A smart contract is a program on a blockchain that runs automatically when specific conditions are met.

While they’re similar to real-life contracts, there are a few differences. For example, they are almost impossible to reverse once they have been deployed, and they do not require a middleman such as a stock broker or real estate agent to implement them.

This allows them to operate in a decentralized manner.

Buying a House

Here’s an example.

Let’s imagine that Sophia is interested in buying a house. She looks for houses online and finds a seller named Ava who is offering her home for sale. After getting in touch and negotiating a price, Sophia agrees to buy the house.

Now, Sophia just needs to send money to Ava to complete the purchase, but here’s the catch: Sophia has to wait for her mortgage application to be approved before she can receive the money. At the same time, Ava is also waiting for confirmation.

Throughout the process, various intermediaries and middlemen get involved, handling different legal and financial aspects of this transaction. Sophia's fees to her agents may increase as they wait for her mortgage application to be approved, adding to the cost and time it takes to complete the transaction.

This is both time-consuming and expensive.

So how can smart contracts streamline this process?

Buying a House with Smart Contracts

What if the world widely adopted smart contracts? What would change?

Wel, for one, the transfer of property ownership could be automated with a smart contract.

Ava, the seller, could make a smart contract that says, “When Sophia has paid 100% of the money, transfer the house deed to her.”

So, Sophia can send the payment to Ava, and the smart contract will guarantee that she receives the house deed once the payment is complete.

This eliminates the need for banks, real estate agents, and lawyers, as well as the fees that come with dealing with these intermediaries.

Buying a House with Smart Contracts Continued

As you can see through this example, smart contracts can streamline many processes.

They aren’t meant to replace people, but to make more complicated processes more efficient and convenient.

This, of course, is just one example of how smart contracts can be used. There are many other scenarios where they can be applied.

Developers can use different coding languages to write a smart contract – but the most commonly used language is Solidity.

Conditions can be written as an ‘If This, Then That’ (IFTTT) statement which will trigger automatically when a particular set of conditions are met.

Once the terms of the smart contract are in place, developers can deploy it on to the blockchain of their choice – like Ethereum or Solana.

Tip: if you’re a developer, you may find Truffle Suite (trufflesuite.com) useful for tools and resources to develop your smart contracts. If you’re looking to test your smart contracts in a private environment before launching them on the mainnet, consider checking out Nameless (nameless.io).