16 Aug 2021 10:07 AM +00:00

Cardano Smart Contracts Explained: What Are Smart Contracts?

In a mid-August development update, IOHK finally announced the Cardano smart contract release date, but what exactly are they?

Set to go live through Cardano Alonzo, smart contracts are not a new concept in the cryptocurrency world. Ethereum is the most prominent network that makes use of smart contracts, while the bitcoin Taproot upgrade may pave the way for bitcoin’s own smart contract integration.

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Here’s what you need to know about smart contracts.


Cardano Smart Contracts Meaning

At the core level, Cardano smart contracts will function similarly to those on the Ethereum blockchain. They will act as executable programs running on the Cardano blockchain.

Smart contracts act as digital agreements, or guarantees, between two parties. Outputs (or transactions) are only executed when the prerequisite conditions (or inputs) have been met. Once conditions are met, the transaction executes automatically. These transactions and their details will then sit on the Cardano blockchain forever.

One of the advantages touted about smart contract integration is the lack of individuals, or middlemen, needed to carry out or keep the contracts, as with traditional agreements. These elements can often slow down the process.

Details of the contracts remain on a decentralised blockchain. This means agreements are free from the risk of tampering or avoidance by third parties, along with increased transparency and traceability.

The inability to change smart contracts does come with some risks. If the smart contract includes mistakes – such as errors or bugs – they can be difficult to alter. Contracts are also at risk of the exploitation of loopholes. Of course, these are not exclusive to smart contracts, but do instead shift further burden to programmers rather than, for example, lawyers.

Cardano Smart Contract Language


Programmers for Cardano’s smart contracts will use one of three languages: Plutus, Marlowe, or Glow.

As described by IOHK, Plutus is “a purpose-built smart contract development and execution platform” that runs both on-chain and off-chain.

Marlowe is Cardano’s domain-specific language (DSL) used moreso for financial contracts, while Glow is a DSL used for writing decentralised applications (dApps).

Plutus and Marlowe are powered by Haskell, a functional, research-driven programming language with a basis in academia and industry. This has granted the language a reputation for robustness and the reliability of code, which could help avoid the vulnerabilities and risks of smart contracts.

Cardano Smart Contracts Examples

The Alonzo hard fork has yet to go live, meaning no smart contracts currently run on the Cardano mainnet.

However, IOHK has released the Marlowe Playground, a browser-based editor for potential Marlowe smart contracts. The Marlowe Playground includes various smart contract examples that give some ideas for potential financial uses, such as escrow contracts, loans, and basic swaps.


IOHK also released the Plutus Playground with its own examples. These include smart contracts for a game, a vesting scheme, and a crowdfunding attempt.

There are countless other potential uses for smart contracts, whether for financial transactions, insurance, voting, or even for digital identity cards.

We’ll see more when the Alonzo testnet goes live on September 1, followed by the mainnet release on September 12.

Read More: Cardano Summit 2021: Dates, Times, Location and More

[Featured Photo by Ruben Hanssen on Unsplash]