What are Cardano Smart Contracts and How are They Different?

Cardano Smart Contracts Overview

1. Cardano smart contracts are self-executing agreements written in Plutus, a functional programming language built on Haskell.

2. They operate on the Cardano blockchain and enforce predefined logic without requiring intermediaries.

3. Every contract is compiled into Plutus Core, a low-level, typed lambda calculus language ensuring deterministic execution.

4. Contracts are deployed as part of transactions and validated during ledger processing by full nodes.

5. Execution occurs off-chain for script validation, with on-chain verification relying solely on cryptographic proofs and input data integrity.

On-Chain vs Off-Chain Execution Model

1. Unlike Ethereum, where contract code runs directly on the EVM during block validation, Cardano separates script evaluation from consensus.

2. Users construct transactions with inputs, outputs, and redeemers, then attach serialized Plutus scripts to be validated at transaction inclusion time.

3. Validators run only during transaction validation—no persistent state or runtime environment exists on-chain.

4. Script execution consumes memory and CPU units measured in execution budgets, which must be declared and paid for in ADA.

5. This model enforces strict resource accounting and prevents infinite loops or unbounded computation on-chain.

Formal Verification and Security Foundations

1. Plutus contracts can be formally verified using mathematical proofs that guarantee correctness under specified assumptions.

2. The underlying UTXO accounting model ensures each transaction consumes specific, immutable outputs, eliminating reentrancy vulnerabilities.

3. Cardano’s ledger rules are expressed in Haskell and undergo rigorous peer-reviewed specification before implementation.

4. Contract logic is decoupled from wallet behavior—signing keys control funds, while scripts govern conditions for spending.

5. This architecture eliminates class-wide exploits like the DAO hack or flash loan manipulations common in account-based models.

Interoperability Through Marlowe and Plutus Ecosystem

1. Marlowe is a domain-specific language layered atop Plutus, designed explicitly for financial contracts and accessible to non-developers.

2. Plutus provides developer tooling including a REPL, test framework, and integration with the cardano-node CLI for local simulation.

3. Contracts interact via UTXO composition—multiple scripts may guard a single output, enabling composability without shared mutable state.

4. No global contract registry exists; script hashes serve as unique identifiers embedded directly in transaction outputs.

5. Cross-contract calls are not native—interactions occur through explicit transaction construction and output referencing.

Frequently Asked Questions

Q: Can Cardano smart contracts access real-world data?A: Native oracles are not part of the base protocol. External data must be supplied via signed off-chain feeds included as transaction inputs or verified through trusted attestations.

Q: Do Cardano smart contracts support upgradeability?A: Upgradeability is not built-in. Contracts are immutable once deployed. Developers implement flexibility using parameterized validators, delegation patterns, or multi-signature governance outputs.

Q: Is gas pricing dynamic on Cardano?A: Execution fees are calculated deterministically using fixed computational costs per operation, adjusted periodically via on-chain governance proposals—not market-driven auctions.

Q: Can Plutus scripts interact with tokens other than ADA?A: Yes. Native tokens on Cardano share the same UTXO model. Scripts can validate token presence, quantity, and policy ID within transaction inputs and outputs.