100,000 Questions and Answers about Cryptocurrencies 62
What is a smart contract?
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. These contracts enforce themselves automatically and are stored on a blockchain.
How do smart contracts work?
Smart contracts work by executing the code that defines the terms of the agreement when certain conditions are met. The code is stored on a blockchain, ensuring transparency and immutability. Once the conditions are met, the contract executes automatically, without the need for a third party.
What is Ethereum used for?
Ethereum is primarily used to build and deploy decentralized applications (dApps) that run on its blockchain. Ethereum's smart contract functionality allows for complex logic and rules to be encoded into the blockchain, enabling a wide range of use cases.
How is Ethereum different from Bitcoin?
Ethereum differs from Bitcoin in several key ways. Firstly, Ethereum is a platform for building and deploying decentralized applications, while Bitcoin is primarily a digital currency. Secondly, Ethereum uses smart contracts to encode complex logic and rules into the blockchain, while Bitcoin's scripting language is more limited. Finally, Ethereum has a different consensus mechanism (Proof-of-Work transitioning to Proof-of-Stake) compared to Bitcoin's Proof-of-Work.
What is DeFi?
DeFi, or Decentralized Finance, refers to financial applications and services that are built on blockchain technology and operate without traditional financial intermediaries. DeFi applications enable lending, borrowing, trading, and other financial activities in a decentralized and trustless manner.
How does DeFi work?
DeFi works by utilizing smart contracts and other blockchain technologies to enable financial applications and services without traditional financial intermediaries. Users can interact directly with DeFi protocols and applications, accessing lending, borrowing, trading, and other financial services in a decentralized and trustless manner.
What are stablecoins?
Stablecoins are cryptocurrencies that are pegged to a stable asset, such as a fiat currency (USD, EUR) or a commodity (gold). The pegging mechanism aims to maintain the stablecoin's price at a fixed level, reducing volatility compared to other cryptocurrencies.
How do stablecoins maintain their peg?
Stablecoins maintain their peg through various mechanisms. Some stablecoins are collateralized by a reserve of assets that are equal to or exceed the total supply of stablecoins. Others use algorithmic stabilization mechanisms to adjust the supply of stablecoins based on market conditions, aiming to maintain the pegged price.
What is NFT (Non-Fungible Token)?
NFT stands for Non-Fungible Token. It is a unique digital asset that represents ownership of a real-world or digital item. NFTs are stored on a blockchain and cannot be replicated, making them稀缺 and valuable.
How are NFTs used?
NFTs are used to represent ownership of various digital and real-world items, including art, music, videos, virtual goods, and even real estate. They enable the tokenization and trading of unique assets in a decentralized and secure manner.
What is gas in Ethereum?
Gas in Ethereum refers to the fee required to perform transactions or execute smart contracts on the Ethereum network. Gas is paid in Ether, Ethereum's native cryptocurrency, and the amount required depends on the complexity of the operation.
How does gas pricing work in Ethereum?
Gas pricing in Ethereum works by allowing users to specify the maximum amount of gas (and therefore Ether) they are willing to pay for a transaction or smart contract execution. Miners then prioritize transactions based on the gas price offered, with higher gas prices leading to faster transaction confirmation times.
What is a blockchain oracle?
A blockchain oracle is a service that provides external data to smart contracts on a blockchain. Smart contracts are unable to access data outside of the blockchain, so oracles are used to bridge the gap between the blockchain and the real world.
How do blockchain oracles work?
Blockchain oracles work by collecting data from external sources, such as APIs, web scrapers, or even human operators. This data is then fed into smart contracts on the blockchain, enabling the contracts to make decisions or perform actions based on real-world events or conditions.
What is the DAO hack?
The DAO hack refers to a major security breach that occurred in 2016, involving the Decentralized Autonomous Organization (DAO), a crowdfunding project built on Ethereum. Hackers exploited a vulnerability in the DAO's smart contract code, draining over $50 million worth of Ether.
What were the consequences of the DAO hack?
The consequences of the DAO hack included significant losses for investors and a crisis of confidence in Ethereum and smart contracts. It led to the Ethereum community splitting into two separate blockchains: Ethereum (ETH) and Ethereum Classic (ETC).
What is the Lightning Network's Watchtower?
The Lightning Network's Watchtower is a service that monitors the blockchain for cheating attempts by Lightning Network participants. It allows users to outsource the task of monitoring their payment channels, reducing the risk of cheating and enabling more secure and reliable Lightning Network transactions.
How does the Watchtower service work?
The Watchtower service works by monitoring the blockchain for cheating attempts, such as one party broadcasting an old state of a payment channel in an attempt to defraud the other party. If such an attempt is detected, the Watchtower can provide cryptographic proof of the cheating to the honest party, enabling them to recover their funds.
What is a privacy coin?
A privacy coin is a cryptocurrency that aims to provide enhanced privacy and anonymity for its users. Privacy coins utilize various techniques, such as ring signatures and zero-knowledge proofs, to obscure transaction details and make it difficult to trace funds.
How do privacy coins work?
Privacy coins work by utilizing cryptographic techniques to obscure transaction details and make it difficult to trace funds. For example, ring signatures allow transactions to be grouped together, making it impossible to determine which input belongs to which output. Zero-knowledge proofs enable transactions to be verified without revealing any additional information beyond the fact that the transaction is valid. These techniques enable privacy coins to provide enhanced privacy and anonymity compared to traditional cryptocurrencies.