Smart contracts and Ethereum

The second most sought after cryptocurrency in the digital market is Ethereum. Investors and crypto enthusiasts are showing a lot of interest in it. It is relatively new to the cryptocurrency world and has already marked its presence in the crypto world. Although Ethereum is largely understood by tech-savvy people less tech-savvy people can also access it.

Bitcoin was launched much before Ethereum, so it is nothing new for a trader who has already traded with Bitcoin. Like Bitcoin, Ethereum is also decentralized i.e., it is not governed by any financial institution but its security cannot be questioned as it ensures safe and secure transaction, as blockchain is the backbone of both the technology.

Blockchain verifies and records all the digital transaction; it works as a digital ledger.  The network of computers known as nodes keeps the record of all the blockchain. When a new block is added to the blockchain it gets validated immediately. Although Bitcoin and Ethereum both use blockchain technology there is a substantial difference between the two.

For Bitcoin, blockchain tracks the transaction owner but for Ethereum it runs the programming code for an application. On Ethereum network blockchain is largely used to pay transaction and Service fees by the application developers.

Ethereum enables application developers to create smart contracts, smart contracts helps in executing certain tasks under certain circumstances, as directed by its creator.  For example, it can be used to pay ether on certain date depending on certain situations.

But Ethereum is not the first cryptocurrency to use smart contracts, Bitcoin is the pioneer to it. Bitcoin also uses smart contracts for the transaction when certain criteria are met. But Ethereum has outrun Bitcoin in this as it gives its application developer to write their own smart contract program.

Areas of smart contracts are:

  • It allows the transaction to happen only when a certain percentage of people agree to do that.
  • It helps to manage agreements between two parties.
  • It works as a library for its application developer.
  • It also stores domain information or membership records.

To work efficiently smart contracts needs support from other smarts contracts, one contract will work on the outside data and the other contract will work according to the information received from the first contract. For working on each contract transaction fees are required which is paid in the ether. check this out to know more about smart contracts.