Smart Contracts and dApps Explained: Building Trustless Applications on Blockchain

Smart contracts are redefining how we build applications in a trustless and decentralized world. In this blog, we’ll explore what smart contracts are and how they work under the hood—using a compound interest calculator as a relatable example.

1. Smart Contracts as Programs Deployed on Blockchain

A smart contract is a self-executing program deployed on a blockchain. It defines rules (just like traditional code), but once deployed, it runs automatically without the need for intermediaries. These rules are immutable—meaning they cannot be changed after deployment.

Example:

Let’s say we want to build a smart contract that calculates compound interest. A user submits the principal amount, interest rate, and time period, and the contract returns the final amount. This logic is coded into the contract, deployed to the blockchain, and becomes publicly accessible to anyone who wants to use it.

2. Role of the EVM in Executing Smart Contracts

The Ethereum Virtual Machine (EVM) is like the CPU of the Ethereum blockchain. It interprets and executes the bytecode of smart contracts. Every time someone interacts with our compound interest calculator, the EVM processes that request, runs the calculation, and returns the result.

So, when a user inputs data (like principal, rate, and time), the EVM executes the contract function and ensures the logic is executed exactly as written, without any bias or external interference.

3. Data Storage in Blocks

Every blockchain is made up of blocks, and each block stores:

• Transactions

• Smart contract states

• Event logs

In our example, if we choose to store the result of each compound interest calculation along with the user’s address, this data becomes part of the contract’s state and is saved on the blockchain. This means we can keep a history of every user’s calculations that is transparent and tamper-proof.

4. Advantages Over Centralized Server Systems

Here’s why building this on blockchain is powerful:

• Trustless: Users don’t need to trust a third-party backend. They can audit the code and data.

• Immutable: Once deployed, no one can alter the logic or stored history.

• Always Available: Smart contracts live on the blockchain 24/7—no server downtime.

• Secure History: All past calculations are stored permanently and can’t be manipulated.

Compared to traditional web apps that rely on databases and admin privileges, smart contracts offer unmatched transparency and user confidence.

5. Importance of IPFS for Web App Deployment

While the smart contract handles logic and storage, the frontend UI (like a calculator interface) still needs to be hosted somewhere. This is where IPFS (InterPlanetary File System) comes in.

IPFS is a decentralized storage system. By hosting our web app frontend on IPFS, we:

• Remove dependency on centralized web servers.

• Ensure the UI is censorship-resistant and verifiable.

• Can serve users directly via blockchain-linked URLs (like ENS or Unstoppable Domains).

• This makes the entire stack—from logic to UI—decentralized.

6. Connecting Smart Contracts to UI

Users don’t interact with smart contracts directly—they use a frontend interface. This could be a React or Vue app where users input values like:

• Principal

• Interest Rate

• Time Period

The UI connects to the blockchain via Web3.js or Ethers.js, sending transactions to the smart contract, and reading results. For example, after the user submits data, the app fetches and displays the calculated result along with previous history stored on-chain.

7. Limitations on Block Size and Computation

Smart contracts run inside a resource-constrained environment. Blockchains like MST Chain have:

• A gas limit per block (restricting how much computation can happen).

• Storage limits due to the cost of on-chain data.

So while we can store calculation history, we must design efficiently to avoid exceeding limits. For instance, instead of storing large datasets, we might store minimal entries (like result amounts or timestamps).

8. Gas Fees: Cost of Execution

Every smart contract execution requires gas, which is paid in the blockchain’s native currency (e.g., MSTC on MST Chain). This fee:

• Compensates miners or validators.

• Prevents abuse by making computation costly.

• Depends on how complex the logic is.

In our example, calculating compound interest and storing the result consumes gas. The more history we store or the more complex the logic, the higher the gas cost.

Users need to have a wallet (like MetaMask) and sufficient balance to pay these fees when interacting with the app.

Conclusion 

By building something as simple as a compound interest calculator using a smart contract, we get a hands-on understanding of decentralized applications. Smart contracts bring transparency, trust, and automation, while tools like EVM, IPFS, and Web3.js enable a fully decentralized tech stack.

As blockchain adoption grows, understanding these building blocks will become essential for developers and product builders.