{"id":9692,"date":"2023-03-18T03:50:50","date_gmt":"2023-03-18T03:50:50","guid":{"rendered":"https:\/\/www.bitnovo.com\/blog\/?p=9692"},"modified":"2025-09-10T15:24:20","modified_gmt":"2025-09-10T15:24:20","slug":"what-is-a-smart-contract","status":"publish","type":"post","link":"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract","title":{"rendered":"What is a smart contract?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Alternar tabla de contenidos\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract\/#history_of_smart_contracts\" >History of smart contracts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract\/#how_does_a_smart_contract_work\" >How does a smart contract work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract\/#smarts_contract_applications\" >Smarts Contract Applications<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-smart-contract\/#example_of_a_smart_contract\" >Example of a smart contract<\/a><\/li><\/ul><\/nav><\/div>\n<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span><section id=\"section_2128190972\" class=\"section\">\n<div class=\"section-content relative\">\n<div id=\"row-1262580739\" class=\"row align-center\">\n<p>You may have heard of a smart contract. Its clearest definition is that of a computer program that functions as a\u00a0<strong>contract<\/strong>\u00a0with the ability to be fulfilled automatically once the parties involved have complied with the terms agreed upon and signed in the contract.<\/p>\n<p>Although it seems very complex, the truth is that a smart contract is a legal contract very similar to the traditional contract that we usually make on paper.<\/p>\n<p>Both options involve two or more parties agreeing to certain\u00a0<strong>conditions<\/strong>\u00a0in exchange for a\u00a0<strong>product or service<\/strong>. Both contracts have the\u00a0<strong>consent<\/strong>\u00a0of both parties and a lawful and real\u00a0<strong>cause<\/strong>. However, they differ in the way they are written, in the legal implication and in the way they are performed.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"history_of_smart_contracts\"><\/span><strong>History of smart contracts<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The idea of a smart contract was first known in\u00a0<strong>1994<\/strong>\u00a0thanks to\u00a0<strong>Nick Szabo<\/strong>\u00a0who referred to contracts as \u201ca computer process capable of executing the clauses of a contract\u201d. His main goal was to bring\u00a0<strong>business practices<\/strong>\u00a0related to protocol designs to\u00a0<strong>web<\/strong>\u00a0commerce with strangers. However, due to the technological limitations of the time, he was unable to implement his idea.<\/p>\n<p>Smart contracts needed a form of online payment that worked like<strong>\u00a0FIAT money<\/strong>\u00a0and finally, in 2009, the\u00a0<strong>Bitcoin<\/strong>\u00a0blockchain emerged. This cryptocurrency was only intended to function as a payment method, but its technology, the blockchain, was of vital importance for smarts contracts.<\/p>\n<p>Finally, in\u00a0<strong>2014<\/strong>\u00a0with the appearance of<strong>\u00a0Ethereum<\/strong>\u00a0smart contracts arrived in the technological world. Currently smart contracts are used daily on two major platforms: Ethereum and Codious, developed by the company called Ripple Labs, developer of the Ripple platform.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"col small-12 large-12\">\n<div class=\"col-inner\">\n<div id=\"image_1203546903\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img fetchpriority=\"high\" decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/%C2%BFQu%C3%A9-es-un-contrato-inteligente-1024x701.jpg\" sizes=\"(max-width: 1020px) 100vw, 1020px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-1024x701.jpg 1024w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-300x206.jpg 300w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-768x526.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-1536x1052.jpg 1536w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-2048x1403.jpg 2048w\" alt=\"\u00bfQu\u00e9 es un contrato inteligente Bitnovo\" width=\"1020\" height=\"698\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-1024x701.jpg 1024w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-300x206.jpg 300w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-768x526.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-1536x1052.jpg 1536w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-2048x1403.jpg 2048w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente-1024x701.jpg\" data-sizes=\"(max-width: 1020px) 100vw, 1020px\" \/><\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"how_does_a_smart_contract_work\"><\/span><strong>How does a smart contract work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As we already know, smart contracts work through the\u00a0<strong>blockchain.<\/strong>\u00a0When creating smart contracts, one of the issues was that software could\u00a0<strong>assure<\/strong>\u00a0two parties to an agreement that it would be fulfilled without changes to the agreement. This issue was solved thanks to the blockchain.<\/p>\n<ul>\n<li>The\u00a0<strong>blockchain<\/strong>\u00a0is not manipulable and is\u00a0<strong>encrypted<\/strong>. It is not managed by a single computer but by hundreds of thousands and anything can be recorded on it including an agreement, so\u00a0<strong>computer manipulation<\/strong>\u00a0is not an option.<\/li>\n<\/ul>\n<ul>\n<li>Another issue was the\u00a0<strong>handling of assets<\/strong>\u00a0online. How to move money from a physical deal to online? Well, thanks to the blockchain, another problem disappears with the creation of\u00a0<strong>cryptocurrencies<\/strong>. Now we have the security that the contract is fulfilled and in addition, a\u00a0<strong>monetary system<\/strong>\u00a0that works as a\u00a0<strong>digital asset<\/strong>\u00a0with which to make online payments.<\/li>\n<\/ul>\n<ul>\n<li>How can we connect smart contracts with the actual assets included in the contracts? Another question why Nick Szabo could not implement his idea. However, today that problem does not exist either thanks to\u00a0<strong>the Internet of Things or IoT.<\/strong><\/li>\n<\/ul>\n<p>This refers to, for example, connecting\u00a0<strong>real assets<\/strong>\u00a0to the Internet without that asset being a computer. We are referring to all those electronic devices that today we can connect to the Internet and control digitally.