How Does Smart Contracts Work
What Are Smart Contracts?
A smart contract is a digital agreement that automatically executes when certain conditions are met. These smart contracts are programmed to self-execute by using blockchain technology and computer code that is unchangeable and transparent.
For this reason, smart contracts are often used to create trust when trading goods and services online.
For example, if one person offers to sell a product and another person offers to pay them in cryptocurrency, they can create a smart contract that automatically transfers the payment when the product is received.
Smart contract is programmed to use information
These types of agreements are beneficial because they remove the need for third-party verification. If someone wants to exchange cryptocurrency for goods or services through a smart contract, they don’t have to go through a bank or other financial intermediary that verifies the transaction.
Instead, the smart contract is programmed to use information from the blockchain to verify that both parties have fulfilled their end of the deal. For example, a seller could accept payment in cryptocurrency from a buyer through a smart contract.
When the seller confirms that the payment has been deposited into their account, the smart contract triggers a transfer to the buyer’s account.