What are Smart Contracts?
Smart contracts exchange value - property, money, or any asset - without a middleman. It’s a piece of software with rules or terms coded into it.
Smart contracts are encrypted and secured on the Ethereum blockchain.
For example, imagine you want to sell a piece of land to a stranger, but you don’t want to go through the hassle of hiring a broker. You’d create a smart contract, include location, price, and verify your identity and land ownership. Then, you’d deploy the smart contract on the blockchain and sell it for Ether, the Ethereum token.
Once the smart contract confirms the funds are paid, it transfers the land title over to the new owner. Both of you have copies of the smart contract and it is stored on the blockchain in multiple locations.
Think this example will happen far off in the future? The Swedish National Land Security is currently working with a blockchain startup to digitize their nation’s real estate process.
Let’s look further at the function of smart contracts and how they contribute to Decentralized Applications.
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