How do smart contracts work?

Author profile picture
Ólafur Páll Torfason
Co Founder / CEO

Date: 10 February 2022

Simplified, a Smart Contract is a computer program that helps you make secure transactions with other people based on a set of agreements.

Its purpose is to make it easier for two or more individuals to enter a transactional contract and both can be assured that if A happens, then B will happen. It’s kind of like going through the a self-checkout service at the grocery store, but for legal services and much cheaper. A very simple smart contract could be when you are buying shares in a company and you want to be sure that the shares will be transferred to you at the moment of payment.

An example of this could be a contract where Emil sells his shares to Ingvar.

Emil cannot pay the full amount until in 4 weeks (expiration date) but he wants to be sure that Ingvar does not sell them to someone else in the meantime. Ingvar doesn’t want to give Emil the shares without him paying. Emil and Ingvar can have incorporated a lawyer for this sort of escrow service. But that takes time and costs money, and spending time and paying their lawyers fee of $250, feels steep for this deal. They decide to use a Smart Contract and use a smart contract that only costs them $100.Ingvar agrees to give the smart contract control over his shares. Emil promises to pay before the expiry date (4 weeks)There are only two potential outcomes for this deal . . .

A: ✅ If Emil pays before the expiration date, then the smart contract delivers the shares to Emil and the money to Ingvar.

B: 🚫 If Emil fails to pay, the Smart contract returns the shares to Ingvar.

Quick, simple, cheap, and easy!

It’s super easy

Whether you are issuing new shares, giving stock options to your employees, or we got you covered. That’s the beauty of technology; we can simplify the complex.

Voila, the contract will collect the signatures and complete all transactions in due time.

Author profile picture
Ólafur Páll Torfason
Co Founder / CEO

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