This blog is a two-part series on blockchain, a game-changing distributed ledger technology (DLT). Part 2 focuses on smart contracts and a description of the plethora of innovations and opportunities enabled by blockchain technology in diverse fields of endeavor. (See Part 1 here.)
Blocks in a chain contain a collection of facts. In part one of this overview we focused on facts primarily as data. However, facts composing a block can contain more complex structures or contracts. For example, a fact may be a small executable program or a mini-database with associated actions to perform on its data. In such instances, each node throughout the global network would execute the mini-program or method on the database, when accessing this specific contract within the block. This facilitates the implementation of a composite or smart contract, as part of the distributed consensus enactment of the global network.
Smart contracts are powerful, game-changing instruments that enable new methodologies for transactions. Consider the legal contract prevalent in our global society. It requires a middle man (e.g., bank, lawyer, ebay, Amazon) for enforcement or dispute resolution. A smart contract can be viewed as a technology-enforced contract, built upon blockchain technology. It also enables specific, automated actions that provide a service for the participants. Among two or more parties desiring to enter into contract, it facilitates a fast, accurate action (e.g., a transaction) with all the necessary data, dates, etc. included. It is a comprehensive methodology with inherent disintermediation. Furthermore, information is permanently stored and cannot be lost, including the entire history and record of the entity, data, record, etc. The Ethereum project has the most popular blockchain technology that leverages smart contracts.
IEEE Spectrum defines a smart contract as:
“Software-based agreements deployed in systems capable of automatically executing and enforcing the terms of the contracts.”
Smart contracts provide autonomy, trust, backup, safety, speed, savings, accuracy and security. Examples of smart contract uses can range from government and financial services to supply chain and healthcare. Furthermore, 12 game-changing uses include digital identity, records and land title recording.
See this smart contracts infographic.
Figure 1. Blockchain Use Cases. (Source: Let's Talk Payments).
Blockchain technology, and the associated smart contracts, has the potential to disrupt operational capabilities in several fields of endeavor. Some of these include financial services, supply chain management, healthcare services, real estate, energy and government services. For example, government pilot projects leveraging blockchain exist in the U.S. state of Illinois, and the city of Dubai in the United Arab Emirates. An energy pilot is under development in Brooklyn, NY. The finance industry has created the R3 consortium to consider opportunities relevant for that industry. Listed below is summary of these projects:
Figure 2. Non-Financial and Financial Use Cases. (Source: Let's Talk Payments).
Leveraging blockchain technology is a factor in the planning and strategies of numerous entities in various fields of endeavor. With smart contracts, distributed consensus, trust, security, and efficiency, it can potentially disrupt many transactional and other processes worldwide, creating $billions+ in new market opportunities. This 2-part series presented an overview of this game-changing technology.
Please see the crowdfunding campaign on iFundWomen.com to support the development of geeRemit, a global remittance mobile app based upon blockchain technology.