Crypto 101: Ethereum and Smart Contracts: The Future of Finance

Ethereum: Beyond Digital Currency

Launched in 2015 by Vitalik Buterin, Ethereum was designed to be more than just a digital currency. While Bitcoin primarily serves as a decentralized digital currency, Ethereum was built to serve as a decentralized platform for creating and executing smart contracts. Read our explanation below. And who to better explain Ethereum, then Vitalik himself. You may find his explanation at the bottom, together with our own video.

What Are Smart Contracts?
Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically execute when predefined conditions are met, without the need for intermediaries like banks, lawyers, or notaries. Here’s how they work:
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Code-Based Agreements: Smart contracts are coded agreements that contain the rules and conditions of a contract. These conditions are written in code, making them transparent and tamper-proof.

1. Decentralization: Smart contracts run on decentralized blockchain networks, like Ethereum. This means that they are not controlled by a central authority, making them resistant to censorship.
2. Automated Execution: Once the conditions specified in the contract are met, the contract automatically executes, transferring assets or performing actions as agreed upon.

Use Cases of Smart Contracts
The versatility of smart contracts extends to a wide range of industries and applications
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Code-Based Agreements: Smart contracts are coded agreements that contain the rules and conditions of a contract. These conditions are written in code, making them transparent and tamper-proof.

1. Decentralization: Smart contracts run on decentralized blockchain networks, like Ethereum. This means that they are not controlled by a central authority, making them resistant to censorship.
2. Automated Execution: Once the conditions specified in the contract are met, the contract automatically executes, transferring assets or performing actions as agreed upon.

Benefits of Smart Contracts
The adoption of smart contracts brings several benefits to industries and individuals
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• Security: Smart contracts are highly secure and tamper-proof due to their decentralized nature.
• Trust: Trust is established through code and mathematics, reducing the need for intermediaries.
• Efficiency: Automation reduces human error and speeds up processes.
• Cost Savings: Eliminating intermediaries and automating processes can significantly reduce costs.
• Transparency: All parties involved can see and verify the terms of the contract.

Challanges?
There are some challenges to Ethereum though, for example if the network is highly used, the fees for using the network, especially with trading, can be enormous. Solutions are there though, with layer 2 networks. Like Arbitrum, Optimism and Polygon. These networks work on top of (or rather below) Ethereum. They are cheaper to use, faster and can process more transaction faster.

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