You must have heard the world Smart contracts very frequently in the crypto sphere but do you know the meaning of this term? Do you know the history if Smart contracts?
The term smart contract was first coined by a computer scientist and legal scholar Nick Szabo in the year 1994. He has successfully embedded a legal contract into a computer code which was termed as Smart contracts.
Originally, smart contracts were not known but with the market of cryptocurrencies and the blockchain ecosystem, smart contracts have become very popular.
How do they work?
Smart contracts convert the human-readable language like legal contracts and term and conditions known as the “wet code” into a computer-readable language known as the dry code.
The wet codes have a higher degree of malleability and can be interpreted in different ways based on human knowledge and thinking, but they are also less fair and subject to manipulations. While the dry codes are rigid and fair and not subject to any deviations. They are less flexible but also much cheaper than the wet codes.
Our life has different types of contracts in every aspect of life such as marriage contracts, employment contracts, government contracts, mortgage contracts etc. The concept of smart contracts was introduced so that many different types of clauses of a contract can be embedded in the software and hardware to reduce the transaction cost and making the practice more fair and transparent.
Properties of Good Smart Contracts
Smart contracts are made to facilitate the common existing law and help people and even computers to make contracts with each other. The smart contracts should have the following properties:
- Verifiability: You should be able to verify the actions of the other party in the contract.
- Observability: F and when you enter into a smart contract, you should be able to observe what the other party is doing and what they said they would be doing in the contract.
- Enforceability: After observing and verifying their action, you should be able to enforce consequences for breach of contract.
- Privacy: The terms and conditions of the contract should be kept private as only you and the other party should know about your contract and its terms.
Stablecoins are a new type of cryptocurrencies in the market which is pegged to the real-world assets.
The examples of real-world assets are gold, oil, commodities or fiats. This linking or pegging is done in order to keep the price of the stable coins stable as compared to the volatile price of BTC and ETH.
How does Stablecoins work?
Stablecoins also have their own blockchain or cryptographic tokens which is visible to everyone on the blockchain.
Stablecoins get their stability from their linking to real-world assets. Their linking does not mean that they are linked to a bank or a nation-state but their stability depends upon their own cryptograph. It also depends on the stringent audits to ensure that the underlying asset is present. These assets are owned by a central entity which ensures that the value and usage of the assets is maintained.
Properties of Stablecoins
The main purpose of Stablecoins is to become a digital firm of cash with stable value. In order to become stable, it has to have the properties of sound money. Some of the major requirements for a cryptocurrency to become stable are:
- Store of Value
- Unit of Account
- Easily divisible and transferable
- Used as a medium of exchange
Types of Stablecoins
There are mainly three different types of Stablecoins
- Crypto collateralized: These Stablecoins are backed up by another cryptocurrency rather than a real-world asset.
- Fiat collateralized: These Stablecoins are backed by real-world assets and these assets are owned by a central entity.
- Non-collateralized: These Stablecoins are not backed up by any asset but instead maintains its value by people expecting it to remain at a stable value. It is also known as Seigniorage coins and uses the same method where smart contracts are used to maintain the value of the coin.
What is the use and importance of Stablecoins?
The main use of Stablecoins is to use it as a medium of exchange whose value remains stable and not fluctuating like other cryptocurrencies like Bitcoins, Ethereum etc.
It should be stable like other currencies such as US dollars, GBP etc. Stablecoins fulfill the store of value concept.
While ICOs are an ethical way of ‘crowdfunding’, the process is not without potential hiccups if you fail to do due diligence on the offering company, its backers and advisors. There are apparent signs that a seasoned trader can sense to evaluate whether an ICO is going to be profitable or not.
If you are keeping a keen watch on the crypto market and contemplating investing in an upcoming ICO, there are several factors that you need to consider to stay away from the scammers. Let’s find out 5 ominous signs that indicate a red flag – you should not proceed further.
- Unrealistic Promises
If promises sound too good to be true, then they probably are. While it’s true that the crypto market has the potential to offer fantastic ROI, it is unwise to expect unprecedented gains. Stay away from ICOs that promote unbelievable claims like “10X returns in ‘X’ months guaranteed”.
- Insufficient Information on Website/Whitepapers
A detailed whitepaper with clear roadmap highlights the viability of the ICO. If you find insufficient information on the whitepaper or the website, it is usually a sign of unprofessionalism. When someone is giving away the shallowest of details, the probability of it being a scam are higher. It should be enough to ring the warning bells that there’s a disaster waiting to happen.
- Credibility of Team Members
It is highly recommended to identify the acumen of individuals behind the project. Are there real people on the team? If yes, are the reliable and well-known? Even fake projects may use the names of reputed crypto advisors to enhance investor confidence. Make sure to do your research right as it can be the most important step in your due diligence.
- The Public Sale Lasts Too Long
When the public sale runs for a prolonged period of time, it usually means either of the two things – 1. the target cap is too high or 2. the demand is pretty low. In both the cases, it’s a clear sign of being uncompetitive/unattractive. You should better avoid such an ICO.
- Promotional Overdrive on Social Media
ICOs that has confidence in their products don’t resort to excessive hype on social media. When you see too many Facebook, Twitter and Google remarketing banners, that’s a red light. Do keep it in mind that it’s always better to err on the side of caution.