A smart contract is a two-person agreement based on computer code. Because they operate on the blockchain, they are kept on a public ledger and cannot be changed. The blockchain handles smart contract transactions, which means they may be submitted automatically without the participation of a third party.
Smart contracts are safe, transparent, decentralized, autonomous, and precise.
Let me give you an example of how smart contracts function. In the event that Alex decides to sell his house to Bob. Then they’d pay a plethora of fees to third parties like real estate brokers, banks, attorneys, and so on. They may simply make a declaration in a smart contract indicating that if Bob pays this amount of money, he will be awarded ownership of the property. As a result, smart contracts can speed up the transaction process while also providing us with secure choices.
Smart contracts can exchange money, property, shares or anything of value in a transparent, conflict-free way, while avoiding the services of a middleman. Ordinarily, a process would require payment to a middleman, government agency, bank, lawyer or a notary, and then a processing time before the receipt of goods or services. However, with smart contract technology it can all be automated.
Smart contract technology can be compared to that of an automated vending machine. With a vending machine, money is deposited into the vending machine and the desired item drops for collection, provided that the correct amount is deposited.
A smart contract is a series of computer codes that can be included in the blockchain network to help facilitate, verify, or negotiate a contract.
Users agree to a set of conditions and requirements for smart contracts to work. The agreement terms are automatically and freely carried out once those circumstances are met. These agreements are set on blockchain technologies to automate the whole process, from carrying out the terms to the payments.
For example, A prospective tenant wants to lease an apartment through a smart contract. When the tenant pays the security deposit for the property, the landlord agrees to give the tenant the apartment’s door code.
Both the tenant and the landlord parties would send their portions of the agreement to the smart contract code, which would keep track of and automatically exchange the door code for the security deposit on the lease’s start date.
The security deposit is then refunded via the smart contract and blockchain process if the landlord fails to provide the door code by the suggested end date of the lease. This would avoid the fees and procedures commonly involved in using a notary, a third-party mediator, or an attorney.