The overnight rise of cryptocurrencies has given an entirely new vocabulary to investors. Then there are a few phrases like “decentralized applications” and “smart contract development” that come up when discussing specific platforms and cryptocurrencies. And thus, today, we are talking about the use of blockchain and smart contracts.
All of these things are matters of concern for investors. It’s because software developers drive the ultimate success and effective proliferation of digital platforms. They can easily adapt to the blockchain-tokens pairings that offer various functionalities.
Further, one of the most crucial things for cryptocurrency investors to thoroughly understand is how blockchain and smart contracts work together. With that keeping in mind, here’s a beginner’s guide to smart contracts and blockchain:
Understanding Blockchain and Smart Contracts
Blockchain
A blockchain refers to a digital network, built and maintained by disseminated computers running specific pieces of software. In the matter of cryptocurrencies, blockchains bring together a digital and distributed ledger that can monitor and track monetary transactions.
Moreover, blockchain networks can utilize their tokens as a method to transfer value in transactions. Tokens developed the various cryptocurrencies on the digital landscape now. A blockchain simplifies business and trade among various parties without any intermediary. This automation is possible due to the use of smart contracts.
Suggested Post | Exploring Modular Blockchain | Moving Beyond Monolothic
Smart Contracts
A smart contract is a type of software program that adds layers of information to digital transactions on a blockchain network. Ultimately, it enables more complex transactions rather than just simply processing the exchanging of digital tokens for a service or product.
In other words, it’s what sounds like a contract. Or it is a sort of agreement between involved parties in a transaction, that hold each side accountable for their role.
Check It Out | Adoption Value of Smart Contracts for Enterprises
Use Cases
Here are some use cases where blockchain and smart contracts can work:
Crowdfunding
Firms often fail to meet expectations and plague crowdfunding systems. We’ve all heard news where fraudulent founders proceed with the plan to raise funds. Then, they abruptly dump the mission and vanish with the money.
One can consider this phenomenon as a systematic failure and inefficient. A central figure has all authority of handling the funding.
If crowdfunding sites instead use the blockchain and smart contracts, then donors may willingly put up the money and donations. A distributed account across the network will process these funds. In addition, a smart contract will enable the release of the total sum of money to the project owners they deliver.
In case, if project owners don’t deliver as mentioned in the smart contract, then the money will automatically return to donors.
It means a likewise framework might work for funding huge capital projects, like a multi-billion dollar liquefied natural gas export. Here, donors would be debt owners or shareholders, spread over a distributed network.
Also, Visit | Developing an Advanced Crowdfunding Platform with Blockchain
Receiving Paychecks
Another fine instance where we can use blockchain and smart contracts is in receiving paychecks. Traditionally, employees receive their paychecks every two weeks or the last Friday of the calendar month. An employer can utilize blockchain and smart contracts to easily pay its employees every day or even every hour.
This system can work exceptionally well for contractors in the rapidly expanding economy (such as Uber Drivers and freelancers), who have a lumpy, project-based income.
Explore | Emerging Smart Contracts Use Cases 2023
Conclusion
Investors that opt for crypto investment have to become comfortable with the pertaining jargon and comprehend the nuanced details of blockchains. Meanwhile, smart contracts promise to deliver the right value for what blockchain can do. Not all blockchains support smart contracts and are developed equally. It should be a concern of a lot of investors, and may eventually help separate the winners from the losers.
For more information, you can contact our blockchain developers.
