Understanding and Utilizing Smart Contracts
One of the most significant growth sectors in blockchain over the last two years has been decentralized finance. This growth has shown investors different options besides getting sub-par returns from traditional finance and allowing your money to work for you through lending. The usual outcome of these scenarios is with greater reward comes more risk, but the value in this particular situation comes from lack of participants as the barrier of entry is high due to technical know-how.
We have covered aspects of these smart contracts by discussing how you can lend your digital currencies with Compound and other platforms, but understanding these contracts at a fundamental level is essential for proper utilization and can help protect you from possible loss of funds.
What is it?
A smart contract is an agreement between two people in the form of computer code. The code is stored on a public blockchain and cannot be changed. The transactions contained within the smart contract are processed by the blockchain, which means they can be sent automatically without a trusted third party.
These contracts can operate within its’ given parameters, but one issue we have seen is poorly written code resulting in loss of funds or easily exploited by financially motivated attackers. The lack of third-party trust relies on the executable code being flawless, which usually takes multiple iterations to reach. The newer the project is more likely for coding errors, but these errors are tested and updated over time.
With traditional databases, upgrading is as easy as deploying the new code, but with blockchain ledgers, an upgraded smart contract requires complete redeployment. The immutability makes smart contracts more like hardware development instead of software as it cannot be changed in the event of found exploits and instead must be taken down or frozen. Unfortunately, this has happened before, causing losses of millions of dollars, such as the DAO hack we discussed last week.
Staying Safe
Thoroughly reviewing new projects or looking for professionally audited contracts to interact with can help protect you from what is referred to in the crypto ecosystem as a rug pull.
A rug pull consists of developers creating a contract to exploit users or abscond with funds. While this problem is severe and is frequently happening in the unregulated space, Contracts are visible to everyone. This takes expertise to audit currently, but over time these barriers become easier to navigate and allow for more ready adoption.
Finding projects earlier, without audited code, can sometimes produce exponential gains and pose the risk of disaster. Projects like YAM finance were able to accrue 500 million in assets within days of launch with unaudited code, leading to a 750 thousand dollar loss of funds.
Platforms need months to execute real-world transactions outside of the test-net environment before I would consider investing.
Future of Smart Contracts
This subject is gaining more traction in the current US law system as of late due to the massive growth over the last year. While we have not seen any traditional courtrooms pass judgment on smart contracts, OpenLaw founder Aaron Wright believes past contract law will uphold the current iterations of smart contract functions. One platform looking to upgrade smart contract deployment is Tezos. The consensus and governance system on Tezos allows for upgrades to deploy after consensus is reached, permitting faster upgrades to the codebase. As with everything in blockchain development, the landscape will change dramatically within a few years, and these early iterations will lay the foundation for finance.
The past week showed us that even with continued growth, volatility is still a problem. On the fundamental side, companies continue to slowly begin exploring digital assets.
Ampleforth Is Giving Governance Tokens to Every Wallet That Ever Held AMPL
Rebasing cryptocurrency protocol Ampleforth is launching a governance token that all past and present users of its price-elastic AMPL token are able to claim.
Project leads told CoinDesk any wallet that has ever “touched” AMPL – 75,743 wallets at press time – will be eligible to collect its portion of the new FORTH tokens through the next year. Active participants in the protocol should expect a higher share, they said. Read more.
Nearly Two-Thirds of US Adults are 'Crypto Curious': Survey
Roughly 63% of adults in the US are “crypto curious,” while over half of those interested in cryptocurrency are women, according to a survey by crypto exchange Gemini shared with Decrypt
According to the survey of 3,000 US adults, the “average” crypto investor who already has some digital assets is currently a 38-year-old male with an annual income of roughly $111,000. However, the findings suggested that the profile of the typical crypto investor is poised for rapid change. Read more.
Uniswap Hits Record $10 Billion in Weekly Trading Volume
Despite the high transaction fees on the Ethereumblockchain, people continue to flock to the network’s DeFiplatforms.
For evidence, look no further than Uniswap.
The decentralized exchange has recorded more than $10 billion in weekly transaction volume for the first time, according to statistics from Uniswap Analytics. The $10.17 billion haul is a 26% increase over the previous seven days. Read more.
IBM Is Turning Patents Into NFTs
IPwe, a platform for the world’s IP ecosystem, today announced that it plans to begin representing corporate patents as non-fungible tokens (NFTs), in collaboration with major computer company IBM.
The tokenization of intellectual property will, per the announcement, help position patents to be easily sold, traded, commercialized or otherwise monetized. In other words, turning patents into NFTs makes it easier to have those patents reach the market. Read more.
That’s all for the free weekly Crypto Crier. If you enjoyed this article please like and share. If you have any questions, please leave a comment and I can answer your questions further. As with all of my writing, this is not financial advice and is my opinion. I cannot stress enough how important it is to do your own research on all financial endeavors. I hope that these newsletters can help investors realize the current financial systems’ downfalls and usher in a more equitable system without middlemen.
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