Eli5 what is a smart contract? Or what does a smart contract do?
In: 5
With the premise that coins hold value it’s a computer program that mimics a financial transaction. You know a translator program will accept a word and spit out a different word. A token exchange smart contract works by taking a coin and spitting out another one. The translator doesn’t need an escrow since the translator is an open program. Similarly a smart contract doesn’t need an escrow since it is an open program. It could be as simple as, “if wallet A receives coin X from wallet B then wallet A will send coin Y to wallet B (assuming there is enough stock and that the smart contract controls wallet A).
Smart contracts go beyond token exchanges and even then the mechanics are a lot more nuanced.
Latest Answers