Understanding Cryptocurrency Forks
February 12, 2025
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Smart contracts is another term that is commonly used within the cryptocurrency community. For the layman, this term can be intimidating if they do not know the meaning of the term. However, once the meaning is explained, the term and its implications become quite easy to understand. Also, the various applications of the smart contract become quite clear, once investors have a firm grasp on the meaning of the term.
In this article, we will provide a detailed explanation of what smart contracts are, what the advantages of these contracts are as well as how they apply to the cryptocurrency world.
The concept of smart contracts can be easily understood by keeping the phrase “code is law” in mind. In the case of a regular contract, two parties come to an agreement. If certain predefined conditions are met, the parties are supposed to undertake certain actions. However, if the parties fail to fulfil their obligations, the issue is referred to the court.
Smart contracts also work in a similar manner. This is because the conditions of the contract are programmed onto the blockchain in the form of a series of if-then conditions. All the possible conditions which may result are programmed and the blockchain executes automatically either based on the time which has elapsed or based on an event that has taken place. Hence, smart contracts automatically enforce the binding conditions leaving no chance for default.
Smart contracts can be triggered based on the information on the blockchain itself. Alternatively, it could also be triggered based on the information from the external world such as the interest rates or the value of the S&P 500 index. In such cases, smart contracts will have to be provided a clear and unambiguous way to derive this external data.
Smart contracts are not been widely used in the cryptocurrency community till now. However, they have been used extensively by Ethereum which is the second-largest cryptocurrency in the world after Bitcoin. This is the reason why large-scale acceptance of smart contracts is expected to take place in some time. Also, it needs to be understood that smart contracts are no longer expensive to develop. Earlier, the services of a programmer had to be engaged in order to develop a smart contract. However, now there are templates available that allow the implementation of smart contracts at a very low cost.
The advantages offered by smart contracts are as follows:
Smart contracts are helping cryptocurrencies provide many financial services in different domains.
Some common examples have been mentioned below:
The bottom line is that the usage of smart contracts enhances the value of cryptocurrencies. This is because many financial services offered while using fiat currency are not offered while using cryptocurrency.
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