x smart contracts in cryptocurrency | uniblok

An Introduction to Smart Contracts in Cryptocurrency

Posted by: kshitij lunthi | 22 Jul 2022

A growing industry like cryptography is constantly evolving, improving, and adapting to ensure long-term sustainability and long-term functionality. Sometimes it’s necessary to go back to basics and ensure you have a solid understanding of the pieces of technology that really underpin the way that we operate. Smart contracts are one of these technologies. Cryptocurrency transactions can be seen as more secure and safe using smart contracts; it’s how these contracts work that gives crypto such a huge advantage over traditional currencies from a security and safety perspective.

Here we’ll take you through the basics of smart contracts, explaining their purpose, why they’re so essential, and some of the applications we’re seeing today. We’re confident you’ll feel more comfortable with crypto adoption after understanding this information, opening up new possibilities for your future. Find out more below, or contact us today to learn how our solutions can help you maximize your digital asset investments.

What is the term smart contract refers to

A smart contract is, at its core, a contract that outlines the terms of a deal. Smart contracts add additional layers of security and verification to agreements using sophisticated code, often to a greater extent than physical contracts involving fiat money can.

Purpose of smart contracts

Smart Contracts are based on blockchain technology, which can be used to record ownership and transactions in an automated, reliable manner, and is used by most cryptocurrencies to accomplish this. As the blockchain is decentralized, it will not be controlled by one central authority; rather, it is distributed across many devices around the world. Therefore, rewriting the script won’t be possible by changing one ‘node’. A token’s ownership must change at every node in the blockchain for the change to take effect. Trading, transacting, and working in a safer digital environment should result in a reduction in instances of fraud and theft.

Benefit to know about smart contracts

By learning about smart contracts now, you can start utilizing them right away, rather than waiting and falling behind. By understanding smart contracts and utilizing them to improve protocols and enhance processes, you will be able to feel like you are one step ahead of your competitors. Smart contracts offer the most benefit to businesses and individuals operating in the cryptocurrency industry in terms of automation without compromising security, which is a further benefit of their adoption in many cases.

Application of smart contracts in different Industries

A variety of industries could benefit from smart contracts over the coming years, as shown below :

Insurance Industry :

The insurance industry is one of the most obvious use cases for smart contracts, so this is likely to happen sooner rather than later. A smart contract could be entered into when a user enters into a policy agreement with an insurer. If the user agrees to the terms of the contract, they can sign it. All policy requirements are outlined and agreed to within this contract.

Smart contracts remain open until the user needs them — when that happens, they simply upload the required forms for payment and the funds are released immediately. Smart contracts simplify and expedite insurance claims by removing the need for communication between parties.

Real Estate Industry :

In the past, buying a house has always been a tedious and time-consuming process filled with back and forth. In most cases, this is due to the confusing nature of the protocols that must be passed during a sale — they are usually handled by a broker, adding another layer of complexity.

As a result, you may not have to pay the brokers for their services if smart contracts were involved. A house deed tokenized in a blockchain, such as Ethereum, can be held in escrow until the funds are submitted and released once verified. Due to the removal of the broker, this instance results in a cheaper selling process, and a quicker purchase process that allows buyers to move into their new home more quickly.

Decentralized Exchanges :

The DeFi exchange is a platform where traders and investors can exchange cryptocurrencies linked to smart contracts. A smart contract incentivizes users by offering interest on funds they hold. DeFi uses these funds to lend for a fee, which is shared with investors. Smart contracts govern and automate all of this so lenders and borrowers can interact seamlessly without relying on a central authority.

Thus, traders and investors can expect greater returns than in traditional finance as a result of this incredible efficiency. DeFi exchanges reward users with a share of transaction fees when they lock funds into smart contracts. Cryptocurrency locked into smart contracts on decentralized exchanges is soaring and there’s no sign of it slowing down anytime soon. Smart contracts are not regulated centrally, so users have to assess risks on an individual basis, which is easier when one understands how they work.

Get in touch with our expert team at info@uniblok.io if you’re interested in making your first moves in blockchain technology, smart contracts or cryptocurrency today or finding a new partner to help manage all your needs at one place.

Check Uniblok Out On

Instagram | Facebook | Linkedin | Twitter | Pinterest

Share On:

About Author

An Introduction to Smart Contracts in Cryptocurrency
kshitij lunthi

Digital marketing @uniblok

Contact Us