Smart Contract Coins

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25 Jan 2024

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Smart Contract Coins

Although the world of crypto money started with the publication of the Bitcoin (BTC) whitepaper in 2008, the blockchain revolution has moved to another dimension with smart contracts. In fact, the history of smart contracts goes way back to the emergence of Bitcoin, but it has become viable and interesting, especially thanks to the Ethereum (ETH) blockchain.

What is a Smart Contract?

A smart contract is a type of self-executing digital contract. In smart contracts, the terms of the contract between the buyer and the seller are written directly into the lines of code. These codes, i.e. the terms of the contract, are kept in a distributed and decentralized blockchain network. Smart contract transactions, like all blockchain transactions, are irreversible and traceable. The execution of the contract is controlled by the code that determines the content of the smart contract.

In short, a smart contract is a contract technology that enables transactions and agreements between different and anonymous parties to be completed in a reliable, decentralized and unmediated manner.

What Does a Smart Contract Do?

A smart contract, in its simplest definition, is a kind of algorithmically self-fulfilling contract. The self-actualization of smart contracts eliminates the need for trust in agreements between two parties. Because a smart contract consists of an algorithm that ensures that the service or money is not transferred to the other party before the terms of the agreement are fulfilled. Thus, there is no need for intermediaries in the agreements between the two parties. In this respect, we can say that smart contract technology functions as a notary public.

With this feature, smart contract technology has played an important role in the crypto money industry, which aims to be decentralized. For example, smart contracts are used for the initial token offering (ITO). In particular, most of the tokens in the ERC-20 standard are released with ITO, and thanks to smart contracts, a reliable money exchange can take place in these sales events. Thanks to smart contracts, decentralized applications and decentralized exchanges can also perform payment transactions securely. In this way, smart contract technology is also at the center of the concept of decentralized finance (DeFi).

That is, smart contract technology makes token sales and service exchanges in the cryptocurrency industry decentralized and secure.

How Do Smart Contracts Work?

Smart contracts are written by coding in various programming languages. Solidity, Web Assembly, and Michelson are popular among these scripting languages. These codes are recorded on the blockchain while determining the content of the contract and how it will be completed. Thus, smart contracts can be reviewed by anyone.

Every node in the network stores a copy of smart contracts and their current state, just like any blockchain transaction. The code of the contract is also executed by all nodes in the network. The involvement of all nodes in the network ensures that this code runs in a secure and decentralized manner.

History of Smart Contracts

Although smart contract technology has become synonymous with blockchain technology, it actually emerged long before blockchains. The idea of smart contracts was first mentioned in 1994 by US computer scientist Nick Szabo. Szabo defined smart contracts as “a set of commitments in digital form, including protocols that enable parties to keep promises.” In 1998, four years after Szabo came up with the smart contract idea, he would develop a virtual currency called BitGold, which also inspired Bitcoin.

However, it was the Ethereum (ETH) blockchain that made the concept of smart contracts viable. Ethereum was founded in 2014 by Vitalik Buterin in response to the need for a blockchain that supports smart contracts.

Smart Contract Coins

Cryptocurrencies of smart contracts or blockchains that support smart contracts are referred to as smart contract coins or smart contract coins. Ethereum (ETH), Binance Coin (BNB), Algorand (ALGO), and Polygon (MATIC) are prominent smart contract coins.