Smart Contracts in Cryptocurrencies (2021)
The fiat economy is already beginning to adapt to a new class of currency that has nowhere to go but up. And no wonder, because the crypto world is a place where everything changes in the blink of an eye. New technologies appear here almost every day, key players and trends change much faster than in any other industry.
It should be noted here that the introduction of blockchain technology has led to the development of bitcoin and other cryptocurrencies. But, digital currencies are not the only benefit of such innovation. Everyone can benefit greatly by using smart contracts.
Smart-contracts are a computer analog of regular contracts, a special program (algorithm) that performs certain actions when the parties to an agreement fulfill certain conditions, such as sending money to a seller when goods are delivered to a buyer of proper quality. Smart-contracts provide an opportunity to securely exchange cryptocurrency, money, securities, and other goods and services directly between the parties to the transaction, without intermediaries.
The concept of smart contracts emerged in 1994 when cryptographer and legal expert Nick Szabo came to the conclusion that self-executing contracts could be concluded by means of an electronic decentralized registry. However, this idea was not put into practice until 2008, thanks to the advent of blockchain technology in the bitcoin cryptocurrency.
The fact is that the blockchain concept used in cryptocurrencies involves storing information (a chain of data) about all previous transactions in each transaction, and this register is not stored on one central server, but in each active network participant, which is called a “node”. All this makes smart contracts as informative as possible (for example, you can see information about all the owners of the property since it was built) and secure against fraud (the server with the data cannot be hacked or tampered with because all active users of the system have information about the transactions and their conditions).
At the same time, the concept of smart-contracts in bitcoin could not be fully realized, because the creators of the cryptocurrency limited the programming of smart-contracts for security purposes.
Smart-contracts were actively developed only in 2013 with the emergence of the digital currency ethereum. Its founder Vitaly Buterin expanded the possibilities of creating smart contracts in the ethereum environment, creating a universal decentralized blockchain platform with the ability to program various data storage and processing systems in the Turing language. The main requirement is that the contract terms must be described as mathematical rules. Today, Side Chains and NXT systems have been added to the platforms in which smart contracts can be implemented.
Blockchain and smart contracts, despite the criticism of many detractors, have left an indelible impact on everyone. Most experts today do not hesitate to use terms like “cryptocurrency world” instead of “cryptocurrency market,” and rightly so. The fact is that blockchain technology has proven to be much more reliable and progressive than the existing banking system. After all, it essentially allows each user to have his or her own bank. And the fact that every transaction is stored in the system eliminates the possibility of artificial overvaluation (undervaluation). In addition, cryptocurrency cannot be created indefinitely – the ability to create it is always limited by the demand for it.
Due to the introduction of blockchain and smart contracts technology into the banking system and the huge investments of corporations in the future, we should expect that cryptocurrency, if not to replace, then to become a full-fledged competitor to the existing payment system. To understand what this will look like, it is enough to study the Chinese experience of implementing the WeChat payment system. In that country, cell phone payments replaced cash and bank cards in just a few years, which triggered positive changes in the country.
This implementation accelerated the growth of the economy in times of crisis, and it helped private businesses to grow more actively. Blockchain technology will eventually bring similar changes, only not within a single country, but for the whole world. Not all countries will probably support it at first, but eventually, they will have to resort to mass adoption of cryptocurrencies as well.
All this shows the smart contract development company and blockchain technology in financial markets around the world.