DIGITAL WALLETS AND SMART CONTRACTS
A QUICK OVERVIEW
What are Digital Wallets?
A digital wallet is a software application or online service that allows users to securely manage various forms of digital assets like cryptocurrencies and non fungible tokens (NFTs) stored on various blockchains.
First off, digital wallets typically provide users with a unique public address or identifier, which serves as their public key for receiving funds or assets. These are like a combination of a web address and bank account number.
You will also, most likely, get an associated private key. This private key is commonly a 12-24 random word cryptographic seed phrase that only you have access to (which you need to store in a very safe place). This key system is what makes cryptocurrencies and blockchain data exponentially hard to hack. The possible combinations of just a 12-word seed phrase is 2048^12. This is a very large number and out of the range of modern computing to brute force hack.
All your assets are not actually stored in the digital wallet, however. They are logged on the corresponding blockchain network. The digital wallet just acts as the communication software which shows assets associated with the public key and authorizes changes of ownership via the private key.
What are Smart Contracts?
A smart contract is a self-executing contract with the terms of the agreement directly written into lines of code. These contracts are stored on a blockchain, and are automatically executed when the predetermined conditions coded within the contract are met.
Smart contracts eliminate the need for intermediaries or trusted third parties, as they are designed to automatically enforce the terms of the agreement. They ensure transparency, security, and immutability by leveraging the decentralized nature of blockchain technology. Once deployed on the blockchain, smart contracts cannot be altered or tampered with, providing a reliable and efficient way to conduct transactions or execute agreements.
Smart contracts have a wide range of applications beyond financial transactions, including supply chain management, real estate, insurance, voting systems, and more. They enable the automation of various processes, reduce the risk of fraud, and increase efficiency by removing the need for manual intervention or intermediaries.
Blockchain and Cryptocurrency Table of Contents
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