Contracts have played a significant role in human interactions throughout history.
While in the past, contracts were often verbal agreements, today, they are commonly documented in written or electronic form.
Binding Agreements in Various Contexts
The primary purpose of a contract is to establish a binding agreement between two parties, whether individuals or companies.
For instance, when purchasing a house, you would sign a contract with the current owner or the selling bank, outlining the purchase price, the transfer of ownership, and other relevant details.
Types of Contracts in the Crypto and Blockchain Space
Contracts serve as official and binding records of agreements between parties. In the realm of cryptocurrencies, contracts take on a new meaning.
There are several important types of contracts in the crypto and blockchain space.
Enabling Decentralized Agreements
Smart contracts are self-executing computer programs that encode the terms of an agreement between buyers and sellers directly into lines of code.
Contracts Enabling Decentralization
Without the concept of contracts, cryptocurrencies, and decentralized finance would not exist.
Contracts, with their technological advancements, enable the functioning of blockchains.
Therefore, contracts are fundamental components of all distributed ledgers and blockchain-based applications we currently utilize.