<\/p>\n<p>Now that the contract is possible, let\u2019s move on to how it works. Smart contracts are stored in an\u00a0<strong>encrypted and invariable database<\/strong>, the blockchain, thus making the smart contract one of the most secure technologies. This same technology allows the<strong>\u00a0transparent circulation<\/strong>\u00a0of assets, ensuring the traceability of each movement.<\/p>\n<p>I will explain it through an example. Party A assigns a car to party B. The condition is that if party B makes a transfer of \u20ac15,000 to A within one month after signing the contract, automatically and without the need for intermediaries or high costs the smart contract registers the ownership of the car for B in the blockchain, which will be\u00a0<strong>irrevocable<\/strong>. Once the money is deposited in A\u2019s account, the ownership of the car will\u00a0<strong>automatically<\/strong>\u00a0become B\u2019s property.<\/p>\n<p>In conclusion, a smart contract works as follows. Two or more parties agree on the<strong>\u00a0terms of a contract<\/strong>. This contract is stored in the\u00a0<strong>blockchain<\/strong>\u00a0until the agreed actions are carried out and finally the results of the fulfillment by both parties are carried out.<\/p>\n<\/div>\n<\/div>\n<\/section>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div id=\"image_2140099522\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/%C2%BFQu%C3%A9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-1024x701.jpg\" sizes=\"(max-width: 1020px) 100vw, 1020px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-1024x701.jpg 1024w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-300x206.jpg 300w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-768x526.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-1536x1052.jpg 1536w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-2048x1403.jpg 2048w\" alt=\"\u00bfQu\u00e9 es un contrato inteligente Bitnovo\" width=\"1020\" height=\"698\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-1024x701.jpg 1024w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-300x206.jpg 300w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-768x526.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-1536x1052.jpg 1536w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-2048x1403.jpg 2048w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/02\/\u00bfQu\u00e9-es-un-contrato-inteligente2_Mesa-de-trabajo-1-1024x701.jpg\" data-sizes=\"(max-width: 1020px) 100vw, 1020px\" \/><\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"smarts_contract_applications\"><\/span><strong>Smarts Contract Applications<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Smart contracts can be taken to different levels of applications, not just to a car sale or a bet. They are now\u00a0<strong>indispensable<\/strong>\u00a0in many areas of the economy. Below we will look at some of the many applications of a smart contract.<\/p>\n<ul>\n<li>They are a key point in\u00a0<strong>payment automation<\/strong>. Through them we can ensure that the agreed amount of money reaches the other party to the contract. This payment can be automated or even scheduled for the future. In this area we also find\u00a0<strong>money lending.<\/strong><\/li>\n<\/ul>\n<ul>\n<li>Another application of contracts is in the framework of\u00a0<strong>registrations and changes of ownership<\/strong>. This is possible by registering the necessary documents on the blockchain and then entering them into the contract. Many banks are currently making use of this technology in their real estate management.<\/li>\n<\/ul>\n<ul>\n<li>Industry is not lagging behind in the use of this technology. Power plants,\u00a0<strong>energy sources and fuel sources<\/strong>\u00a0are bringing their assets into the digital ecosystem. Power and fuel sources are connected by contract to organizations or individuals who pay for the service.<\/li>\n<\/ul>\n<ul>\n<li>We find an infinity of services facilitated by smart contracts such as the\u00a0<strong>bets<\/strong>\u00a0we have already seen, life, home or car\u00a0<strong>insurance<\/strong>, we can even program\u00a0<strong>votes<\/strong>. Every day technology takes a step forward and smart contracts are becoming more and more essential.<\/li>\n<\/ul>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"example_of_a_smart_contract\"><\/span><strong>Example of a smart contract<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Let\u2019s imagine that we want to make a bet using a smart contract. We want to bet 0.003 BTC that\u00a0<strong>horse A<\/strong>\u00a0will win the race. Our friend also wants to place a bet, of the same amount on\u00a0<strong>horse B<\/strong>. Both amounts of money are deposited in the contract. The contract will make sure, after the race is over, that the winner will keep the sum.<\/p>\n<p>Here we find another question: How does the intelligent contract know which horse has won the race? This contract involves the\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-a-blockchain-oracle\/\">Oracle<\/a>. This computer tool\u00a0<strong>checks the external information<\/strong>\u00a0related to the contract in order to validate it.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span>You may have heard of a smart contract. Its clearest definition is that of a computer program that functions as a\u00a0contract\u00a0with the ability to be fulfilled automatically once the parties involved have complied with the terms agreed upon and signed in the contract. Although it seems very complex, the truth is that a smart contract [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":8264,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[185],"tags":[],"class_list":["post-9692","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain-en"],"_links":{"self":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/9692","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/comments?post=9692"}],"version-history":[{"count":2,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/9692\/revisions"}],"predecessor-version":[{"id":24722,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/9692\/revisions\/24722"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media\/8264"}],"wp:attachment":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media?parent=9692"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/categories?post=9692"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/tags?post=9692"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}