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A smart contract is a decentralized application that executes business logic in response to events. Smart contract execution can result in the exchange of money, delivery of services, unlocking of content protected by digital rights management or other types of data manipulation such as changing the name on a land title. Smart contracts can also be used to enforce privacy protection by, for example, facilitating the selective release of privacy-protected data to meet a specific request.
Their main function is to programmatically execute business logic that performs various tasks, processes or transactions that have been programmed into them to respond to a given set of conditions.
Cryptocurrencies are digital assets created using computer networking software that enables secure trading and ownership. The term cryptocurrency comes from the cryptographic processes that developers have put in place to guard against fraud.
Bitcoin and most other cryptocurrencies are supported by a technology known as blockchain, which is a record of transactions and keeps track of who owns what. Public blockchains are usually decentralized, which means they operate without a central authority such as a bank or government. These innovations addressed a problem faced by previous efforts to create purely digital currencies: preventing people from making copies of their holdings and attempting to spend them twice.
Individual units of cryptocurrencies can be referred to as coins or tokens, depending on how they are used. Some are intended to be units of exchange for goods and services, others are stores of value, and some are mostly designed to help run computer networks that carry out more complex financial transactions.
For most people, the easiest way to get cryptocurrency is to buy it, either from an exchange or another user.
A blockchain is a distributed database that is shared among the nodes of a computer network. Blockchains store information electronically in digital database format. Blockchains are best known for their crucial role in cryptocurrency systems for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled. The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed. This is why blockchains are also known as a distributed ledger technology (DLT).
The key to blockchain's security is that any blocks created on the network are immediately sent to all users to create a secure, established record. Nodes on the network constantly monitor the blockchain for consistency at many vantage points to detect any attempt to alter the ledger.