By Team Block697
Smart Contracts give a whole new meaning to the phrase "trust but verify" Imagine a contract that guarantees fulfillment of obligations between parties without requiring an intermediary or a trusted third party. We break down what Smart Contracts are, how they work, and how they can be implemented to make organizations more efficient.
When transactions are facilitated trust needs to exist between both parties, simple transactions like buying a candy bar require less trust. Complex transactions like insurance agreements, lease agreements, and so on, require more trust. With these larger and more multifaceted transactions, we tend to rely on contracts arbitrated by trusted third parties. Smart Contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way without a middleman.
The emergence of Smart Contract technology is going to be transformationally disruptive in the areas of:
Smart Contracts have the potential to render entire industries Obsolete, but more likely they are and will first augment these industries to become smarter and more efficient. There is a possibility of a future that contractual obligations and mandated trust will touch every aspect of society where Identification may become totally digitized & decentralized in a singularly governed ecosystem. We believe first there will be the emergence of smart contract implementations within walled ecosystems.
A simple way to understand a smart contract would be a vending machine. Normally, you would go to a lawyer, pay them, and wait for the document. With smart contracts, you simply drop a digital token into the vending machine (i.e. ledger), and your escrow, identification, or whatever drops into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforce those obligations.
"Instead of the cashier and ticket-ripper of the movie theater, the block chain consists of thousands of computers that can process digital tickets, money, and many other fiduciary objects in digital form. Think of thousands of robots wearing green eye shades, all checking each other's accounting." -Nick Szabo
Nick Szabo a re-known cryptographer and legal scholar, was the first to recognize that decentralized ledgers could be used for self-executing contracts. In this format, contracts and data could be converted to computer code, stored and replicated on the system and supervised by the network of computers that run the blockchain. Smart Contracts act as an automated judge, but a judge is useless without the right data. In order for a more sophisticated Smart Contract to work, you need Oracles.
Oracles are trusted data feeds that send information into Smart Contracts, to lighten the workload on the underlying blockchain. Oracles eliminate the need for smart contracts to directly access information outside of their network. Ironically, enough relying on a trusted third party to provide the data feeds. This is an issue great debate in the space because it deviates from the decentralized nature of Smart Contracts.
Oracles allow non-deterministic, real-world data to interact and function within the deterministic structure of the blockchain.
Oracles as of today are necessary for decentralized applications to communicate with the real world. There will soon be an emergence of a decentralized platform that will enable unifed, integrated communication between blockchain and non-deterministic data.
The applications for Smart Contracts are almost endless. One of the more scalable applications is Healthcare. Personal health records could be encoded and stored on the blockchain with a private key which would grant access only to specific individuals, this is also referred to as a permissioned blockchain. The same strategy could be used to ensure that research is conducted via HIPAA laws (in a secure and confidential way). Receipts of surgeries could be stored on a blockchain and automatically sent to insurance providers as proof-of-delivery, this could be largely disruptive to revenue cycle management companies. The ledger, too, could be used for general healthcare management, such as supervising drugs, regulation compliance, testing results, and managing healthcare supplies.
Another example could be financed IOT products. Say if someone finances a car linked on blockchain and misses their payments, that car can prevent the owner from using because of a self-executing Smart Contract.
Smart Contracts can transform our lives in unfathomable ways, and help companies make processes more efficient and secure. What we must be careful of is the pace of implementation because of the technologies power to eliminate jobs. Smart Contracts are just a fascet of automation and should be implemented at a reasonable pace to benefit all of society not just for the sake of overhead reduction.