Smart Contract Ideal Use Cases

by Auctus Team

With the introduction of Ethereum in 2015, an additional concept was also disseminated as part of the blockchain; smart contracts. A smart contract is nothing more than a computer code that establishes the rules for a contract (i.e.: if X happens, then do Y). As such, a contract can manipulate inputs using defined algorithms, store data and provide outputs suiting the needs of an application. One contract can also interact with other contracts, reusing its code, and taking advantage from a set of already established rules and can consolidate them.

Ethereum implements a turing complete programmable language over the blockchain. A smart contract running on a blockchain is run by a massive set of computers, rather than being controlled by a small cluster or just one server. This means that everyone gets to be aware of the inputs, calculations and results.

Because of blockchain’s inherent decentralized technology, smart contracts allow individuals to achieve an agreement between themselves, without the need to pay for a trusted intermediary, such as a bank, notary or lawyer in case of a dispute. Furthermore, there is no downtime, censorship, fraud or interference. Through Ethereum, a series of currently indispensable intermediaries could become obsolete.

Why do we need blockchain and smart contracts?

There are many benefits of using smart contracts. Deloitte has listed 9 benefits of blockchain technology.

Disintermediation & trustless exchange: transactions and values exchanges that before rely on an intermediary to guarantee that both part will act honest, now can rely only on code logic.

Empowered users: Without the requirement of a big intermediary, users can now choose to use the contracts that better fit their needs.

High quality data: blockchain data is complete, consistent, timely, accurate, and widely available.

Durability, reliability, and longevity: As data in a blockchain are spread across multiple network’s nodes it can not be erased, censored or does not have a central point of failure.

Process integrity: Code will be executed exactly as it logic determines, there is no space for multiple interpretation.

Transparency and immutability: Data that uses blockchain have full transparency and traceable background, making it almost impossible to change data after network’s confirmation.

Ecosystem simplification: Less intermediaries, less registers duplicity, full acknowledgment between the parts.

Faster transactions: Transactions that once before rely on multiple intermediaries to approve and validate can now be published straight through its users.

Lower transaction costs: middlemen fee that chopped big part of deal, now only need to pay network’s computational fee.

The past two years have shown that blockchain applications are growing exponentially. Many startups are implementing the various capabilities of blockchain in numerous fields: gaming, real estate, gambling, digital content, digital identity, escrow and custodial service, medical records, investment funds, computation sharing, digital advertising and many other are just a small example of the ground already covered. Apart from startups, banks and other financial services are also been actively investing in blockchain technology. Some of them prefer to keep information private and are therefore using a private chain instead of Ethereum’s public network.

For a wide range of potential applications, blockchain-based smart contracts could offer several benefits. Some entrepreneurs believe that virtually all industries could be disrupted by smart contract technology. However, there’s obviously still a long way to go.

If you are thinking about blockchain based business opportunities, it is important to avoid getting over-excited about an idea or a problem that a traditional centralised database could solve easily. Blockchain just for the sake of it has no added value. Only situations where the characteristics blockchain and smart contracts add value make sense.

What are ideal use cases for smart contracts ?

Source: Auctus Team

Now we are going to take a look into those questions by analysing what we are aiming to accomplish at Auctus.

The challenge of providing financially secure retirement solutions to our aging society is well known. Since the middle of the last century, life expectancy have increased significantly. The top bar represents the projected percent increase in life expectancy by 2050.

Source: The World Bank DataBank: Health Nutrition and Population Statistics: Population estimates and projections

Even though the stakes in this area are huge, the retirement market is still poorly explored, since there is a lack of easy access to pension funds. Many workers in developed and developing markets, still lack easy access to pension plans and saving products. The self employed and informal workers are, obviously, least likely to have access to a cooperative savings plan. Those working at smaller companies are also at disadvantage, considering that regulations may be causing overly burdensome plan to be offered.

There are many inefficiencies in the industry. Most of the funds’ money is invested in plain vanilla assets like domestic and foreign stocks and bonds. The managers of those “public asset classes” are usually paid based on the amount of money they manage, not the returns they achieve. Sometimes the more the manager takes in fees, the worse the fund is doing. This contributes to a lack in consumer confidence.

Transparency in this segment might also be a concern. Despite being heavily regulated, there are still several cases of fraud in pension funds. Poor management and oversight are enabling corruption within the fund.

Auctus focuses on the sustainability and affordability retirement systems, ensuring that the public has confidence in the system, and that agreed benefits will be honored. To protect against poverty in old age, we believe that retirement systems should be redesigned to provide a higher-level playing field and equal opportunity for all individuals. We also believe that this improvement is possible by introducing enough transparency and assertiveness to the system, using a solution based on blockchain / Ethereum technology.

Our crowdfunding event is coming very soon. If you liked this article, join the discussion on our slack and follow us on twitter for updates!