamper-resistant execution.
The concept was first proposed by computer scientist Nick Szabo in the 1990s, but it became practical with the launch of Ethereum in 2015. Today, smart contracts power the vast majority of decentralized applications, including stablecoins, decentralized exchanges, lending protocols, and NFT marketplaces.
Why smart contracts matter for stablecoins
Smart contracts make stablecoins programmable in ways that traditional currencies simply can't be. They handle minting and burning, manage balances, execute transfers, and enforce rules around supply. They also make the entire system auditable: anyone can read the code, verify how it behaves, and confirm that the rules are being followed. This is a fundamental shift from traditional finance, where the rules of a financial product are often buried in legal documents and enforced by institutions.
The trade-off is that smart contracts are only as good as the code they're written in. Bugs, vulnerabilities, or design flaws can have serious consequences, which is why reputable projects invest heavily in audits, formal verification, and careful design.
Steady's smart contract
Steady's smart contract is the heart of the protocol. It handles minting and burning, manages every holder's balance, and handles the rebase mechanism that grows holders' positions to reflect the performance of our underlying assets. It's been built to swiss-german standards of rigor, with security and compliance as a priority from day one. Because the contract operates on a public blockchain, anyone can inspect the code and verify that it functions exactly as described. We've also done third-party code audits, which can be found on our Transparency Dashboard.
Related Terms
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
DeFi (Decentralized Finance)
ReadDeFi refers to financial services and applications built on blockchain technology, operating through smart contracts without traditional intermediaries.
Ethereum
ReadEthereum is the most widely used public blockchain for smart contracts, tokens, and decentralized applications.
Liquidity Pool
ReadA liquidity pool is a collection of tokens held in a smart contract that enables decentralized trading, lending, or other financial activities.
On-chain
ReadOn-chain refers to processes, transactions, or data that are recorded directly on a blockchain.
Permissionless
ReadPermissionless means anyone can access, use, or build on a system without needing approval from a central authority.
Rebase
ReadA rebase is an automatic adjustment to the total supply of a token, where every holder's balance changes proportionally to reflect a new total supply.
Risk Monitoring
ReadRisk monitoring is the continuous process of identifying, measuring, and responding to risks that could affect a protocol, its assets, or its users.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
Custodial vs. Non-Custodial
ReadCustodial means a third party holds the private keys to your assets on your behalf. Non-custodial means you hold your own keys and control your own assets directly.
Custody
ReadCustody is the safekeeping of assets (digital or traditional) by an institution or system responsible for protecting them on behalf of the owner.
LearnMoreAboutSteady
Transparency Portal
reserves, statements, audits, smart contract, and more.
FAQs
Discover the basics about Steady in our frequently asked questions.
Contact Us
questions, feel free to get in touch. We'll be happy to help.
