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How does the smart contract work?

Interested in knowing how CrypScrow issues escrow smart contracts? A number of exchange platforms have found large success using smart contracts. This post will show you what smart contracts are and how they work in an understandable way. Misconceptions are that blockchain can’t run smart contracts. Let’s use the Ethereum blockchain to explain.

Smart contracts, although it uses an open-source, don’t allow your funds to be twiddled by.


Why do people need contracts in the first place? Simply, they don’t trust people even with those they don’t have a purported agreement with. If you don’t trust the realtor down the street to sell your house without an agreement, would you trust a person you’ve never seen with the sale of funds online? Smart contracts solve that problem.

Smart contracts aim to provide an element of trust. Smart contracts are not stacks of paper filled with legal languages hard to understand. Unlike legal bonds that takes an army of lawyers to know what it says, smart contracts are digital versions of agreements.

Trade on CrypScrow will hold in this format:

  1. The buyer and seller confirm and agree on the terms of trade.
  2. The seller places the cryptocurrency into the smart contract. This serves a proof of funds.
  3. The buyer makes direct payments to the seller.
  4. There are, however, two outcomes:
    1. The seller confirms the payment and trade is completed, or;
    2. A party raises a dispute and brings in a third-party mediator. The party provides them with the keys to decode the messages and help the parties reach a consensus.

The smart contract introduces trust in the exchange between parties, as well as a third-party administrator to help parties reach an agreement when disputes arise. For now, the trusted mediator will be CrypScrow but in the future, the mediator-role will be switched to a well-respected arbitrator. A powerful use case for smart contracts is decentralized escrow-where contracts act as a third party to enable transfers between parties.

 Escrows are not directly linked to trades on CrypScrow. At the start of a trade, no escrow exists until the trade is funded in a transaction. To keep contracts clean, CrypScrow sends out an invitation. The invitation will contain a signature of the trade`s properties which includes:

1. The buyer`s address

2. The seller`s address

3. The size of the trade

4. CrypScrow percentage

5. The payment window in seconds

It`s important for the buyer and the seller to reach an agreement before the escrow is funded. Even if you end up canceling a transaction, you’d be charged a fee. To avoid losing money unnecessarily, sellers should ensure that buyers agree to their T&C.

Imagine this scenario, Alice wants to sell cryptocurrency and Brady is looking to buy the same amount of cryptocurrency. Alice places the cryptocurrency on CrypScrow, Brady sees it, bids for it. He sends the payment with his delivery address and Alice makes a good delivery. 

However, in this case of Alice and Brady, there is no protection for Brady to ensure that Alice actually delivers cryptocurrency. For protection, the smart contract act as an escrow account holding the cryptocurrency as a third party until either of these happen – Alice delivers the cryptocurrency or the limit order runs out.

The contract will hold the cryptocurrency until it receives a transaction. It then sends a correct random number which points the cryptocurrency to Alice. If the contract does not receive the random number within the transaction time, the contract is voided and the ether is returned to Brady.

Compared to real-world courier firms who deliver packages, Alice may order the firm to deliver the material only if Brady provides a secret code (we call the code HASH). Once the key is provided by Brady, the package is released.

Now, let`s get a little technical.

CrypScrow might be many people gateways to several digital currencies exchange, hence might find it complicated. With interaction with the blockchain for gas is not free, consumers without funds can`t interact with smart contracts.

With consumers in mind, our platform is designed to make interaction with smart contract-free. 

Here’s a quick example of the code bare-bones of a smart contract:

contract Escrow {

address buyer;

address seller;

address agent;

function Escrow(address _agent, address _seller) {// In this simple example, the person sending money is the buyer and sets up the initial contract

buyer = msg.sender;

agent = _agent;

seller = _seller;}

function release () {if (msg.sender == agent) suicide(seller); // Send all funds to seller, else throw;}

function cancel () {if (msg.sender == agent) suicide(buyer); // Cancel escrow and return all funds to buyer, else throw;}}

The above is an example of the Escrow smart contract written by Chriseth.

The above-written contract are lines of codes written on computer programs. The above programming contains IFs, WHENs, and THENs;

IF/WHEN you send me the item X, THEN the funds will be yours

IF/WHEN you transfer the money in full, THEN the item X be yours

IF/WHEN I finish the job, THEN the funds will be mine.

Ethereum CTO, Gavin Wood says “the potential for [smart contracts] to alter aspects of society is of significant magnitude. This is something that would provide a technical basis for all sorts of social changes, and I find that exciting”. This brings a new question. Who can benefit from the smart contracts?

Who can benefit from the smart contract?

  • Government
  • Management
  • Supply Chain
  • Automobile
  • Real Estate


With the secured insider vouch, rigging elections seems impossible. But, what is better than better? It’s the best. With the infinitely more secure system, votes protected in the smart contract would need to be decrypted and would require computing power that cannot be accessed. The problem of low turnout will be solved as lining up, the slow and annoying process will be bypassed. With smart contracts, thousands of voters can vote online for their choice.


The smart contracts introduce an element of trust, blocking potholes in communication based on satisfactory accuracy and transparency. Traditional business operations wait for approval from internal or external sources to sort issues out. Smart contracts prevent this, cut out the discrepancies that may lead to lawsuits and delays.

Proof of success

In 2015, the Depository Trust & Clearing Corp. (DTCC) used a blockchain ledger to process more than $1.5 quadrillion worth of securities, representing 345 million transactions.

Supply chain

Smart contracts, as stated earlier, work on the If/When-Then command. Supply chains are characterized by hampered paper-based systems due to the numerous channels required for approval. They become susceptible to lose and fraud. With smart contracts, all parties find accessible, secure platform to complete tasks and payments.

Proof of success

Barclays Corporate Bank uses smart contracts to log a change of ownership and automatically transfer payments to other financial institutions upon arrival


In a world where AI is taking prominence, imagine a future where everything is automated. Everything around us proofs, Google’s smartphones, smart glasses, and hybridized cars. Can smart contracts play a part? One way is the self-parking cars, where smart contracts play a role of “oracle” that can detect who caused a crash. Automobile insurance companies can use it to determine rates for different insured consumers. 

Real estate

You stand a better chance of making more money. Imagine you want to mortgage your apartment to someone, you’d pay a middleman: a realtor or the newspapers, to advertise it. If you finally get a buyer, you’d need to pay for the sale to be confirmed. Smart contracts cut the cost. All you do is to pay via your wallet and encrypt the content on your escrow smart contract. Who benefits? Everyone in the property game gain profit.

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