INSUBCONTINENT EXCLUSIVE:
By Pareen LathiaSmart Contracts are a set of promises that are defined in code and a routine for their implementation
Although the term and theory was coined by Nick Szabo in 1996, it is only after ethereum, the second most popular blockchain project
popularised it that there is real implementation being seen today.
Certain aspects of a contract can be coded on a blockchain and whenever
these conditions are met, the contract is executed and an irreversible entry is made in the ledger on a blockchain
It works very much like an escrow, but let us take a real life example of how Smart Contracts would redefine a transaction in the real
Smart Contracts in real estate industryBuying and selling of property is currently done offline and is a lengthy process which often
involves a host of middlemen
Once real estate records are digitised, all the property's details and owner's details will be available on a secure blockchain that would
most likely be maintained by a government authority
Now everyone can trade on this blockchain by creating their own Smart Contracts.
For example, if I own a house with two of my brothers, we
get a key to that asset on the blockchain
Now if we want to sell this, we can set up a Smart Contract to say that any serious buyer must first deposit five per cent of the property
price and will then be allowed to see the details of ownership (which are private till then), and then they have 48 hours to complete the
purchase by depositing the remaining amount
If they fail to do that, their five per cent is refunded and the property goes up for sale again
If the sale goes through, I and two brothers get our share of token and the blockchain now has updated ownership details
These records will be irreversible or immutable and linked to each other so that the next buyer could see details of all previous purchases
and ensure the dealing is transparent and quick.
This is how it works even now
But all of this involves a lot of paper work, too many middlemen, and a lot of time is wasted in back and forth.
Also, ownership paper needs
to be verified manually from local land records and a physical signature could be easily faked
be executed by machine or code rather than human intervention at every level.
A scenario where a house owner passes away, a
industries would benefit from the efficiency brought about by a Smart Contract
Some use would be for insurance industry for processing claims, banking to verify person's credit rating and disburse loans according to
predefined standards and tracking of paybacks and EMIs, pharma industry to track and verify the authenticity of drugs, private companies
would use this for tracking their inventory, production throughput and customers could bid on the product pipeline giving companies the
highest possible price for their latest batch of products
Peer-to-peer lending is one area that is already being used by blockchain community
From online voting to tracking of government spending, the uses of Smart Contracts on a blockchain are virtually unlimited.
Practical
implementationRight now there are very few developers in the world who can write Smart Contracts but with projects like ethereum that aim to
provide an infrastructure layer (like an operating system for writing Windows apps), it will become increasingly easy to write these
contracts and make Smart Contracts as ubiquitous as email did in the internet era.
(Pareen is a blockchain and crypto currency writer
He's also an investor and a tech entrepreneur)
