Wider View of Smart Contracts

 Smarter but also more usefully cooperative too.

Smart Contracts are Here and They’re Getting Smarter

by Thomas Frey | Dec 9, 2021 | Future Trends   in Futurist Speaker

In a recent podcast interview, Max Galka, CEO of Elementus.io (a “search engine for non-private blockchain”) explained the fundamentals of blockchain-based smart contracts using a travel insurance policy as an example.

In that scenario, a person taking out a travel insurance policy would instantly have the potential payout amount put into escrow by the insurer. If the plane left on time the money would revert to the insurance company, but if it was delayed, money would be transferred to the policyholder.

Departure and arrival times presumably would be defined in the policy in terms of plane pushback, wheels up, and the permission to de-board. Since these conditions are factual and not subject to interpretation, no lawyers or other parties are needed to determine whether on-time departure and arrival was achieved.

This may not be the best example, since policyholders might try to game the system, perhaps by actually trying to delay the plane. And insurance companies don’t have sufficient capital to hold in reserve at all times to cover every one of their possible obligations.

But the illustration makes the point about how smart contracts are self-executing. And they’re about to enter the mainstream of our lives in many scenarios similar to that illustration.

What’s Smart about Smart Contracts?

First, a note about terminology. In today’s IT world, the term “smart contract” is broadly applied to refer to the placement of nearly any program or decentralized application (DApp) on the blockchain.

For our purposes, though, we’re going to explore the concept in the context of smart legal contracts, contracts in the traditional sense of the word – agreements between parties that take the form of programs placed on the blockchain where the provisions are monitored and executed.

In this context, the concept of smart contracts emerged well before the advent of blockchain technology. The person who coined the phrase was a computer scientist, Nick Szabo, who likened the concept to the mechanical technology behind a vending machine.

Mechanisms in the vending machine verify that the purchaser has deposited sufficient money, verify that they’ve made a valid selection, and determine whether change is due. Only then does it deliver the product. No human being acts as an intermediary to verify the transaction – to the chagrin of someone who sees their Milky Way get hopelessly wedged so it can’t fall down the chute!  ... '