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Ethereum. A guide. (Third part)

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Uses of smart contracts

Smart contracts allow very wide possibilities of specific uses, from those used to create new cryptocurrencies (including stablecoins), to others that allow the design of video games or decentralized governance systems.

Thanks to this functionality, Ethereum became an infrastructure network for the entire crypto ecosystem. And the possibilities are only restricted by the ability of developers to be able to translate specific processes into the Ethereum language.


One of the first widely spread uses of smart contracts was the ability to create new cryptocurrencies with unusual simplicity. This is possible thanks to the ERC-20 protocol, which simplifies and standardizes the creation of tokens on the Ethereum blockchain.

Before the existence of Ethereum, if someone wanted to create a new crypto it was necessary to write a whole new blockchain, to fork the existing one; Or that the cryptocurrency was integrated into the Bitcoin blockchain, a task by no means easy.

Ethereum brought the possibility of creating new cryptocurrencies, secured on its blockchain by just writing a smart contract, and with the ERC-20 standard guaranteeing operation and interoperability.

This gave rise to a small “gold rush” under the modality of ICOs (Initial Coin Offering), a method that linked the launch of a new cryptocurrency to a “crowdfunding” type of prior sale system.


I will dedicate an entire guide to this type of cryptocurrency, given its current importance in the ecosystem.

To summarize, stablecoins are a type of cryptocurrency whose price is always associated with that of another asset, which is why they are considered “stable”.

The best known are those that have one-to-one parity with the US dollar, such as DAI or USDC, also known as crypto dollars. Although there are also others, such as PAX Gold, which maintains its stability linked to the value of the ounce of gold.

All these cryptocurrencies work based on smart contracts hosted on the Ethereum blockchain and under the ERC-20 standard.

Video games

With Ethereum, the possibility of creating unique digital tokens gave rise to the design of video games with collectible and interchangeable objects.

Instead of ERC-20, many of these games use another protocol, ERC-721, which allows the creation of non-fungible tokens.

The difference between a fungible token and a non-fungible token is that the latter represent objects with unique characteristics (a deed or a car license), while the former represent objects with identical characteristics (all dollar bills).

For example, a DAI token is equal to all other DAI tokens. Rather, each blockchain kitty in the CryptoKitties game is unique and unrepeatable.

This opened the possibility that, in video games, each collectible item could be transferred to Ethereum-compatible wallets, thus creating a market for collectible digital items.

In CryptoKitties, users can breed cats, cross them, and have young with different characteristics of hair, eyes, color and size. Other video games that use this technology are Gods Unchained, with interchangeable digital cards in the style of Magic: The Gathering; and Decentraland, a virtual reality world with its own token, where each user can buy a plot in that world and build whatever they want.

This modality even reached the world of football and figurines. The Socios.com game allows you to collect players from teams from all over the world, build your squad and play games. In addition, these collectibles can be sold and have official licenses from teams such as Barcelona, ??Juventus and the Argentine Independiente.

Even the multinational Panini, the world's leading figurine album creator, launched its own blockchain-based collectibles system.


No less important are smart contracts that allow you to create governance organizations.

For instance, The DAO was an attempt to put control of the smart contract in the hands of users. In this way, those with a certain amount of tokens could decide which direction the project would take.

But in the wake of a vulnerability that forced the entire Ethereum network to hard fork, the DAO project was ruined.

However, the original idea still exists in other cryptocurrencies. Like the DAI stablecoin, created by the MakerDAO organization. Those who have the Maker Token (MKR) in their possession can make decisions regarding the project, using a decentralized voting system.


Digital & Hitech

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