How Smart Contracts Might Change The Way We Live

A brief introduction to smart contracts and their real-world applications.

Certain technological advances — such as the Internet — have altered human existence in ways we never could have predicted. What started out as a fad-like concept reserved for nonconformists and outliers has single-handedly changed the way we share information across time zones and borders. The revolution of blockchain technology is predicted to do the same.

The power of blockchain represents a shift in our dependence on centralized value transfers and third-party services monopolized by banks and governments, to one of secure digital interactions that are trustless, open-source and transparent. They represent a realization of a technological and philosophical vision — a change in the status quo that removes inefficiencies and empowers people to rely on their skills and abilities regardless of where they are in the world.

With the advent of smart contracts based on decentralized public systems, there is high potential that the way we live and interact with one another is about to be transformed.

Smart contracts are, in essence, programs stored in an immutable database, with thousands of copies worldwide. They could enable the automation of business processes and allow for a high level of transparency and security. Each step of a value transaction can be tracked and verified. As smart contracts exist on open systems that anyone can access and use, they could be instrumental in the transformation of a wide range of services and the elimination of intermediaries that would be no longer required. This is the far-reaching promise of smart contracts. However, challenges will arise on the journey ahead.

The trouble with smart contracts

Scalability, or the number of computations that can be performed per second, and ease of usability by non-tech users are the two primary objectives along the way.

The smart contract platforms that are currently available are not yet equipped to support a large variety of commercially successful applications.

Even the small number of decentralized applications that are currently available for use by thousands of people can overload the system and lead to errors and delays. This issue would obviously become exponential if millions or billions try to use these platforms.

These are some of the fundamental problems with smart contracts that æternity is determined to fix.

æternity’s smart contracts exist in state channels, not on-chain, as is the case with current blockchain solutions.

This allows for the load to be moved away from the main chain, facilitating significantly improved scaling. With æternity, the vast majority of value transfers and smart contract executions will happen off-chain with the positive effect of increased privacy, required for numerous business processes. We believe this will effectively unleash the full potential of smart contracts.

Cutting out the “middlemen”

Smart contracts are particularly useful in reducing the complexity of sales processes by removing unnecessary parties — the middlemen which previous technological inadequacies required. The impact of this technology on how we live could be enormous, given how much time, energy and money we currently spend on things like identity management, currency transfers, administration, data storage & security, notaries, sale agents, trade through third parties and more.

Smart contracts have the potential to completely redefine how we use resources when it comes to the legal agreements we create between people, companies, and governments.

Smart contracts have a multitude of applications and will be particularly powerful where user-centric identity management is concerned. Not only will blockchain technologies allow for secure and fast identification verification to occur, they could also drastically reduce instances of fraud, smuggling, and money laundering to name a few.

The vision for a self-sovereign identity, meaning an identity that is not managed by a government or company, could be realized as a result of this technology. æternity’s Base aepp (previously Identity Manager) is the first step toward this goal. It will allow users to have various accounts within their identity, depending on context and will allow the user to manage them freely, thereby removing access to third parties that are no longer necessary. Moreover,

a self-sovereign identity will allow users to sell their data for real-world value and not provide it indiscriminately in exchange for a free service.

Thanks to scalable smart contracts on a public blockchain, users will be able to regain their privacy from technological giants and governments.

Trusting the crowd

One of the biggest advantages of the user-focused approach to smart contracts is the potential for neutrality via the essence of what blockchain is: crowd-sourced trust. This could be particularly powerful in the entertainment industry for example, where musicians and game developers can create products and choose the conditions under which their materials are sold. This would allow them to retain not only rights to the content, but also the bulk of income generated from it, rather than ironically being the last person in the supply chain to get paid. This could also change social networks, where user data is sold and abused for profits that go to a company, potentially re-distributing proceeds to the community of users to whom the data belongs.

Public blockchain for public services

The capacity of blockchain smart contracts to liberate us from paperwork and red tape is another exciting aspect of the technology. A world where administration services operate quickly, seamlessly and with complete transparency was previously a dream. No more queuing up in lines to submit a passport application, or spending hours on the phone on hold to change the registration of your address. Imagine having all of your health records in one place, without having to liaise between all the medical experts you’ve seen to share the information. Or actually knowing what’s in your own records — from health to finance, services history to property ownership.

The future is now

Thankfully it is not a question of if this will happen, it is a question of when. This is æternity’s vision for a brave new world, based on a powerful blockchain platform, scalable smart contracts, and user-friendly applications. The re-distribution of power is already happening. æternity is proud to be a catalyst, ushering in this exciting digital revolution.

Learn more about æternity’s approach to smart contracts by watching this video by Erik Stenman, recorded during the Code BEAM SF 2018 event:

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