Michelson is the stack-based, strongly typed, low-level language supported by the tezos blockchain for smart contracts. We only provide a brief description of michelson here, and refer the reader to the official documentation for more details.

A michelson contract is similar to transition system. The storage of a contract is its current state; the entry point (code) of a contract is a function which takes

• some tezos tokens (of type mutez),
• the current storage of the contract, and
• a parameter of a certain type provided by the client of the contract.

It returns

• a list of operations (contract/account creation, transfers, etc.), and
• the new storage of the contract.

In practice, a contract looks as follows:

storage <type> ;
parameter <type> ;
code <instruction> ;

Note that tokens are passed implicitely: they are credited to the contract before it starts running (although the amount of the transfer can be accessed with the AMOUNT instruction). Hence the code of the contract takes two parameters, which are aggregated in a pair (parameter, storage). The same goes with the operations and the new storage returned by the contract, which are returned as a pair (operations, new_storage).

In the stack-based context of michelson, "takes <something> as argument" means "starts with a stack containing <something>". Likewise, "returns <something>" here means "leaves <something> on the stack at the end (and nothing else than <something>)".