Cryptocurrencies and Smart Contracts: What Are They?

Cryptocurrencies and Smart Contracts: What Are They?

Overview

Cryptocurrencies have become a global phenomenon. According to a study conducted by the University of Cambridge, the combined market value of all cryptocurrencies was approximately $27 billion in April 2017; as of September, they are in excess of $150 billion. Bitcoin, the first decentralized currency in the world, was launched in 2009. It is the largest player in the cryptocurrency market, trading at just under $4,000 as of September 2017.

Ethereum is a virtual-currency blockchain – a public, i.e., decentralized, ledger of all cryptocurrency transactions that have ever been executed. In February 2017, corporate giants including Microsoft, Cisco, Master Card, Intel, and J.P. Morgan formed The Enterprise Ethereum Alliance, with the goal of creating a standardized version of the Ethereum software that businesses around the world could use to track data and financial contracts.

Bitcoin and Ethereum are each components of the cryptocurrency world. However, there is a major difference between them – smart contracts. Where Bitcoin functions as a decentralized currency, Ethereum was primarily designed to support smart contracts.

Smart Contracts

Traditionally, when two parties decide to enter into a contract, a document is drafted by lawyers that outlines all mutually agreed-upon terms and conditions. Once both parties sign this document, it becomes legally enforceable.

In contrast, a smart contract is not written – it is programmed. All of the rules and regulations pertaining to the contract are programmed, meaning that the software will execute each and every action that is specified in the contract. This eliminates the possibility of miscommunication or misinterpretation. Furthermore, because this code is written on top of the blockchain mechanism, it means that for execution purposes, the code of the contract is decentralized and immutable.

Consequently, smart contracts are an exceedingly secure method of ensuring that all terms and conditions of a contract are fulfilled. As computer codes, they provide a transparent method of exchanging money, shares, property, or anything of value, leaving no room for conflict, deceit, or a middleman. Furthermore, smart contracts eliminate the need for any escrow service.

Future Outlook

Where Bitcoin exhibits the successful implementation of blockchain in terms of a decentralized currency, Ethereum, with smart contracts, takes it to the next level. Smart contracts are the primary reason for the success of Ethereum. When The Enterprise Ethereum Alliance is factored in, it’s clear that there is tremendous opportunity for growth.

Strategic Coin is your go-to source for crypto market research insight and education. Whether you need help understanding the basics of blockchain technology or desire to read an in-depth analysis of the latest ICO or token launch, Strategic Coin will provide you with the information you need to take advantage of market opportunities within the crypto space.