How does the Smart Contracts work in a blockchain

Question

I am relatively new to blockchain technology, and my only knowledge is relative to the way bitcoin blockchain works. I know it is based on mining and and transfer of value that gets scarce whenever more bitcoins get mined.

Next I got into the blockchain technology as a standalone technology away from the finance field of cryptocurrency. I found out about the usefulness of the unique tokens and how to link digital assets to these tokens.

One of the biggest adding to blockchain is the smart contacts which by my knowledge are contracts that don't require third parties as brokers.

The problem is that I still can't figure out how do these smart contracts integrate into blockchain technology. Any help? is there any concrete exemple I can read about ?

Thank you !

Answer 1

when it comes to bitcoin world, smart contracts are usually some kind of escrow service. A good reference is in the book from Andreas: "Mastering Bitcoin". Both editions can be found in the net. The second edition has chapter "7. Advanced Transactions and Scripting". It explains the use of multisig, escrow, timelocks and more.

When you say integration in blockchain technology, then in this case it is bitcoin and its scripting. One of the several use case examples from the book is this:

... The participants in the multisig scheme are Mohammed, his two partners Saeed and Zaira, and their company lawyer Abdul. The three partners make decisions based on a majority rule, so two of the three must agree. However, in the case of a problem with their keys, they want their lawyer to be able to recover the funds with one of the three partner signatures. Finally, if all partners are unavailable or incapacitated for a while, they want the lawyer to be able to manage the account directly.

I would also like to mention, that the logic behind these scripts is the secret to the lightning network. Have a good reading :-)