What is a smart contract?
As the name suggests: a contract which is smart. What should you think of? See a smart contract as a set of rules that can no longer be modified because it is stored in the blockchain.
Developers write the smart contracts. Therefore it isn’t a physical contract (like a pdf or paper) but a digital contract consisting of computer code. This code includes the rules that parties have put together, but also when the smart contract has to be executed. What benefits is a smart contract compared to a normal contract?
- A smart contract can be performed automatically, Is therefore faster and cheaper
It’s executed without the intervention of third parties.
It cannot be manipulated (because it is in the blockchain).
Example of the use of a smart contract
For example, a smart contract can be applied to a bet. Does the intercity between Utrecht Centraal and Amsterdam Centraal depart on time? Person A(lfred) thinks ues and person B(etsy) thinks not. Both are betting 50 euro. The smart contract can look like this.
- If the train leaves on time, then Person A receives an amount of 100 euros.
If the train leaves late, then Person B receives an amount of 100 euros.
Once it’s 9 am, the smart contract checks through a connection with the NS API (a way a smart contract can communicate with NS software) if the intercity from Utrecht Central to Amsterdam Central has left on time. Based on this data, the smart contract ‘decides’ who wins and will be executed: Person A or B receives the amount immediately.
You can imagine that a smart contract can solve “more complex” issues, without the intervention of people.
Imagine that the train is delayed and you are entitled to a refund of your train ticket. In the Netherlands you need to fill in a lot of paperwork, need to have phone calls and have to wait until you get your money back… A smart contract could make the refund based on the example above in seconds! That’s a lot faster and cheaper, for both the NS and the consumer.
The best known: Ethereum (Classic)
At the time of writing there are dozens of projects that take place in the smart contract market. The best known is Ethereum, which is invented by Vitalik Buterin aka the guru. Ethereum is currently working as an ICO facilitator: If someone gives X Ether, then he receives X tokens.
Ethereum is currently popular because it serves as a platform for ICOs, but Ethereum has more in-house. Some well-known Dapps who already run on Ethereum are Golem (decentralized computer computing power), Melonport (asset management) and Status (directed to mobile use of the Ethereum network).
Ethereum has not developed without a fight. As mentioned earlier, Ethereum is widely used as an ICO platform and one of the first ICO’s was that of the DAO. In short, the smart contract that supported the crowd sale proved unsafe and a hacker locked 3.6 million Ether away. You will understand: Shit hits the fan. Hard.
Blessing in disguise. The digital coins were stolen, but with a ‘simple’ act, this could be reverted; just turn the blockchain back to the time before the hack. Camp A was in favor of the revert; so all the investors would get their Ether back. Camp B was against; Code is law. Why? Because the idea behind blockchain is that transactions on the blockchain are not mutable, so also the transaction of the 3.6 million Ether,
Eventually a hard fork originated: Ethereum. The old also remained: Ethereum Classic.
From Asia: NEO and Qtum
Although the blockchain technology is not theoretically demarcated by land borders, there are some smart contract providers who are keep it in mind. NEO and Qtum are good examples of this. Both focus on the Chinese market (because of regulations jwz). You may have seen it overcome: NEO or Qtum are the Chinese Ethereum. Nope, not quite true.
Marketing technically it sounds quite cool, but both NEO and Qtum offer different values at a technical level. Without exceeding too much technical jargon: where Ethereum has its own programming language (Solodity), it is also used by Qtum. NEO, however, chooses to use commonly accepted programming languages such as .NET, Java and Python.
“All nice Michiel, but come up with concrete examples with which those so-called smart contracts will change my life.” Nice to start over, because I have!
Where normally the croupier in the casino shares the cards, the maiden in the elderly home checks the bingo bells whether the betting office registers your chosen race horse, these intermediaries with the blockchain are no longer needed.
- Never pay more money (commission) to the house, because it no longer exists.
Make sure the gambling can not be manipulated (“Yes, you only get 10 instead of 100 euros, because there were 9 other winners.”)
Food and transport control
You buy organic chicken legs at Albert Heijn, but who guarantees that the chickens have actually eaten organic chicken grains? And who knows, the chickens are fed biologically, inhumanly slaughtered. Or: The meat has been frozen for 40 years. All certainly possible!
- With sensors that forward and store information in the blockchain, you know exactly what conditions a chicken has grown.
With the same sensors you could even see when the chicken was slaughtered and which way he traveled. Does the chicken come from Botswana or Barneveld?
The real estate market
You see a nice house, you do a bid, but no, you’re not the lucky one. Again. “Sorry, but someone else had a better bid.” What is the definition of better?
Once you have gone through the opaque bidding process and you finally do a winning bid, you need to go to the notary. You will pay hundreds of euros for a piece of paper stuck in a vault. Well, of course, there are some mandatory administrative costs from the government, but why is this not all automated?
If you own the house, it’s time to put the oh so popular new bathroom in place. But what the freck: Thick asbestos layer in the intermediate walls. Your budget for the renovation of your bathroom is four times higher. Nothing can help you anymore, because during the construction inspection the asbestos was not revealed ..
There are dozens of blockchain projects that want to make the housing market more transparant.
- Are you renting a home? Then you are sure that the party who is renting the house is also in a position to perform this.
No more suspicion that brokers close secret deals, all bids are publicly available in the blockchain.
Insights of the history of a house, for example, construction year.
Your property acts are not available in one place, but available whenever you want.
It’s midnight at midnight when you ride your Fiat Panda peacefully across the A2. There is track control. You drive 103, because you know that falls within the boundary. Suddenly a blow. From behind you have been hit by a shy businessman. His leased station wagon has damage to the front, your Panda as well as total loss. Who was the guilty one?
After 3 months of investigation, the trained businessman seems to be driving you around 130 kilometers per hour. In addition, he was drunk and forgot to indicate when he changed his job, according to witnesses.
- No more manipulated mileage. These are kept neatly in the blockchain.
Your insurance (smart contract) is linked to the GPS system and other measuring instruments of your car. An insurer can see your driving behaviour.
When will you encounter the first smart contracts in daily life? Probably never, as smart contracts mainly accelerate processes. These processes may already exist, but are no longer “cumbersome”, but automatically through a smart contract.
Let me say that this article is no plea for smart contracts, but a contemplation in which I hope to explain what it could mean. Automation can do a lot in terms of intelligence and acceleration, but has no comprehension of EQ.
Last, but not least: There are many parties involved in the so-called smart contracts, including in the Netherlands. A well-known party is the Dutch Blockchain Coalition, where the Dutch government also has a finger in the porridge.