In my article “Let’s Talk: Wallets, Blockchain and Spending” I said that I would delve further into the Blockchain and what else it could be used for. Today we’ll look at a few but first I have a new concept for you to think about.
A blockchain isn’t just for money. A blockchain is a platform, and platforms are used as the foundation for the building of new and smart applications. Right now we use that platform to (in Bitcoins case) to use the currency app. The currency app is Bitcoin, and it has a value. I have used it for purchasing items and services, and I have been paid in Bitcoin. There are currently other uses for Bitcoins blockchain, and in fact other currencies have been created with slight or major modifications to enable other application types to be created.
Ethereum, much like Bitcoin is a currency, and runs on a blockchain, however Ethereum has its own little niche. Their platform is decentralised, just like Bitcoin, but their platform and blockchain was custom built to run Smart Contracts. While the Bitcoin network can do the same, but Ethereum (at least in my mind) is a far better platform as it is purpose built.
“Applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.” – ethereum.org
As good as the ethereum.org definition of a smart contract is, it doesn’t tell you how all those wonderful things will be achieved, or how they might be used, so let’s look at a few examples:
Our first example will be the most basic application of a smart contract. You are a business owner, or maybe you’re a freelancer or contractor. I’ll use the example of a freelance photographer who was hired by a magazine to photograph an event.
Sometimes freelancers aren’t promptly paid, and sometimes freelancers don’t deliver as they promise, either one of these, or a myriad of other issues may cause a dispute between the two parties. Smart contracts simplify and automate the implementation of the conditions that two (or more) parties agree to.
A smart contract is basically an if, else statement. So, using the above example, If I was the magazine, I would set up a smart contract with the freelancer. We would agree on the fee, the due date, and perhaps a few other details, quality, quantity, etc.
These conditions are put into the smart contract, and the funds from the magazine are held in escrow whilst the contract is being fulfilled. If the freelancer submits the photographs on or by the time the contract due date comes into fruition, and all of the conditions agreed upon are met, the funds are released to the freelancer, else the funds return to the magazine.
Will and Testament
We just explored a short-term type of contract, but what if I wanted to ensure that my decisions are carried out – even if I am no longer around or able to enforce them.
We discussed previously that a blockchain is a ledger, which means that it is simply a recorder of transactions. As I’ve said before, the blockchain is a platform, and not the final product, the currency element is just one application on the blockchain’s platform.
We can create applications to register, log and transfer the ownership of any asset. So it is feasible that everything I own could be added to a smart contract, and in the event of my death, or incapacitation, the contract would fulfil all of the criteria that I programmed would be implemented, this could go as far as my wishes should I be on life support, require a blood transfusion, or whether or not I want to donate my organs.
These contracts are probably most useful when it comes to managing and doing tasks that take a large amount of time or resources.
A claim at an insurance company requires many manual tasks and lots of human interaction, this inevitably comes at the cost of every single customer as the insurance company needs to cover its overheads. The blockchain can contain measurable parameters, like flood data, hurricane magnitudes, weather data etc.
When one of the parameters in the contract is met, say a hurricane and flood hits your property, the claims process can be immediately triggers and the payout process can begin, minimising the time it takes to settle a claim for a customer, or in the case of a natural disaster, many clients. Imagine if such a system had been in place when Hurricane Katrina hit the U.S.? It took many weeks for insurance companies to process all the claims, ultimately affecting countless families who were in dire need of the funds from their claims to rebuild their lives.
Ethereum is only the start of the blockchain innovations that take the invention away from a currency and into a practical and useable product or service that will change the way we do things, that have the potential to reduce living costs of our regular expenses and ultimately simplify our lives.