Just as the Internet has changed our lives in the past two decades, so will cryptocurrency. The rise of blockchain technology and digital tokens has given a chance to a new way of storing and transmitting value in society....
With the peer-to-peer version of PayPal or another online payment system, cryptocurrency introduces a new token economy that stands to have a lasting and broad impact on our world. Just like the Internet, there are many people who think that cryptocurrency is nothing more than a fad. However, given what we know about the future of technology and how society is responding to it, we’re inclined to believe that this isn’t just another passing fad. If you’re interested in learning more about how cryptocurrency can shape the future, read on for our analysis.
How Smart Contracts Work
A smart contract is a computer code that can execute an agreement between two parties automatically. It’s like a self-operating computer program that can execute when certain conditions are met. It’s a certain set of rules that two parties agree to and put into code, and then it executes the code automatically. Let’s say that John hires Mary to paint his house. He gives her the paint, the date that the job should be completed, and the amount of money that she will be paid. Traditionally, John would put his money in a trust account, and Mary would get paid when she finished the job. This has a lot of drawbacks. If John and Mary don’t trust each other, they’ll want to put their money in a neutral place. If they do trust each other, they’ll need a third party like a lawyer to oversee everything. Otherwise, they’ll have to get a contract drawn up and signed by both parties. The parties could get into a legal dispute and have to go to court. Any changes to the contract would also require going back to a lawyer.
What Are The Benefits of Smart Contracts?
Some of the key benefits of smart contracts include cost-savings, speed, and security. Smart contracts don’t require any third-party oversight, which means that they’re much more cost-efficient than traditional forms of contract law. They also execute much more quickly than the average court case, which can take years to resolve. Beyond cost-savings and efficiency, smart contracts are also much
more secure. There are no human actors involved in the transaction, and the code is incorruptible. This means that there’s no single point of failure within the contract itself.
Limitations of Smart Contracts
While there are many benefits to using smart contracts, there are also a few limitations that you should keep in mind. Some limitations include the fact that the contract won’t work if the Internet isn’t available. You’ll also need a programming language that can facilitate the creation of a smart contract. There are also some legal challenges that you won’t face with a traditional contract like how to prove that a contract was entered into. Additionally, if the contract is breached, you’ll need a way to enforce the contract. It’s good to be excited about the potential of smart contracts. Trillions of dollars worth of goods and services are transferred or traded every day. The ability to replace all that with smart contracts would be a game-changer. However, there would be consequences. This is because businesses often use smart contracts to automate contractual obligations where one party offers goods and services in exchange for the other party transferring money. That’s the typical scenario for the exchange of money for goods or services. But it’s not always the case. Sometimes smart contracts are used to automate the exchange of ownership.
Then you have decentralized autonomous organizations (DAOs), where the property is exchanged without the transfer of any money. In this scenario, smart contracts can help reduce the risk of fraud. And, if ownership is transferred, it can also help automate the documentation that’s required to transfer ownership.
However, smart contracts are not appropriate for all types of transactions. They’re not appropriate for highly conditional transactions such as hiring employees. They’re not appropriate for providing routine services like providing electricity. They’re not appropriate to automate trust between two or more parties.
Ethereum’s Ether and Its Role in Smart Contracts
Ether is the native cryptocurrency associated with the Ethereum blockchain. It’s the primary way that users pay for the resources required to create and run smart contracts. So, in a way, using Ethereum and using Ether is very similar. It’s important to note that Ether and Ethereum are two different things. Ether is the underlying currency that fuels the Ethereum network, whereas Ethereum is a specific blockchain that uses Ether as its primary token.
Benefits of the Ethereum Network
High liquidity - Real-world assets that are tokenized with the Ethereum network become highly liquid in the marketplace. That means,
you can sell the tokens anytime you want, just like stocks that trade on exchanges. - High demand - The main reason why investors buy stocks is to own a part of a company that owns valuable assets like patents for medical research. Therefore, the promise of high demand for real-world assets like art, real estate, collectibles, equity stakes, or commodities makes it a lucrative investment opportunity. - Low cost - Real-world assets can be tokenized with the Ethereum network at low cost because the whole investment and ownership process happens as a smart contract on the blockchain. That way, there is no need for intermediaries that come with high brokerage charges and transaction fees. - Complete Security - Ownership of real-world assets is recorded on the blockchain, which makes it highly secure and transparent. There is no risk of property theft or fraud. - Complete Transparency - All transactions of real-world assets tokenized on the Ethereum network are recorded on the blockchain, which makes them highly transparent. That way, you can trace your investment and ownership history.
Summing up
Cryptocurrency is a new and revolutionary way to store and transfer value between peers. This new token economy is powered by smart contracts that are fully automated and self-executing computer programs. Ethereum is the blockchain that powers the smart contracts behind cryptocurrency. It uses Ether as its primary token. Oracles are trusted third parties that are used to confirm that certain events have occurred. This helps to solve the problem of trust in automation. When these five areas are taken into account, it’s easy to see that cryptocurrency is here to stay. It’s a revolutionary way of storing and transferring value that relies on trustless technology and decentralization.