What is a Smart Contract and How Do They Work?

Smart contracts are self-executing pieces of code that run on blockchain networks. They operate based on predefined conditions, removing the need for intermediaries and manual processing. These digital agreements enable secure, efficient, and transparent transactions across various sectors including finance, supply chain, healthcare, and decentralised applications (dApps).

In this article, we take a closer look at what smart contracts are, how they work, and how they are used in the context of StraitsX stablecoins.

What are smart contracts?

A smart contract is a computer programme that automatically enforces the terms of an agreement. The logic of the contract is written into code and stored on a blockchain. 

Think of a smart contract like a vending machine. You put in a coin (that’s your input), choose a drink (that’s your condition), and the machine automatically gives you what you selected. No human in between, no questions asked. In the same way, a smart contract runs on its own. 

Once deployed, the contract executes specified actions when the required conditions are met. When a transaction is submitted to a blockchain, a smart contract is verified by the network and added to a block. After deployment, it cannot be modified, making smart contracts tamper-proof and transparent.

Benefits of smart contracts

Smart contracts offer several key benefits:

• Automation: Once triggered, smart contracts carry out actions without human intervention. Smart contracts work by executing the code automatically when pre-defined conditions are met, making processes more efficient and reliable
  
• Accuracy: Removing manual processes reduces human error. Because the contract logic is written in code and stored on the blockchain, the actions it performs are precise and predictable.
  
• Lower costs: No intermediaries are required. In crypto, smart contracts are widely used to enable peer-to-peer transactions, decentralised finance (DeFi), and other blockchain-based services without needing banks, lawyers, or brokers.
  
• Transparency: All actions are recorded on a blockchain and visible to participants. Blockchains handle smart contracts by validating and storing every transaction in a shared ledger that cannot be altered, ensuring accountability and visibility for all involved.‍
• Trust minimisation: No need to trust a third party; the contract executes based on code. In the crypto space, this is especially powerful, allowing users to interact directly with decentralised applications without relying on central authorities.

Smart contracts vs traditional contracts

Traditional contracts are enforced manually and often involve multiple intermediaries such as lawyers or banks. This increases costs and introduces potential for human error. Smart contracts simplify the process by ensuring that once conditions are met, actions are carried out automatically. This deterministic nature of code removes ambiguity and potential disputes.

Real-world use cases of smart contracts

Decentralised Apps (dApps)

Smart contracts form the backbone of dApps. These applications use multiple interacting smart contracts to handle user actions and transactions. Examples include:

• DeFi apps that enable swapping, staking and liquidity provision
• NFT marketplaces for minting and trading tokens
• Blockchain games that allow asset ownership, in-game payments, and play-to-earn mechanisms

Supply chain management‍

Smart contracts improve efficiency in supply chains by automating tasks such as:

• Verifying and issuing purchase orders
• Managing inventory
• Processing payments
• Enforcing delivery terms

Healthcare

Smart contracts can enhance data privacy and security, while also enabling cross-institutional access and auditability of patient records.

Financial Services

In insurance, smart contracts can simplify claims assessment and payment processing. In trading and cross-border payments, they enable lower fees and faster settlement. Stablecoins powered by smart contracts can provide 24/7 liquidity and reduce FX conversion fees.

Stablecoins

Smart contracts underpin the creation and management of stablecoins. In the StraitsX ecosystem, XUSD, XSGD and XIDR are supported by smart contracts to ensure secure minting, burning, and on-chain verification.

Smart contract languages

Smart contracts are written in different programming languages depending on the blockchain. The XUSD, XSGD and XIDR smart contracts are publicly available and can be viewed on blockchain explorers or the StraitsX Developer Docs.

Scilla (Zilliqa, ZRC-2) 

Scilla is used on the Zilliqa blockchain and is known for its focus on safety and formal verification. Transactions for XSGD and XIDR on Zilliqa take around 40 seconds, offering a balance between performance and security.

Solidity (Ethereum: ERC-20, BNB Smart Chain: BEP-20 for XUSD)

Solidity is the most widely used smart contract language and powers both Ethereum-based applications and the BNB Smart Chain. StraitsX uses Solidity to enhance interoperability for XUSD, XSGD, and XIDR across DeFi platforms via the ERC-20 token standard. XUSD also runs on BNB Smart Chain as a BEP-20 token, leveraging the same Solidity-based infrastructure thanks to EVM compatibility.

How do I buy XUSD, XSGD and XIDR stablecoins?

StraitsX is committed to communicating the benefits of stablecoins. Mint, swap and redeem with XUSD, XSGD and XIDR with other stablecoins with our StraitsX Partners.

1. Sign up for a Personal or Business Account.
2. Verify your identity by submitting the required documents.
3. Transfer In from your bank account to get XUSD, XSGD or XIDR. 
4. Create your own non-custodial wallet with our partners.
5. Transfer Out your XUSD, XSGD or XIDR to one of our DeFi partners: DFX, Uniswap, and Zilswap 
6. Swap your XUSD, XSGD or XIDR on DFX, Uniswap and Zilswap to redeem various other stablecoins such as USDC, USDT and more.
7. Pool your XUSD, XSGD or XIDR to reap attractive yields with low slippages.

Want to move larger amounts? StraitsX also offers an OTC Desk for institutions and high-net-worth individuals, enabling large block trades with deep liquidity and competitive pricing.

Final thoughts

Smart contracts are transforming how agreements and digital interactions are handled. Their ability to execute transactions automatically and transparently makes them a foundational layer for blockchain ecosystems.

At StraitsX, smart contracts ensure the secure and reliable issuance of stablecoins like XUSD, XSGD and XIDR. As adoption continues, smart contracts will play an even greater role in shaping the future of finance and beyond.

Explore our Developer Docs or contact us to try StraitsX stablecoins today.