Smart Contracts

What are Smart Contracts on the Blockchain? Smart contracts are self-executing agreements consisting of the conditions of an arrangement amongst peers. The smart contract performs on the Ethereum blockchain's decentralized system. The contracts help with the exchange of cash, shares, residential property, or any type of asset. Watch our smart contracts video tutorial to find out what smart contracts are on the Ethereum network and how smart contracts work to perform complex sets of rules. Learn more about DeFi Yield Farming here or go to our main website BEES.Social

How Does a Blockchain Smart Contract Work?

How do smart contract really work? We won't dig into how a program actually works, because if you remember from our previous video, a smart contract is actually a program that runs on a blockchain.

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Watch the entire video series guide about smart contracts on the blockchain here

Lawyers aren't involved in the smart contracts unless it's about a legal topic. But for the most part, a smart contract is a set of self executing rules. What are self executing rules? When something triggers the smart contract, it will execute the rules that are programmed into it, usually in the programming language, Solidity.

It might be something as simple as on the first of every month it will do something. It might be the fact that a particular token has reached a certain price, execute the set of rules to either liquidate the holdings, or go buy another holding.

If that price was below a certain threshold, it might even be to walk through a complex transaction. Something like, if you come to the table with an listed credit score of 790, and you have 45 Ethereum, in your wallet, and you have the title to your home, and if all those things are true, then provide you a loan at a rate equal to the combination of that and a formula. All those things can be found by looking on various places on the Ethereum blockchain.

You could get a loan for a mortgage for 2% 3% 4% or 7%. Based upon all that criteria, it wouldn't matter where you lived, it wouldn't matter who you were. It would only matter that all those other sets of criteria took place and the smart contract would work, execute those rules and ensure that it protected all the lenders.

I mentioned in a previous video, if your balance dropped below a certain threshold, it would liquidate the rest of your balance to make sure that the lenders were whole. That would be another smart contract operating to back it up.

So how smart contracts work is they are triggered by specific events. They execute on the blockchain, and they can enforce, manage, or run complex or very simple transactions on the blockchain to satisfy your needs. Understand that a smart contract is a program that is triggered with self executing rules written in Solidity.

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You can also watch this entire DeFi Yield Farming beginners guide video series in 3 parts

Part 1 - What is DeFi? - Decentralized Finance on the Blockchain

Part 2 - Liquidity Pools - Different Types of Liquidity Pools in Balancer, Uniswap, Compound

Part 3 - What is Yield Farming? How do Yield Farmers Make Money?

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