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How do Ethereum smart contracts work?



Like many ideas of the blockbuster industry, the work of smart contracts often raises many questions.
To explain to a person what a smart contract is difficult enough because the definition of a smart contract is very different from the standard understanding of the word contract. In the usual contract, as a rule, the conditions of mutual relations of both parties are stated, while the smart contract is carried out through the cryptographic code.

The idea of ​​a smart contract, described by the programmer and cryptographer Nick Szabo in 1993, was a kind of vending machine. In his example, he described how users can enter values ​​and get the corresponding final code. A simple example of the work of the smart contract at the moment: users of Ethereum can send 10 units of crypto currency to another user through a smart contract using a contract with the appropriate code.

Ethereum is a platform created specifically to create smart contracts. Nevertheless, the technology can be used on other platforms. It should be noted that bitcoin was the first to support the basis of smart contracts in the sense that the network can transfer currency from one person to another.

How smart contracts work
A smart contract contains electronic offers that initiate processes in accordance with the contract condition. A transaction block is a database that is systematically checked by contractors. A smart contract is an automated mechanism of work: compliance with a specific condition X causes a corresponding commitment to Y. The obligation can be caused by a variety of conditions: the occurrence of an event, the expiration of a certain time, etc.

A vending machine can be a vivid example of how an automated work is carried out on which a smart contract is based: when the buyer contributes the necessary amount of money (condition X), the machine immediately transfers the chocolate to the owner (commitment Y). Smart contracts allow you to manage digital rights for real assets.

With blockchain technology, there is no need to physically store the goods until the condition is satisfied. Instead, the block chain stores a multi-page record of the transfer of ownership.

Advantages of Smart Contracts
Smart contracts provide the contracting parties with the clarity of the terms of the contract. The contract terms are written in the code and are available to both parties via an agreed data source.

Contracting parties can "view" and "track" the status of the contract. This can lead to the fact that contracts will be treated as their own "web page", increasing the transparency of transactions of both parties.

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