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POV: It’s mid-2021, and everyone is talking about NFTs, Ethereum, and how someone made more than $300,000 in under a minute. You’re standing there wondering, “but how does all this mind-blowing technology even work?” The answer lies in learning more about smart contracts.
A smart contract is similar to conditional sentences in literature; they do something when certain conditions are met. "If this happens, I’ll do that". The most common smart contracts are written on Ethereum networks using solidity. The main goal of smart contracts is to remove human error from systems.
Two main things make smart contracts beneficial and superior to traditional finance:
Smart contracts enable us to perform many things: start an insurance company, buy a house, and almost anything! Here we go through some examples of the wonders of smart contracts.
Flash loans make it possible to borrow a lot of money all at once with no money down. They run on a smart contract that pays the same amount back to the lender in the same minute. All of the funds must be paid back after a minute. You can buy a token for 0.5 cents and sell it for 0.6 cents on coinbase. Theoretically, you can borrow $10 million, spend it all on the token, and you’ll get 20 million of the said token. You then sell the tokens for 0.6 each and receive $12 million in exchange. You can then pay the $10 million loan back. Congrats - you have made $2 million in under a minute. The smart contract can check itself, and simulate what it was programmed to do, and check if it’s possible to pay back the lender after the code is run.
For example, a celebrity launches a collection of 10 NFTs and announces that whoever owns one of these NFTs can have access to their exclusive fan club, where they post unique content for the owners. This is all written on a smart contract that automatically grants access to whoever owns one of those said NFTs.
Non-Fungible Tokens are a type of digital asset with real-world utility. Anything can be an NFT - from digital paintings to a rare seaweed species! By buying an NFT, you are buying the rights to that asset. The wonders of NFT are made possible by the use of smart contracts.
It is possible to take your house and its deed on a blockchain. The house is not owned by you anymore, nor the bank. It is owned by whoever has the deed on the blockchain. In theory, you can sell or buy a house right on the blockchain without going the traditional way - spending weeks finding or advertising and all the high fees. Within a few minutes, the other person can accept your house offer on the blockchain. If they accept, they immediately own the deed, and you directly receive the payment.
It is true that smart contracts are truly amazing and someone managed to make more than $300,000 through a flash loan. However, we’re not financial advisers, and any information on Cryptologi.st is purely for educational purposes. We have provided everything you need to compare your options and choose what works best for you. We believe awareness is the key to successful investment decisions.
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