When you begin getting involved in cryptocurrency, there are a lot of terms that are thrown around. It is easy to become overwhelmed and be unsure where to start. Therefore, it is best to communicate with a financial advisor who can help with the process. Once you understand the basics, you will be ready to start using your digital money for more purposes than just mining. Smart contracts are one way to allow cryptocurrency to benefit your life.
What Are Smart Contracts?
Smart contracts are a way to exchange items of value without using an intermediary to assist with the process. For example, instead of going to a lawyer for specific documentation, you will pay for a legal document by entering your cryptocurrency into the ledger. For example, if you are looking to rent an apartment, you will pay for the deposit with bitcoin, and they will use the digital entry on the apartments. Every time you make a payment on the virtual contract, the digital key is sent to you for access. This is highly beneficial for short-term apartments.
How Smart Contracts Are Used
As you can see, these contracts can serve multiple functions for a variety of industries. Here are a few areas that benefit from smart contracts.
Government – Voting online has become a hot topic after COVID shut down much of the world. However, the biggest problem that people had was verifying the identity of the voters. Smart contracts would allow people to pay a small fee to submit proof of identification to vote online. It is also possible for the money to be refunded after voting or receiving a “thank you for voting” bonus reward.
Employment Management – One area that companies struggle with is waiting on approval for overtime or projects. Instead of waiting for paperwork to go back and forth, both parties can log into their smart contract to see updates on where things stand. In addition, information on hours and products used can be uploaded into the blockchain ledger. It will help to reduce discrepancies between documentation, as well as speed up the process of payouts.
Automobile Industry – The automobile industry is evolving quickly with the aid of technology. They have added smart cars that can sense when you are too close to another vehicle, people or items are behind you when you are in reverse, and some will even navigate without a driver. Now there is the addition of cryptocurrency, where people can pay their car payments virtually. These cars will have a box inside the vehicle that prohibits them from running without an access key that is only obtained through payment. This success is being seen through high-risk car dealerships, as well as car rental companies.
Pros and Cons to Smart Contracts
- Autonomy – Middleman is eliminated, and everything can be done online.
- Trust – Everything is encrypted on a shared ledger.
- Safety – Unlike standard soft wallets, encrypted logs are safe for both parties.
- Speed – Everything is automated to speed up the process.
- Accuracy – Due to automation, the individual error is reduced.
- Bugs – Unfortunately, anything that deals with programming code is prone to bugs.
- Taxes – Cryptocurrency runs with very minimal government interference, but this causes dilemmas with taxes.
- Disputes – It is harder to battle virtual contracts in court currently due to the minimal regulation of cryptocurrency.
Cryptocurrency is continuing to grow, and challenges will be managed as they present themselves. For now, Ethereum smart contracts are transitioning our current paper contracts into the virtual world. They offer us a hybrid that creates a more versatile method for companies to reach consumers.
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Last modified: June 30, 2021