Smart Contracts

Smart Contracts

A smart contract is a new kind of digital contract built and administrated through the blockchain, which is a new digital immutable ledger technology. 

Unlike an old paper document, a smart contract exists in code on a blockchain-based platform. That makes the contract more versatile, and easier to use in many ways. The blockchain, for its part, helps verify the contract and its historic chain of custody, which can be important for stakeholders who are parties to the contract, or, for example, auditors.

Why put contracts on the blockchain to start with? It's partly because of the enduring nature of a smart contract. The immutable ledger of the blockchain means it’s impossible to change the smart contract in certain ways, for instance, erasing parts of its history. That leads to verifiability and security values. There’s also the promise of automation: In some cases, a contract on the blockchain makes it easier to automate parts of a process that would have once been done manually.

The Blockchain and Cryptocurrency

The blockchain was originally developed as a way to handle digital money or cryptocurrency, and later, assets like non-fungible tokens or NFTs. However, people realized you can implement contracts through blockchain models (i.e., on web3 protocols). Smart contracts are sometimes referred to as “extra-financial” or “non-financial” in terms of not being a financial transaction, per se, but instead, a verified contract.

Smart contracts need to be made on blockchains that support smart contract handling. While the original cryptocurrency, Bitcoin, doesn't accommodate smart contracts, a newer form of Bitcoin called Bitcoin SV or “Bitcoin Satoshi Vision” does work for smart contract handling. The other top cryptocurrency, Ethereum, has been widely known as the most popular smart contract blockchain.

Now, other alternative coins and tokens on their own blockchains are being used for different kinds of smart contract handling. For example, lending systems and other innovators use the chains Polkadot and Kusama, as well as side chain or “parachain” systems to alleviate problems like congestion in a network. As these systems evolve and create new kinds of functionality, it will be easier to implement the average smart contract online. It also makes these kinds of systems more familiar to a wider range of people.

What's In a Smart Contract?

Essentially, anything in a traditional contract can be put in a smart contract and implemented through the blockchain.

Some of the most popular use cases for modern smart contracts include:

  • Contracts for smart city administration
  • Financial contracts related to fintech
  • Contract made by tech-savvy parties and cryptocurrency proponents
  • Contracts related to cryptocurrency platforms or exchanges

Now that you know a little more about smart contracts, enter on Tokened for opportunities to win digital assets and NFTs, and get more knowledgeable about how NFTs and crypto assets work. Become part of the new world of crypto and “digital money,” and you’ll see how useful these types of decentralized finance systems can be in our modern world!