Nowadays, there are many locks that can be opened with a card, like those used in hotels, so as long as the card is active, you can open and close the door as many times as you need.
Now imagine that you paid for a hotel with rules stating that check-in time is 11 a.m. and check-out time is 8 a.m. If you do not comply with that time, you would not be able to open the door with your card.
The rules of that contract would be executed by themselves without the need for an intermediary, so there would be an action only between the interested parties.
Another example is if someone wants to buy a house by entering into a purchase agreement for a monthly payment; the terms of the contract would be:
A specific amount of money monthly.
Payment due on the day of the month.
Total amount of the property to be cancelled.
In addition, other important rules will be followed, such as if the person does not pay on time, they will not be able to enter the property until they do so; or that once the total amount of the property has been paid, the former owner will not be able to re-enter.
The parties schedule the terms of the contract.
These terms are stored.
When the conditions are met, the system executes the contract.
The established consequences take place.
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How is a Smart Contract Made?
To better understand how to create a smart contract, we will use the example of the security deposits of any Bitcoin-enabled website. Obviously, no one likes to lose their money.
Steps to Create Smart Contracts
The steps to make a Smart Contract with this example are:
User and website share a newly created public key.
The user makes the first transaction without broadcasting it by sending a certain amount of Bitcoins to an output that requires both the user and the website to sign it.
The user sends the hash (cryptographic operation) of the first transaction made to the website.
