Written by Alex Fisher
The blockchain is but one element that sets cryptocurrencies apart from hard cash printed money we are so accustomed to. Yes, the regularly backed up data and secure decentralized transactions of cryptocurrencies would not be the same without the blockchain. So where exactly do smart contracts fit into the picture?
What Are Smart Contracts?
Aside from another piece of crypto jargon, smart contracts have a quintessential purpose. For starters, smart contracts generate a trusted contract between two anonymous parties without the utilization of a legal system or central authority. A decentralized transaction, essentially a legal contract fulfilled and governed by the blockchain skipping the middleman and lowering transaction costs. It is most often affiliated with the transactions of crypto coins holding each party accountable for their commitments in the transaction or exchange of currency and coin.
What makes this unique is the ability to add layers of information to the transaction resulting in the ability to generate more complex transactions autonomously. The concept for smart contracts was originally discussed and brought to light by Nick Szabo in 1994. He wanted to bring a point of sale exchange system into the digital realm to execute the terms of a contract. Several years later Bitcoin was born and blockchain and smart contracts developed along with it.
Smart contracts are not just for purchases or trading cryptocurrencies although this is what the most common interpretation is. These transactions are where the smart contracts initially entered the market and earned their name, however with the ability to develop layered information each contract can be as simple or complex as needed.
Industries Currently Using Smart Contracts
Let’s take a look at industries currently implementing smart contracts and a few other examples. We already touched on cryptocurrency trades and purchases. How about the standard finance markets? Not quite yet, but there are some highly specialized financial services utilizing blockchain and smart contracts to fulfill complex ledger systems like the Yangon Stock Exchange in Myanmar where transactions only synchronize twice per day. The layered contracts on a blockchain help solve this limited sync dilemma.
Real estate is beginning to dabble in smart contracts for transactions. The first transaction for the Propy system took place in September of 2017. We, of course, have all heard of the houses being put up for sale and being purchased in a variety of coins but this specific transaction took place in Ukraine for a $60,000 apartment complex. Things are only getting started in real estate and we will surely see them heat up in the coming years. Imagine being able to contact any agent, any builder, or better yet build a little off-grid cabin by using cryptocurrency and smart contracts to eliminate all of the crazy fees associated with buying a house.
How about insurance? No, not health insurance or life insurance, at least not yet anyway. Try flight insurance. A contract emerged offering flight insurance for what most airlines do not cover, massive delays often residing in the grey area of flight unfulfillment. Fizzy AXA created an insurance contract for your flights, the contract is fulfilled if and only if your flight is delayed for more than 2 hours. Most airlines offer no reimbursement in this case but Fizzy will give you a little something for your time since the contract is fulfilled once the delay breaks the 2-hour threshold. Unfortunately, this is a limited offering for flights and routes but the company intends to begin expanding throughout 2018.
These contracts and crypto-accepting services are new to the scene. If you aren’t already aware, Amazon, Microsoft, and IBM have taken notice of the trends and have each begun developing BaaS or Blockchain as a Service. So what does this mean for markets capable of implementing these secure low-cost transactions?
Industries Capable of Implementing Smart Contracts
This is where the real fun begins. Think of all of the different contracts you encounter throughout a given year. Purchasing a house, if not renting an apartment? Yes, you could utilize a smart contract and speed up the transaction process, cut some of the banking fees and ensure your information is airtight on the blockchain. The same can be said for purchasing a car and gaining car or health insurance.
Currently there are many services available to act as a middleman if you were interested in placing larger purchases with your coin. They serve as an agent to smoothly exchange the coin for fiat currency to make a purchase saving you/the buyer time and energy that would be wasted negotiating with sellers not interested in cryptocurrency technology.
Let’s take it a step further, how about government implementation in regards to elections or regular polls. The voting system would be 100% confidential with some seriously heavy duty processing power needed to access and utilize the data eliminating chances for hacks and corruption. This would also be much more convenient in terms of registering and completing paperwork, waiting in line, etc. The votes could be cast from the convenience of your own home resulting in an increased voter turnout.
Education and Academia could utilize these contracts preventing fraudulent credit and education statuses. Sony Global Education is currently working with IBM on developing an education platform to share student records for this specific purpose.
Cloud computing and storage, stocks, real estate, insurance and healthcare are all eligible for legitimate encryption and fee structure implementation. Human resources and law enforcement not to mention advertising markets and loyalty programs can all benefit from the implementation of smart contracts.
This technology is truly limitless, to think that crypto markets are the sole industry that benefits from smart contracts and blockchain is laughable. Take a minute to pause and think how quickly technology is changing and then make a note that the internet is still in its infancy. If blockchain, smart contracts, and digital currency have anything to say about it… convenience, anonymity, and customization will be in the palm of your hand for any given product or service you intend to interact with. For now, smart contracts are still adapting and being developed further on a case by case basis to resolve specific needs one industry at a time and that is what makes them so amazing.
Alex is a travel and outdoor enthusiast writing for Riverwood Cabins a modular cabin builder. He stays on top of emerging technologies and enjoys learning and sharing his discoveries through his writings and photography.