Smart Contracts in Crypto: Blockchain Beyond Coins

Contract is a binding agreement between two parties. In the case of cryptocurrencies, smart contracts perform functions on the blockchain.

What is contract?

Since their inception, contracts have been a huge part of human interaction. While a few centuries ago, contracts were mostly agreed upon verbally, nowadays this binding agreement often takes the form of a written or electronic document.

The main purpose of a contract is to confirm that person or company A has agreed to some form of financial relationship with person or company B.

For example, if you have a desire to purchase a new home, you will have to sign a contract with the current owner or the bank selling the home. The contract will detail the purchase price, time of title transfer, and other details. When you start a new job, you also sign a contract detailing your job duties and tasks, as well as the compensation you will receive for completing them.

In fact, contracts are a formal, binding way to record the agreement between the two parties. In the field of cryptocurrency, contracts take on a whole new meaning. When it comes to cryptocurrencies and blockchain, there are several important types of contracts.

Smart contracts are the backbone of any blockchain. With them, all transactions and operations on the blockchain can take place anonymously. Smart contracts are self-executing computer programs with terms of agreement between buyer and seller parties directly embedded in lines of code. This program, along with the agreement it contains, is distributed over a decentralized blockchain network.

Mining contracts are another important form of contract used in blockchain-based systems. Mining contracts allow users and crypto-enthusiasts to mine tokens using cloud storage. In these contracts, the necessary mining power is transferred to a cloud service, making it easier to mine without requiring physical storage.

Contracting is an integral part of the global economy. No matter what form they take, without the binding force contracts offer, agreements between parties would not be possible. Every day we interact with various forms of contracts. In essence, we sign a contract even when we accept terms and agreements for the use of a website or service.

If there were no concept of contract, cryptocurrencies and decentralized finance would not have come into existence. Blockchain can function the way it does because of this concept and its improved application from a technological perspective.

From this perspective, contracts are some of the fundamental components of all the distributed ledgers and blockchain-based applications we can currently use.