The smart contract is one of the most important developments on the blockchain. It allows entering into contracts, the provision of which is guaranteed and irrefutable. Read the material to receive more information about how the smart contract works.
A smart contract can be called a protocol written using computer code. It is created for the conclusion and execution of contracts on the blockchain.
The smart contracts contain information about the obligations of each party, the sanctions for their violation and the automatic fulfillment of all the terms of the contract.
The principle of the smart contract can be painted on the example of the rate. Suppose there are 2 participants, a football match and 2 teams that are fighting for victory. One participant puts Bitcoin on the victory of the team “A”, the second puts on the victory of the team “B”.
To avoid cheating, you send cryptocurrencies to an account controlled by a smart contract.
The match ends with the victory of team “A”. The “smart contract” receives information about this and, according to the conditions, transfers the prize to the participant who bet on team “A”.
Of course, this is a very simple example. Transactions can be of different levels of complexity and in proportion to this increases the reasonableness of the smart contract.
Benefits of the technology
Lack of intermediaries, security, autonomy, speed – there are many advantages of smart contracts.
In our time to make a deal you need to go through a huge number of stages. For example, communication with a notary, preparation and payment of documents, waiting for their execution. In case the agreement is violated, the participants have to go to court. And again – time, waste, and, as a result, loss of confidence.
With smart contracts, everything is much simpler and more transparent. It does not need intermediaries, but only the parties to the “smart contract”. Since it is stored on the blockchain and duplicated, the security of the transaction is guaranteed. Blockchain also provides automation of processes.
Areas of use or how does a smart contract work in markets
Smart contracts are applicable where payments and actions are subject to terms and conditions. These can be banking services, insurance, accounting and auditing, logistics, voting and other areas.