# 5. Contracts, state & operations

RGB contracts are bearer agreements which are being maintained independently of each other.

Each user has a partial view on the contract state.

Contract state forms: owned and global

Types of contract state. Data type system. Formal verifiability.

Definition of a contract. Interfaces, Schemata, Genesis.

State transitions.

State extensions (“decentralized genesis”). The way they work.

*RGB smart contract* defines *state*, *owners* of that state, and *operations*, which participants of the contract (owners and sometimes more broad public) can execute to update the state.

*Operations* include *genesis* operation (*issuance of the contract*), *state transitions* updating the existing state (or adding to the state data) and *state extension*, which represent a mechanism how anybody (public) can participate in the contract operations.

*State* of the contract consists of *state atoms* of different *data types*. *Data types* are defined in the same terms as variable types in any structural language (C, Rust, Haskell, etc).

RGB contract always have a well-defined parties of the contract, which hold *ownership rights* over *atoms of state*. The state owned by a contract party is called *owned state*.

Let's start with writing a simple contract managing decentralized identity backed by a PGP key. The "smartness" of the contract (comparing to normal PGP/GPG and Web of Trust) comes from the fact that when a revocation operation is executed, everybody in the world will know about it (since they can see that the UTXO, associated with the key -- the owned state -- was spent), and it can be proven whether at any given moment of time the identity was valid -- or it was already revoked.

5.5. Availability of the global state


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