Even though smart contracts are one of the most important features of blockchain technology, there are many myths regarding them. To get a better sense of the blockchain technology you use and make the most of it, you must separate fact from fiction in terms of smart contracts.
Many mistakenly believe that smart contracts are essentially contractual agreements. This is not the case, but smart contracts do make it troublesome and expensive to breach an agreement since the contract controls a valuable property of some sort. In other words, they are not contractual agreements. Instead, they enforce implementation following fulfillment of a requirement.
On a similar note, you should not mistakenly believe that smart contracts can be enforced legally. They are not yet law, but they can be interpreted as parts of a legal agreement. At the moment, smart contracts working as legal agreements is a myth, but this may change since the relationship between the two is still evolving.
Because of all that smart contracts can do and their complexity, many believe that smart contracts feature artificial intelligence. This is actually a myth since there is no AI involved. Instead, you code the smart contract to do exactly what you want. Essentially, you program it so that the contract executes some action once another occurs. However, some smart contracts can be triggered by a range of external data, some of it accumulated by AI.
Speaking of which, there are some misconceptions regarding how easy or hard it is to program smart contracts. It can be relatively easy to write a simple one, particularly when using something like Solidity from Ethereum. At the same time, many smart contracts are much more complex and rely on oracles or data sources that deliver actionable information.
Since smart contracts can be simple at times and there are programs to assist with them, the idea that only developers use smart contracts is slowly becoming a myth. There will soon be more user-friendly ways of incorporating them. Given the vast applications of smart contracts, they will become used more and more by non-developers.
How to Decide Whether an ICO Is a Good Investment
Once you have a keen interest in cryptocurrencies, you may consider investing in an ICO instead of simply buying and selling established cryptocurrencies. ICOs can lead to a dramatic return on investment, but a large percentage of them fail, making it crucial that you do your research ahead of time. To choose whether to invest in an ICO, read all you can about the project, including the white paper, and what others have to say about it.
As you evaluate a particular ICO, pay close attention to the development team. While an ICO with an anonymous development team may pay off, this is usually a red flag and should be avoided. If the ICO claims to work with a prominent figure, confirm that this person is truly involved since it may be a false claim to make more money.
When evaluating the development team members behind the ICO, look at their educational history, cryptocurrency experience, leadership experience, and past ICOs, paying special attention to their role in any crypto projects. Check if the team has links to profiles on LinkedIn and GitHub. This will at least indicate it is not a scam, although team experience is a better indicator of potential success.
Next, look at the community behind the ICO in question. The projects that do well tend to have a great deal of community support and involvement. If you spot a public Telegram or Slack chat that is actually active, this is a great sign. This is also when you should read reviews and summaries of the project. Just keep in mind that many ICOs have bounty programs where they reward those who publish information about their project, which can lead to an influx of overall positive reviews.
You will also want to take a look at the code. If the project doesn’t have a functional code or does not have it as open source, you may want to look elsewhere. A functional code indicates that the team already made progress toward its goal and shows potential. Other ways of evaluating if an ICO is a good investment is checking the quality of its website, long-term use goals, and market capitalization.