I first heard of Bitcoin in 2011. I was genuinely fascinated by the idea of a decentralized digital currency that was under the control of no single person or body. Even more importantly, it occurred to me that we finally had “money that was truly for the internet.”

Now, granted, there are technology companies and financial institutions out there that have actually worked to improve the use of fiat money (money issued by central banks) on the internet. Still, none quite cuts it like Bitcoin.

With Bitcoin, I do not have to go through the cumbersome and risky process of entering personal identifying details to make a one-off order for a pizza or a pair of sneakers. With Bitcoin, I do not have to commit to a monthly subscription for a service that I probably only wanted for a small moment in time.

With Bitcoin, I just pay in cash as I always do offline. No personal data shared. No data leaks to worry about.

Bitcoin is more than just a currency

But, as I learned later, serving as money is not all that Bitcoin can do. Specifically, that is not all that the Blockchain, the peer to peer public ledger on which bitcoin runs, can do.

The Blockchain is actually an instruction programmable public ledger. The basic instructions on it are like ‘send X money to Y address and return Z balance’.

These instructions can be made more complex through scripting that is done on top of it to form smart contracts.

Now, before we get ahead of ourselves; what is a smart contract?

There are many ways to look at it. However, a smart contract is essentially a piece of software with rules on how to automatically negotiate, verify and execute agreed terms of a contract.

In other words, a stored process is carried out when an agreed upon event triggers it. A simple smart contract in action can be experienced at the soda vending machine. Insertion of coins automatically triggers delivery of a can of soda.

Blockchain removes single points of failure

However, the Blockchain is taking away the reliance of making such smart contracts between transacting parties on central systems. The peer-to-peer network on which Bitcoin runs enables parties to transact directly with each other without going through a trusted third party.

A copy of every contract that is formed, hashed and confirmed on the blockchain is stored on every computer that is part of the peer to peer network. If any party tries to change its terms later, the network won’t allow it.

Personally, the idea of smart contracts on decentralized platforms has always fascinated me. It solves for me problems that have for so long been outstanding.

A case in point…..

My father was a session musician, and he played on a few rock and pop hits in the 70s and 80s. For the most part, he gets royalties for airplay, but in a not in a very straightforward way. He is represented by a collection agency which collects the royalties from the radio stations.

Whenever one of his songs is played on the radio, it is logged and hopefully payment is sent to the collection agency. With this, of course, comes with the challenge of auditing.

How does the agency track when the song is played? How would my father know that his royalty statements are accurate?

Indeed, a lot of tracking and auditing are required, which are costly undertakings.

Here comes smart contract…

Now, however can this be solved is through the application of a smart contract:

A song is written and copyrighted on the blockchain. A smart contract is drawn stipulating the amount payable for using the song. It could also break down percentages of the income going to my father, writer, producer, etc. Every time someone seeks to use the song, he or she is automatically charged, and the revenue goes to my father and producer without going through a third party.

Obviously, many details have been left out. However, this gives an idea of how smart contract technology could help the music industry.

As a matter of fact, smart contracts on a blockchain have the following advantages;

No cost of a middle man, No worry about trust. Contracts are enforced automatically Resistant to single points of failure

There are already startups as well as established mainstream technology companies developing smart contract solutions.

One of the most mentioned brands in this regard is Ethereum. This is not a company but an open source platform project first proposed in 2011 by Vitalik Buterin, a Canadian-Russian programmer.

It is an entirely different blockchain with a built-in Turing-complete programming language that allows anyone to easily write smart contract applications.

Another platform that could be used to create smart contracts is Rootstock. It is like Ethereum in most aspects only that works in a side chain (a smaller blockchain that links to the Bitcoin Blockchain) hence it will use bitcoin to power contracts.

It is also the first open-source platform of its kind that also rewards the Bitcoin miners via merge-mining.

Other startups in the space include CounterParty and CommonAccord. Indeed, as the month of March 2016 came to a close, BNP Paribas, one of the largest commercial banks globally, selected CommonAccord as one eight startups to join it new FinTech accelerator, L’Atelier.During the London Ethereum Developer Conference in November 2015, Matthew Spoke of Deloitte said the following; “What is the role of an auditor going into the future where smart contracts operate on a large scale? Will we need humans to check transactions? The system itself will ensure things are accurate, verified and confirmed.”

Indeed, smart contracts, on decentralized platforms, is not something that many people have interacted with yet. However, everything points to a future where most of the enterprise processes will be guided by this technology.