Smart contracts are the backbone of Ethereum:
Ethereum relies on smart contracts as the backbone of its network, enabling it to offer more than just cash transfers (like Bitcoin). This is a simplified explanation of the reasons for reliance and how these contracts have changed the future of finance:
1- Decentralized programming:
Smart contracts are programs that execute automatically upon meeting certain conditions and are stored on the Ethereum blockchain. This allows for the creation of decentralized applications like finance platforms or voting systems without the need for an intermediary.
2- Trust and security:
The need for trust in a third party is eliminated, and the terms are written in immutable code, reducing human errors.
3- Flexibility and innovation:
Smart contracts enable the creation of complex services, such as issuing digital currencies or creating digital markets.
How have smart contracts changed the future of finance?
1- Decentralized Finance (DeFi):
- Smart contracts automatically operate lending and borrowing platforms, allowing users to earn returns.
- Decentralized trading:
Platforms like Uniswap allow direct currency exchanges between users through smart contracts.
2- Financial inclusion:
Anyone connected to the internet can use financial services without conditions or formal identity, especially in remote areas.
3- Cost reduction:
Eliminating intermediaries reduces fees. Example: International money transfers via smart contracts are cheaper and faster than traditional methods.
4- New innovations:
- Self-insurance: Contracts that automatically pay out compensation when a disaster occurs.
- Collective investments: Groups managed through smart contracts voted on by members.
Summary:
Smart contracts have transformed #ETH into a decentralized global computer, making finance more open and efficient. Despite the challenges, they are considered a qualitative leap towards a transparent and accessible financial system for all.