If you’ve ever typed ‘blockchain’ into Google, you’ve probably come across smart contracts.
Blockchain uses smart contracts to enact transactions without third parties. Bitcoin, for example, employs them to transfer money from one person to another. These are basic smart contracts, because Bitcoin’s language and system are limited.
On Ethereum, however, developers can create and program their own smart contracts. This freedom makes Ethereum less secure than Bitcoin. It also means that Bitcoin is far, far more constrained in its ability.
Most of us have heard the word ‘blockchain’ in relation to cryptocurrency. In reality, blockchain can do a lot more than just store and transfer Bitcoin. So can smart contracts.
Naturally, this brings up the question: what exactly is a smart contract?
Smart contracts are computer protocols stored on the blockchain. These contracts involve the transfer of cryptocurrencies or assets. Because blockchain is decentralised and permanent, so are contracts, and all parties involved can view the contract and add changes.
How are companies using smart contracts?
Companies can use smart contracts for legal, governmental and employment purposes.
In December 2017, several banks – including Barclays, Credit Suisse, KBC, SIX, Thomas Reuters and UBS – collaborated to implement Ethereum smart contracts. The goal of this collaboration was to improve data quality in the markets in the financial instruments directive (MiFID) regulation of January 2018.
The foundation of the future
Smart contracts remove the uncertainty of a contract’s transparency and legitimacy. Because of this, usage has increased immensely over recent years. On January 4, 2018 alone, Ethereum processed 1,349,890 transactions in a single day with smart contracts. This is a sharp contrast from July 2015, when Ethereum went live, and had a mere 8000 transactions per day.
In short: not only are smart contracts more efficient, they are gaining traction beyond the blockchain community. Adoption, eventually, may become more of a requirement than a choice.
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