The advent of blockchain technology has led to some remarkable solutions being dreamed up including the ever popular cryptocurrencies that caused a fever a few years ago.
Cryptocurrency is not the only thing that blockchain can be used for in fact many experts will argue it’s the most boring application of a blockchain. So then, what does an interesting application of blockchain look like?
Smart contracts is as good a place as any to start but what is a smart contract?
A smart contract is usually deployed on the Ethereum blockchain and it’s written in the Solidity programming language but there’s a bit more to it as senior associate at Webber Wentzel, Seshree Govender explains.
“Smart contracts comprise of two essential elements: self-executing functions; and storage state variables. As both a smart contract and a traditional contract share the same end goal, which is to give effect to the intention of contracting parties in their dealings with one another, the fundamental structure of a smart contract is comparable to the fundamental structure of a traditional contract. The storage state variables and self-executing functions making up a smart contract are comparable to, and share common traits with, the contractual definitions and rights and obligations set out in a traditional written contract,” says Govender.
“In addition to the contractual definitions, a traditional contract similarly houses sets of rights and obligations which operate in tandem with one another. For every obligation imposed on a party, there is an associated right that can be invoked by the other party. Smart contracts differ in that, instead of a set of rights and obligations, smart contracts contain a set of ‘if/else’ conditional statements, which operate on the ‘if this – then that’ principle,” the associate continues.
The idea is that the contract is automated in a sense. For example if I had a smart contract with my landlord and I fail to pay rent, the smart contract could immediately terminate my lease. The fine grained facts would of course need to be discussed in-depth but the smart contract acts as the unbiased third party ensuring the terms of the contract are adhered to rather than a human who could be swayed to act in either of the party’s best interests.
“In a smart contract structure, the required contractual performances are not dependent upon the parties’ trust in one another, or a 3rd party, but rather are dependent upon the parties’ trust in the smart contract itself which is not premised on a promise to perform but on intentional programming designed to achieve a specific objective,” says Govender.
And Govender points out, smart contracts are inherently trustworthy, eliminating the need for two humans to establish trust or hire an intermediary if they don’t feel the other person is trustworthy.
The key is simplifying the entire contractual process and making each party fully adhere to the terms the contract lays out and at the end of the day isn’t more accountability something we’re all striving for?[Image – edar from Pixabay]