Smart contracts, are in essence, a contract that is facilitated, verified or enforced by a computer system, instead of by a human. They govern information that is trackable and un-editable and are used to replace the middleman in many situations, including legal and financial exchanges.
Where are Smart Contracts Used for?
Smart contracts are predominantly used in cryptocurrencies to provide certain services on their blockchains. Through the use of smart contracts, blockchains can make a business case to replace the trusted middleman, for example: replacing the bank for transactions, or verifying and executing legal documents that decrease the need to hire lawyers.
One prominent smart contract network runs on the Ethereum blockchain, where many applications have been created already. However several security issues have presented themselves recently on the network, with one attack stealing $50 million of the blockchain’s currency, Ether.
One company that seeks to improve upon the current smart contract scenario is DasCoin, a hybrid cryptocurrency that runs a specialized blockchain called a ‘consortium blockchain’. Using the blockchain to run a whole host of services and applications, DasCoin have developed a more secure and efficient host for smart contracts than has been seen before.
Am I smart enough to use smart contracts?
The great thing about smart contracts is that you don’t need any specialist knowledge to use them. You simply sign up to a service that uses smart contracts and the contract does all the work, as and when you use them.
What can I use smart contracts for?
Smart contracts can be used for all sorts of things, and some very strong use cases have been identified, these include:
Land contracts & deed agreements
One of the first suggested uses of smart contracts was in land contracts and deed agreements.
An important part of land contracts and deed agreements is transparency of process. Around the world, there are certain rules in relation to transparency that these contracts would help to set the standard for. And a person would never again have to worry about a lost or stolen title deed.
Smart contracts would also help to match buyers with sellers over the blockchain. So not only would you have the contractual part of the process taken care of, but you’d no longer need to take find a buyer for your house, eliminating a huge amount of stress on both ends.
Vehicles and automobile insurance
With the advent of driverless vehicles and smarter insurance algorithms, smart contracts could play a huge part in the future of transportation.
Imagine a smart contract-based taxi service, that picked up passengers, calculated routes and withdrew money from your account, all without your input. Such a system could even split the fares between groups of friends taking a taxi with ease, removing the awkward discussions around who’s paying for what.
Currently, patent protection relies on a lot of human involvement. Humans need to check specifics of patents, how they’re registered, where they’re registered and how the law applies to each patent in different jurisdictions.
Smart contracts could check patents instantly without any human insight, and further than that, could enforce the patents automatically. If we switched to an all-digital smart contract patent system for all patents worldwide, we’d automatically eliminate patent lawsuits, and alleviate the pressure on civil courts to hear cases, around the globe.
This is already being used to some extent in the fashion industry, with fashion guru Julien Fourniē being one of the first to adopt blockchain into his workflow. Using DasCoin’s blockchain, Julien is planning to protect his designs from being copied, using the blockchain’s unique timestamping mechanism. And because the blockchain is un-editable, Julien can prove his design was created first. With smart contracts now being merged into the blockchain, this system could now automatically protect designs.
The new middleman
As smart contracts edge ever closer to wider adoption, we’re set to see a huge shift in the technological landscape. As businesses better understand the integration of smart contracts, it might only be a matter of years till they become a daily occurrence. And with the speed of the digital world only increasing, we all need to make sure that we don’t get left behind.