What this lesson solves

If blockchain answers “who maintains the state,” smart contracts answer “who executes the rules.” This lesson reduces the idea to something concrete: code deployed onchain.

A practical definition

A smart contract is not a legal agreement. It is a program deployed to a blockchain.

Its importance is not that it is “smart,” but that:

• the rules are public
• execution is repeatable
• results are written into onchain state

What smart contracts do

Typical responsibilities include:

• controlling asset movement
• maintaining protocol state
• defining permissions
• handling staking, lending, swaps, and voting
• exposing interfaces that other contracts can call

Deployment, calls, and state updates

Deployment

Deployment means publishing the contract code to a blockchain and receiving a contract address.

Call

Calling a contract means sending a request to that address with specific data that tells the code what to do.

State update

If the call succeeds, contract storage may change and the global chain state is updated.

Externally owned accounts vs. contract accounts

In EVM-style systems, two address types matter:

Externally owned account

Controlled by a private key, usually the user wallet.

Contract account

Controlled by code, not by a private key. It can only respond according to the logic already deployed.

This difference matters because many “agent onchain execution” designs are really about how permissions are split between user-controlled accounts and contract-controlled logic.

Why smart contracts are composable

One of the biggest strengths of smart contracts is composability.
Logic written by one protocol can be reused by another.

That means:

• new products do not need to reimplement every financial primitive
• protocols can call one another
• complex systems can be built as modules

The tradeoff is clear as well: the more dependencies you compose, the more ways risk can spread.

Common risks

Automatic execution does not mean safe execution. Typical risks include:

• flawed permission design
• reentrancy
• oracle dependency problems
• unclear upgrade logic
• cascading failures through external dependencies

So “code is law” never means “code is automatically correct.”

Why testing and audits matter

Once a contract is deployed, changing it is usually much harder than changing a normal backend service.
That is why smart contract development needs stronger discipline around:

• unit testing
• integration testing
• permission review
• audits
• production monitoring

How this fits AI × Web3

If an AI agent is going to perform real onchain actions, it usually should not bypass smart contracts.
The healthier split is:

• AI handles understanding, planning, and decision support
• contracts enforce execution boundaries and final rules

That structure keeps AI flexible while keeping execution verifiable.

Minimum takeaway

After this lesson, you should be able to explain:

• what a smart contract actually is
• how deployment, calls, and state updates relate to one another
• the difference between externally owned accounts and contract accounts
• why composability is both a strength and a risk source

What comes next

The next lesson introduces DeFi and shows how smart contracts become full financial systems when they are composed together.

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