ICOs are a rage. Everyone is talking about it and people who never thought that Cryptocurrencies would ever do well have started learning and investing in them. The unprecedented success of Bitcoin is one reason that pushed Cryptocurrencies to the limelight for investors. All of a sudden ICOs became more popular than hot cakes.
But every project hasn’t been entirely successful, and people still have to be very careful when investing in an ICO. This does not seem to deter any of the investors who are continually looking for potential in new ICOs.
Here’s a few things that you should know about Ethereum, ICOs and Smart contracts and how the three work together to create a robust platform for conducting transactions using Cryptocurrencies.
What do you know about Ethereum?
Ethereum is a Cryptocurrency just like Bitcoin. It gained a lot of popularity since it was first launched and it has become one of the preferred currencies for most ICOs. The reason for this is that in addition to provide a decentralized and transparent payment system, Ethereum takes it up a notch by providing users the option to create smart contracts on the Blockchain.
This means that just like transaction details are saved on the Blockchain, smart contracts end up being saved on the Blockchain and they are available for all users to see. It also means that the contract is stored forever and the security of the Blockchain ensures that no one can tamper with it.
This concept gained traction quickly and its innovative nature made Ethereum grow substantially.
What do you mean by ICO?
ICO, short for Initial Coin Offering is a newly devised method to get mass funds from public. Just like companies used to issue Initial Public Offerings to invite the public to fund their projects and would promise a certain number of shares in return, ICOs are used by startup companies to fund their project from Cryptocurrency owners.
They may promise a certain amount of dividend, a specific number of tokens or nothing. The Useless Ethereum Sale which offered nothing at all to its owners still ended up raising 310.445 Ether which is equivalent to $126,798.
If someone likes the project, they end up contributing towards it through Cryptocurrencies like Ethereum. Every project may not end up running as successfully as you may expect, so it is important to carefully check who is running the project and what the details behind the project are before you invest in it.
Since ICOs can be difficult to understand, it is best to use the website ico token news for this. This website helps you compare the different ICOs that are going to come up in the near future and live token sales in which you can invest your money.
Users can hold discussions regarding different ICOs and also check for ICO news on this website. It is the best website to access all ICO related information in one place. The website is easy to navigate and can quickly bring up the information you may be looking for.
How does a smart contract work?
On its release, Bitcoin offered a finite version of the smart contract where it was limited to a specific set of transactions only. Transactions were validated only if any of the specified transactions took place which was basically the use of Bitcoins.
Ethereum however, is different because it allow developers to create their own smart contracts. Bitcoin has a restrictive scripting language while Ethereum replaces the same language to provide greater flexibility in terms of creating smart contracts. It supports a broader range of computational instructions which makes it possible for users to create smart contracts of a wide variety.
There are endless ways in which these smart contracts can be applied. Some of the common ways in which smart contracts are currently used are:
- Creating wallets with multiple owners where multiple signatures are required to access the funds of the wallet.
- Manage agreements between users
- Storing information related to an application like domain registration details
- Self-placing bets
- Providing utility to other contracts
While these are some of the main ways in which smart contracts can be used, one of the most popular uses of smart contracts is to raise funds through ICOs. The reason why a smart contract makes sense is because it automates accounting by logging details related to who contributed and how much money was contributed by a particular user.
It also helps in the distribution of tokens according to the Cryptocurrency contributed by the user and hence enable every contributor to transfer or sell the tokens in future.
Smart contracts remove the whole process of endless verification emails, credit cards, authorizations, etc. which improves the efficiency of the entire system. Keeping the transparency of smart contracts in mind, it is also easy for people to find out how many tokens were issued and who the participants of these tokens were.
The blockchain also ensures that the startup company or project owner does not cheat the participants by selling additional tokens or by selling the same token twice. Since these smart contracts are placed on the blockchain, no one can alter them or destroy them.
There are two important factors that play a role in the Ethereum Smart Contracts:
- Solidity, which is a turing-complete programming language
- A minimum Ether price called gas which is paid for executing every line of the code
What is Solidity?
Solidity is a Turing-complete programming language. It has been created particularly for Ethereum Smart Contracts. The meaning of Turing-Complete is that the language is capable of solving almost any computational problem and it also includes the support for functions like infinite loops.
Ethereum provides developers with a number of tutorials which help developers understand the language and create smart contracts effectively. Ethereum developers continually improve the manner in which Solidity interacts with the blockchain to help developers create more smart contracts with fewer constraints.
At this time, many smart contracts may not be implemented simply because of their complex nature not making it viable for people because of the cost of the transaction.
To help you understand Ethereum smart contracts better, let us take the example of a bet on a football game about which team would win. This will require at least two contracts. One contract will check for the data related to the game and to find out who wins. The other contract will use information from the first contract and settle the bet. Executing the entire transaction costs a fee which is determined by gas.
What is the role of gas in a smart contract?
Every line of code in a contract costs transaction fees. This fee depends on the computational power which is required for executing the codes. This is why developers aim at creating smart contracts which are simple yet they are strong enough to avoid repetitive attacks.
The price of ether paid by a user for executing a smart contract or for completing a transaction is known as Gas. Every transaction involves a minimum gas price. It is usually negligible and is used as a payment for the miners.
Gas is often referred to as the fuel that keeps the massive Ethereum engine running. With no fuel, you would not be able to conduct any Ethereum transactions. The more gas you use, the swifter your transaction is on the Ethereum network.
Are there any limitations of smart contracts?
At this time, smart contracts are still very new for the internet. Many users are unaware of it, and it may not be used as extensively through all industries. But smart contract has a lot of potential and it can soon give rise to Web 3.0. For now, here are a few limitations of smart contracts:
- The transparency of blockchain which is often seen as its biggest benefit often turns into a hindrance too since some people may not want information to be made available so openly about their transactions.
- Smart contracts are deemed relatively slow because of the gas that has to be paid for the transaction. Usually there are about 3 to 5 transactions per second in total. This may not be very effective if more people join the network. This is also one of the reasons why Ethereum’s networks often end up blocked during certain ICO sales.
- Since smart contracts once added to the blockchain cannot be deleted or changed, errors continue to live on the blockchain forever. If a person wants to correct the error then a new smart contract will have to be created and added to the blockchain which still does not delete the old smart contract.
Using Ethereum in ICOs and for smart contracts is gaining momentum and more people are beginning to invest in this Cryptocurrency. If you are new to Altcoins then you will first have to begin by registering on an exchange. Find comprehensive details regarding Cryptocurrency exchanges on crypto coin judge.
It is a website that provides clear and concise information about the exchanges along with their reviews. It will help you choose the right exchange and provide other helpful info about Altcoins and ICOs.