Smart Contracts Are Bringing An Unprecedented Layer Of Disruption Into Business

Posted: May 21 2018, 12:32pm CDT | by , in News | Technology News

 
Smart Contracts are Bringing an Unprecedented Layer of Disruption into Business

What are smart contracts?

Change is the only constant thing in the world – everything is subject to change as legacy systems continue to give way to innovative technology. The Internet is a disruptive force of epic proportions – the internet disrupted the operations of brick and mortal establishments, and businesses that didn’t transition online in good time ended up being relegated to the sidelines. The Internet empowered companies such as Amazon, Uber, and AirBnB to disrupt the retail, transportation, and hospitality industries respectively.

Now, a new wave of disruption is building up and internet companies could find themselves on the sidelines if they are not quick to embrace the change. Blockchain technology is the single most-disruptive in both the technology and finance industries right now. You’ve probably heard about cryptocurrencies, chief of which is Bitcoin built on the Blockchain. Now, blockchain-powered smart contracts are building up momentum to change the way we do business.

What are smart contracts?

Smart contracts are digital agreements created and stored on the blockchain with the view to be self-executing and self-enforcing once predefined parameters are met by counterparties to the contract. The idea of smart contracts surfaced in 1996 based on the works of a computer scientist names Nick Szabo. In his work, “Smart Contracts: Building Blocks for Digital Free Markets” he espoused the idea of a contractual deal between people and vending machines, where dropping in a finite number of tokens guaranteed you a drink without the need for a third party to validate your purchase.

Ethereum is a blockchain solution that provides a decentralized platform for creating and running smart contracts. Ethereum ensures that Smart Contracts are free of third-party interference, fraud, censorship and downtimes. The very idea of smart contracts is interesting because it eliminates the need for middlemen, brokers, and facilitators in business transactions. Cryptocurrency investors seem to be optimistic about the disruptive potential of Smart Contracts and their optimism is evident uptrend in Ethereum price in the last couple of years. In 2017, Ethereum gained almost 9000% from around $8.24 on January 1, 2017 to $747 by December 31, 2017.

Here’s how smart contracts could potentially change the world

One of the first industries that will experience disruption from Smart Contracts is the finance industry. For instance, UBS is already exploring the possibilities of using Ethereum Smart Contracts to increase investor protection, strengthen the financial market, and to enhance the quality of its financial data.

Last year, the Swiss Bank filed a patent application for using smart contracts to register and validate transactions by creating permanent records of transactions. UBS is also working with IBM and a consortium of other banks to create a trade transaction platform built on the blockchain UBS CEO, Sergio Ermotti notes that Smart Contracts will "play a big role in changing and reshaping our industry."

The mortgage industry should also brace up to experience disruption from Smart Contracts by introducing an unprecedented layer of efficiency into the mortgage process. With Smart Contracts, the initiation, funding, and servicing process of mortgages can be automated to reduce the time spent on verifications. Smart contracts can be outfitted to pull property data, credit scores, and income sources to compute how much house you can afford. A smart-contract backed mortgage will also manage the mortgage payments, interest payments, homeowner equity, and other important metrics.

Smart contracts might also be used to introduce a new layer of transparency into the gambling process eliminating the idea of “the house always wins”. Current gambling systems are usually accused of being “rigged” in favor of the gambling establishment and you can never guarantee that the odds of any game are fair. Smart contracts make it easily to see the dynamics of the odds before you place a wager. In addition, smart contracts can eliminate the delay in payouts by automating payment to the account of winners.

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The Author

<a href="/latest_stories/all/all/2" rel="author">Luigi Lugmayr</a>
Manfred "Luigi" Lugmayr () is the founding Chief Editor of I4U News and brings over 25 years experience in the technology field to the ever evolving and exciting world of gadgets, tech and online shopping. He started I4U News back in 2000 and evolved it into vibrant technology news and tech and toy shopping hub.
Luigi can be contacted directly at ml[@]i4u.com.

 

 

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