Smart contracts are tools that enable the users to conduct transactions without third parties. As discussed earlier, they are an alternative to EOAs and generally they are applied on Ethereum blockchain. Nevertheless, in Walliro users are able to apply smart contracts not only on Ethereum but also on other blockchains.
A smart contract is a program that runs on Ethereum. It’s a collection of data that stores data. As the name of blockchain implies, it can send transactions throughout the network. They are able to run rules based on the codes that define them and the rules can be applied according to the requirements of the users which can be individuals or enterprises. It can act like a normal contract, but it can’t be deleted and transactions are irreversible.
Ethereum, originally was designed to be the base where smart contracts can reside in, however, it is not the only platform and Walliro is one the few wallets that make applying smart contracts on other blockchain possible.
Bitcoin, as the world’s first cryptocurrency, has the feature of smart contracts. However, it is not as functional as the one on Ethereum. On Ethereum, the language supports a broader set of computational instructions. On Ethereum smart contracts, programmers can write any rules and apply them for different users.
What can smart contracts be used for?
Some common ways of using smart contracts are:
- Multisignature accounts: Funds can be controlled when a certain percentage of signers confirm it.
- Encoding financial agreements: Agreements between users can be written into a code and modified into a smart contract.
- Agreements based on the outside world: Data from the outside world (financial, political, or whatever) can be pulled in with the help of oracles.
- Provide third party: Similar to the libraries in programming platforms, smart contracts can apply libraries.
- Storage: It can store information and keep them as they are needed, such as domain registration information or membership records. The data is immutable and can’t be eliminated.
Advantages of smart contracts
There is a variety of benefits that smart contracts provide, among which speed, efficiency, accuracy, trust, transparency, security, and savings can be mentioned. Smart contracts, implementing computer protocols, conduct transactions automatically which results in saving time in commercial processes. Additionally, the automation mitigates the risk of third-party manipulation since it eliminates the presence of brokers and intermediaries. Apart from that, the imposed expenditure which is forced to pay for the transaction will be eliminated or at least decreased.
- Accuracy, Speed, and Efficiency
The contract is immediately executed when a condition is met. Since they are digital and automated, there is no paperwork to deal with, and no time is spent to correct errors that can occur when filling out documentation by hand.
- Trust and Transparency
There’s no need to worry about information being tampered with for personal gain because there’s no third party engaged and encrypted transaction logs are exchanged among participants.
Because blockchain transaction records are encrypted, they are extremely difficult to hack. Furthermore, because each entry on a distributed ledger is linked to the entries before and as a result, hackers would have to change the entire chain to change a single record.
Smart contracts eliminate the need for intermediaries to conduct transactions, as well as the time delays and fees that come with them.
Where do smart contracts potentially apply?
Smart contracts, apart from their appliance in payments, could be useful tools for facilitating some issues. Here there are some examples to mention.
In the online world, information is like money. Companies take advantage of people’s information such as their interests. However, people themselves are not aware of the data and they can’t control the information. The contracts will enable them to control it. In a blockchain-based future, identities will be tokenized. Considering an ideal future, it implies that individual’s identity would be on decentralized blockchain, and naturally would be secure from bad hands. Smart contracts can also modify social media and the information on it. It means that it allows users to choose which information to make public and which to keep private. If they intend to exchange information, for instance, endorsing someone, a smart contract can be applied to modify what data of the user should be transmitted. Banks could be another appliance of such usage. Your email address doesn’t have to be stored to be sent to other credit companies and they won’t bother you with their promotions.
Naturally, realtors are indeed irritating since they increase the risk of scam or at least even if they are honest ones, they oblige the customers to pay a large fee for the transaction that has been conducted. Smart contracts can act like a broker. The terms of the deal can be deployed on the contract and they can be met as both sides of the contract confirm them. In this way, there is no need for the broker so it would cost much less and it would be as safe as with an intermediary. Envisage the deed to your house is tokenized on the Ethereum blockchain. If you’re ready to sell it, you’d create a smart contract with the buyer. So, everyone is happy and they can save quite a large amount of money.
This is another field of industry that can apply smart contracts. All policy requirements would be written into the smart contract, which the user would read and sign if they agree. The contract would sit open until the liable party needs it. Then, they’d simply upload the requirements that prove their need for insurance payment and the funds would be released.
A tangible example can be flight insurance. Envisage one’s flight is delayed and a company is in charge of indemnification. A smart contract of Ethereum can be applied here by being linked to the database recording flight status which is based on terms and conditions. The terms mandate the rule that the flight can be delayed to 1 hour and after that they have to make it up to the passengers. The contract holds the company’s money and delivers it as long as the requirements are met. The nodes on EMV must all agree that the conditions are implemented and if not, they automatically indemnify the delayed time.
Grocery stores, office warehouses, farmers and more are examples of places that can apply smart contracts to track product custody and follow payments among other stuff. They can automate and incentivize all parts of the supply chain to raise their accountability.
With smart contracts, the grocery store could set up an automated check-in at each step of the process. While there are check-ins already in a normal supply chain, they must be fulfilled manually. Human error is very possible in such situations which might end up in theft and great losses to store owners. They could be deployed and as a result the payment wouldn’t be released unless the counting has been completed. It would be based on trustless system.
Future of Smart Contracts
Although smart contracts still require to evolve before they are widely applied for production use in complex commercial agreements, they have the effect to revolutionize the reward and incentive form that shapes how companies compromise in the future. To achieve such goal, it is important not to simply think how existing concepts and structures can be ported over to this new technology. Nevertheless, the true revolution of smart contracts will come from entirely new paradigms that have not yet been envisioned.