Like many of the disruptive technological advancements brought by blockchain technology, a smart contract serves as a way of overcoming the need for intermediaries. Often cited as one of the blockchain industry’s most disruptive creations, smart contracts are a technology that has the potential to largely modify the world of commerce as it exists today.
Put simply, a smart contract is a set of programmed commands that will initiate once certain conditions have been met. Through a smart contract, parties can exchange goods and services without having to rely on a mediator, and benefit from a lower risk of any party misbehaving.
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This because smart contracts are software applications that execute outside of the direct control of any of the contract’s members. Not only do they clearly define rules that encase the agreement, but they are also able to automatically carry out the contract once its conditions have been met. For example, if you wanted to create a digital magazine subscription service, you could hypothetically use a smart contract to overthrow the need for any third party. Once the required amount of a specified digital currency is sent to your business’ account, the contract could automatically send the buyer a link to your digital magazine.However, this example is very small in scope, as smart contracts can do a lot more than merely cut back on merchant fees. The potential for fair, digitally-enforced agreements to disrupt entire industries is readily present - especially when considering how they factor in to the decentralization movement.
Proponents and influencers across the blockchain landscape often have differing views about how they imagine the industry will evolve going forward. One area that seems to be agreeable to many of the industry’s champions, however, is the need for decentralization. In its current form, blockchain technology is often credited to the anonymous group or figure that created Bitcoin, under the pseudonym “Satoshi Nakamoto.” By its design, this new decentralized technology allows for transactions to occur in a way that empowers those directly involved in the transaction, rather than intermediaries present in centralized systems. It is only natural that many of the industry’s proponents praise smart contracts for this same reasonIn the modern world, trust can seem like a depleting resource. In the wake of breaches and intrusion from third parties, the desire to connect without a need for intermediaries is an understandable phenomenon. This is evidenced in findings from the 2017 Edelman Trust Barometer, which measures a country’s trust in the government, businesses, the media, and NGOs.According to Edelman’s findings, only 40% of Canadians expressed confidence in the media, 38% expressed confidence in Federal Parliament, and only 30% have faith in major corporations. Additionally, Canadian trust in Financial Industry Analysts and CEOs is at an all-time low.These findings further discovered that Canada slipped from its once ‘neutral’ rating into the ‘distruster’ category, due to a growing lack of institutional trust amongst the public.With smart contracts, however, advocates believe that individuals and entities can leverage a trustless system that will overcome many of the public’s woes about commerce, trading, and everyday life.
Real-world examples of smart contracts are becoming increasingly abundant. Perhaps the most famous smart contract is the DAO (Decentralized Autonomous Organization), which was an investor-directed venture fund built on the backbone of smart contracts. While a breach led to the DAO being shut down, the decentralized autonomous organization served as a prime example of the technology’s potential.Real estate is one of many industries where innovators believe smart contracts could be a useful disruption. In the world today, a significant portion of property sales go to third parties. To overcome this, smart contracts could modernize the buying, selling, and renting of property. Currently, Propy is an example of a project using smart contracts to disrupt the world of real estate. Purportedly, the service had its first transaction in September 2017, and the team claims it completed the first real estate deal recorded on a blockchain in the United States.In Vancouver, on the other hand, a startup called Etherparty is allowing users to build their own smart contracts. The project launched a “contract wizard” which allows a wide array of users to access the potential of smart contracts without the need for programming knowledge. One of the most popular decentralized applications of all time, CryptoKitties, is another example of how smart contracts function. Due to the project’s blockchain being publicly available, users are able to view the smart contract responsible for the existence of CryptoKitties. Created by its Canadian parent company, CryptoKitties is a wildly popular platform for trading and ‘breeding’ digital collectibles.
Ultimately, there are many exciting projects in the world today leveraging smart contracts to create systems that function without intermediaries. However, for all the exciting projects that currently exist, it is likely that the industry will continue to observe new and even more disruptive smart contracts in the future. Through adding platforms that do not rely on trust, these innovative projects are able to create systems of commerce that can prevail in an increasingly trustless world, through technology that did not exist a few years ago.
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