Bitcoin News and Finance
What Are Smart Contracts? Unpacking Today’s Digital Agreements Skip to main content

What Are Smart Contracts? Unpacking Today’s Digital Agreements

What Are Smart Contracts? Unpacking Today’s Digital Agreements

In the digital currency realm, smart contracts have enhanced the financial industry through tokenization, decentralized finance (defi) and other agreements in the form of self-executing code. But how exactly do they work? What benefits do they offer? Here’s a concise overview of smart contracts and their profound effect on trust and collaboration in our interconnected society.

Smart Contract Origins

If you keep up with cryptocurrency news you’ve likely heard of “smart contracts.” Smart contracts, in their current form, are self-executing agreements housed on a blockchain.

Fundamentally, the “smart” in smart contracts stems from automation, while the “contract” denotes a binding agreement or function that runs automatically. The idea of smart contracts was first posited by American computer scientist Nick Szabo.

Ethereum’s Role & Beyond

In the early 1990s, Szabo defined smart contracts as “a set of promises, specified in digital form, including protocols within which the parties perform on these promises.” Modern smart contracts, however, didn’t emerge overnight.

But with the advent of Ethereum, the blockchain’s Turing completeness and coding capabilities quickly made it the preferred platform for smart contract protocols. Ethereum’s Turing completeness means that, in theory, any computable function can be run on Ethereum, given sufficient processing power and time.

Programming With Solidity

This capability offers vast potential for the kinds of applications and contracts that can be developed, extending well beyond mere financial transactions. Typically, these contracts are coded in Solidity, a Turing complete language tailored for smart contract development.

Solidity code is then translated into bytecode, which the Ethereum Virtual Machine (EVM) executes. Today, smart contracts facilitate a multitude of applications, including the trading of money, goods, real estate, tokenized bonds, securities and more.

The DAO Incident and Risks

Among the first smart contracts on Ethereum were a crowdfunding contract, a blockchain domain registration system, and digital assets and tokens. For instance, The DAO, a decentralized autonomous organization for venture capital, debuted in 2016.

Despite being the first DAO, it faltered due to a flaw in its smart contract. So, while smart contracts offer numerous benefits, they come with inherent risks such as software bugs, tainted oracle data, and the potential loss or theft of contract-controlling credentials.

What Are Smart Contracts? Unpacking Today’s Digital Agreements

Varied Use Cases

Comprehensive audits, formal verification, simplifying contract design, bug bounties and following best development practices can reduce these risks. Nevertheless, challenges with smart contracts persist. Yet, they have ushered in trustless peer-to-peer trading via decentralized exchanges, and streamlined lending and borrowing processes to facilitate collateral-backed loans and interest accrual.

They’ve enabled the birth of digital tokens that represent tangible assets like real estate, non-fungible tokens (NFTs), commodities, stocks, and more. Additionally, they’ve given rise to decentralized autonomous organizations (DAOs) and other automated services, including file storage, prediction markets and shared computing power.

It’s safe to say that smart contracts have and still are revolutionizing the digital currency landscape, offering automation, security, and diverse applications. As they continue to evolve, their influence on trust and collaboration in our digital society is undeniable and transformative.

What do you think about smart contracts? Share your thoughts and opinions about this subject in the comments section below.

Comments

Post a Comment

Popular posts from this blog

Custodial Lightning Network Service Attack Discovered by LN ‘Newbie’ — Hacker Strikes 6 LN Custodians

On September 18, a Redditor posted to the r/bitcoin forum and explained how he discovered a way to “attack [the] lightning Network’s custodial services.” The Reddit account dubbed “Reckless Satoshi” wanted to figure out if a “discrepancy between real routing fees and service’s transaction fee can be exploited for a profit.” The researcher disclosed that he wanted to see how large the damage could be and said “it is bad.” 6 Lightning Network Custodial Services Attacked, Researcher Discloses Findings to Offenders Prior to Public Disclosure A Redditor called Reckless Satoshi published a disclosure post on r/bitcoin this past Saturday and disclosed how he had found a vulnerability with routing fees and some of the Lightning Network’s custodial services. The research attack was done in good faith and after it was complete he disclosed the bugs to the offending services before publishing his findings. Reckless Satoshi used the Lightning Network (LN) attack on six different services incl...
Post a Comment
Read more

Axie Infinity Down 40% Since Last Week’s Price High, Protocol Revenue Outshines Competitors

Last week, the game token leveraged within the Axie Infinity gaming universe skyrocketed to all-time highs, while other crypto markets remained extremely lackluster. During the last seven days, Axie Infinity’s platform token has dropped significantly in value shedding more than 12%. Meanwhile, the game platform’s smooth love potion token has slid over 8% over the last 24 hours. Axie Infinity Down More Than 40% Since All-Time High Not too long ago, the axie infinity (AXS) token was a topical conversation because it reached an all-time high on July 15. At the time, AXS managed to capture $28.93 per unit and since then it has shed 12.8% during the last seven days. The axie infinity (AXS) token is used within the blockchain-based game that involves battles between token-based creatures called “Axies.” AXS is used for the game’s governance system as well as other actions within the game. At the time of writing axie infinity (AXS) is exchanging hands for $16.70 per coin. AXS/USD on Ju...
Post a Comment
Read more

Play-to-Earn Game From Polker (PKR) Exchange Listing – Endorsed by Akon

The Play-to-Earn NFT based Polker.Game ‘s native token $PKR has been officially listed on the popular centralized exchange BitMart. Polker.game has been in the spotlight recently as Akon, the American R&B superstar and record producer gave his official endorsement of polker stating that the “game is revolutionary” and that Polker is “hands down.. the best play to earn, NFT game in the space.”. With the BitMart listing and celebrity endorsement from Akon, Polker is perfectly positioned to become a major player in the Play-to-Earn league. Watch Akon’s Video Here What is Play-to-Earn? Although not a new concept, play-to-earn has become a trending term due to the popularity of the NFT game AXIE infinity. In the past, previous play-to-earn games have also achieved success – however, thanks to the huge amount of development in the blockchain space in recent years the gaming experience is now massively improved. Play-to-Earn games are essentially free to play and open to anyone and...
Post a Comment
Read more

China to Crack Down on Copyright Infringement Through NFTs

Authorities in China are going after creators of digital collectibles based on other people’s works of art, the use of which was not authorized. The government offensive is part of a campaign to combat online copyright infringement and piracy with the participation of several departments. Regulators in China Move to Strengthen Copyright Supervision of Online Platforms The National Copyright Administration of China (NCAC) has recently launched a campaign against copyright infringement and piracy on the internet, together with the Ministry of Industry and Information Technology, the Ministry of Public Security, and the State Internet Information Office of the People’s Republic. A major objective of the initiative is to improve copyright supervision of online businesses by investigating cases involving the sale and distribution of infringing products on short video, live broadcast and e-commerce platforms, and promptly dealing with infringing content, the agency announced in a press r...
Post a Comment
Read more
Blogarama - Blog Directory