What is a smart contract?

03 Jun 2021

What is a smart contract?

Many people view cryptocurrencies as a potential digital alternative to the physical cash they are used to. While the storage of value is one attribute of this new asset class it misses the true potential of moving currency into the digital age. Cryptocurrencies are built on computer code that automates the logistics of transactions between two parties. This automatic execution of code opens up the possibility to include more than just transferring value from one wallet to another.

Decentralized Finance

ClinkUp was built to demystify the opaque nature of classic financial institutions. Decentralized finance (Defi) directly aims to produce a new system that allows for visibility into exactly how the currency you own acts within the global defi system. The new crypto defi economy offers you the ability to directly lend, borrow, long/short, and earn interest. You hold your money instead of trusting companies to handle it for you. You no longer need a bank account to transact money and transactions take minutes instead of days.

Some aim to reduce volatility and call themselves "stable coins". These are particularly useful in countries where the official fiat currency is facing hyperinflation and does not hold value. Stablecoins, as the name implies, are structured in a way that reduces volatility.

  • Send money around the globe in minutes
  • Access stable currencies to protect against inflation
  • Borrow funds with or without collateral
  • Lend funds directly to borrowers and earn interest automatically
  • Start crypto savings
  • Trade tokens (NFTs)
  • Buy insurance

Decentralized autonomous organizations

Want to start a company or organization but have heard horror stories of co-founders scamming their business partner? A decentralized autonomous organization (DAO) solves that fear by decentralizing the company's treasury so everyone in the group has to grant access. So how do members grant access? There is a built-in voting mechanism that is stored directly on the blockchain. This opens up the possibility to have organizations run by hundreds or thousands of individuals with no risk of fraud. The structure of a dao is defined in the initial smart contract added to the blockchain and cannot be changed without a vote by the members. Financial decisions must also be voted on to go through.

Memberships in a dao can be viewed like owning stock in a publicly-traded company. Token-based daos require members to provide liquidity or proof of work into the coin to obtain voting rights. This type of organization is usually used to manage large-scale coins. Share-based memberships, on the other hand, are more "human-centric" and focus on charities, worker collectives, and investment clubs. These require a proposal to enter with what value the individual can contribute to the organization.

Non-fungible tokens

Non-fungible tokens or NTFs might seem like a strange concept at first but with the internet being more integrated into our daily lives NFTs could be the future of proof of ownership. You might have heard of the Nyan Cat gif selling for 300 ETH (about $590,000 at the time) but why would anyone want to buy a digital image file that can easily be found anywhere on the internet? Well, non-fungible means that these items are not interchangeable, and their ownership is backed up by the Ethereum blockchain. While you are used to being able to copy and paste a .webp image file with both being indistinguishable, NFTs are unique. As social media, virtual reality, and augmented reality become more a part of our lives having a way to prove ownership of digital assets is becoming more of a necessity. Music streaming services take the majority of your favorite artist's music because these services distribution network is hard to replicate. With an NFT, an independent artist can maintain ownership of their work and compete with the giant media corporations.

  • Digital artwork. Not just memes
  • A unique dress design in a limited-run fashion line
  • A unique skin for in-game characters
  • Prove that your college essay has not been plagiarized
  • Digital collectibles
  • Website domain names (.crypto, .eth)
  • Coupons
  • Concert tickets
  • Your sweet drum and bass tracks

To get started with NFTs you will first need a wallet that supports the blockchain you plan to mint your NFT on. Next, you will need to find an NFT marketplace and create an account (some are listed below). Upload your file and fill in the necessary fields such as title and description. There might also be options to define the scarcity and uniqueness of your new NFT. After creating your NFT you will see a new collectible in your wallet! Now you can add this unique asset to the marketplace.

Some NFT marketplaces: