The future of cryptocurrencies and smart contracts shines brightly, with many excited about the transformative potential behind Bitcoin, Ethereum, and subsequent contract technologies. To understand why businesses and individuals are increasingly interested in smart contracts and their connection with cryptocurrencies, it's important to delve into their underlying mechanics and potential impact.
The backbone of smart contracts is blockchain technology, which enables the creation and implementation of these contracts. Through this technology, data records (contract clauses, for instance) are compiled into separate blocks, encrypted, and stored in a chain linked with a meticulously computed check digit per block. This decentralized blockchain can be stored across various servers and computers, with each copy containing identical information.
This might sound intricate to those new to the concept, but comparing smart contracts to traditional contract systems can make the functionality more comprehensible. Traditional contracts often require third-party involvement, like lawyers or arbitration bodies, to ensure enforcement. However, blockchain technology facilitates the enforcement and execution of contract provisions without necessitating a third party – a truly revolutionary shift. Smart contracts can't be altered post-creation, and only come into effect if predetermined conditions are satisfied.
Smart contracts offer a multitude of benefits, including substantial cost reduction and enhanced efficiency. For example, in cargo shipping, the costs of accounting and manually recording orders often exceed the value of the cargo itself by 50%. Another promising application is in the music industry, where artists could ensure fair revenue distribution directly, thereby eliminating the risk of being exploited by record labels or managers.
Ideally, the blockchain employed for documenting a smart contract would also incorporate an existing or new cryptocurrency, as seen with Ethereum, the second-largest network following Bitcoin. This integration allows the use of a particular currency to fulfill the contract, potentially fostering a large community within a business field. This new way of conducting business aligns perfectly with what most people have been seeking: simplicity, efficiency, trustworthiness, social equality, and fairness. Given the substantial benefits, it would take a significant shift for this technology not to gain traction.
