Smart contracts power almost everything in crypto beyond just holding coins. DeFi, staking, even trading, is all made possible on blockchains without lawyers or paperwork, just self-executing
Smart contracts power almost everything in crypto beyond just holding coins. DeFi, staking, even trading, is all made possible on blockchains without lawyers or paperwork, just self-executing code.
Brianna Migliaccio, who works in developer relations at the Solana Foundation, joined TheStreet Roundtable to explain how smart contracts work.
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Think of a vending machine.
"You put money in and you push a button of what you want the output to be, and the vending machine is going to execute that logic. You're guaranteed to have whatever you choose to be your output," Migliaccio said.
Vending machines don’t have somebody inside that gives you your soda and snack when you order. The logic is built in, and it automatically selects it for you, based on whatever buttons you hit.
Smart contracts function similarly, insofar as they contain transaction logic for a variety of use cases.
"Rather than a third-party person, you have this machine that has code written into it. It's removing the need to have this trusted third party in any type of agreement," Migliaccio said.
The use cases extend well beyond just payments. Anything that once needed a middleman, like an escrow agents, brokers, lender, and so much more, becomes a program, with rules hard coded into how it functions.This is why so many major blockchains, including Solana, Ethereum, Avalanche, and more all run off of smart contracts.
As with many other crypto products, one of the most obvious and important use cases is cross-border payments and transactions.
"Let's say my family is over in Italy. Through traditional finance, it's going to take several days with a lot of fees. If I do that through a blockchain, it's going to be instantaneous, gas fees that are like a fraction of a cent," Migliaccio said.
The other killer use case for smart contracts today is trading.
"You don't have to interact with a brokerage or a firm. You can just execute everything by yourself and have full power in how you're trading," she said.
This matters because in traditional finance, many products are inaccessible to normal traders.
"There's gatekeeping and you need to be an accredited investor to access certain trades. With blockchain you can see every venue and build the entire stack that you want for your trade,” Migliaccio explained.
Like anything else, smart contracts are not a guarantee that your assets will be protected. Migliaccio shared a short checklist of items for users to go through when engaging with any sort of smart contract.
The first thing to look at is liquidity.
"Validate the product to make sure it has a lot of liquidity, it has a lot of users," she said.
Without liquidity, even the most well constructed smart contract will not be able to execute.
Wallet hygiene is also very important.
"I would always recommend having most of your funds exist in a hardware wallet and just a small amount in any wallet that exists on your browser," Migliaccio said.
A hardware wallet is also known as a “cold wallet”, while software wallets are called “hot wallets.”
She also advocated for open-source software. In the age of AI, anyone can take a GitHub repo and hand it off to your LLM of choice to look for bugs and potential exploits.
"Even if you're non-technical, you can use your Claude Code subscription to scan a repo and let you know if it's safe or not," she said.
