What Are the Smart Contracts and How They Work

History

For 17 years it was just a concept, until, in 2013, the founder of Bitcoin Magazine, Vitaly Buterin, developed the idea of a Blockchain network that would embody the full potential of smart contracts. On July 30, 2015, the network was launched and the crypto community was able to use smart contracts for a variety of purposes.

What Is a Smart Contract and How Does It Work

  1. If “the performer handed over the work”, then “the system automatically transfers him the reserved amount.”
  2. If “the contractor did NOT hand over the work”, then “the reserved amount will be returned to the customer’s account.”

This is the simplest example to demonstrate how smart contracts work. This technology allows us to exchange everything: money, goods, real estate, securities, and other assets. Let’s look at examples of the practical implementation of smart contracts.

The Simplest Examples

Another example is an automatic account top-up or utility service payments. Some bank applications provide this opportunity. Users specify the payment time and value and the system automatically settles the payment.

Rental Property

When the lessor makes the first payment, he gets the placement key. If the is no monthly payment, the electronic door lock will be blocked, and the deposit will be transferred to the lessor account.

ICO

  1. The investor reserves the amount of money.
  2. The startup issues tokens.
  3. The investor receives several tokens equivalent to the investment amount.
  4. The funds are credited to the startup account.
  5. If the startup does not issue, the funds are returned to the investor.

Everything is in the auto mode. Neither the startup nor the investor is involved in the value exchange. Everyone creates their own (money, tokens), and the smart contract does the rest.

Benefits of Using Smart Contracts

Originally published at getblock.io on September 17, 2020.

GetBlock is a service that provides fast and easy API connection to blockchain nodes of 40+ cryptocurrencies.