Smart contracts have the potential to make business more efficient. So what are they and what are the coolest smart contracts that are already used in the real world? A smart contract is a computer program that runs on a distributed ledger or blockchain network and executes the terms of a contract. So far, most of the focus has been on financial services like payments and lending, but the applications are much wider. It can be anything from buying a house to hiring a consultant.
Here are the coolest smart contracts in action.
Futarchies
Futarchy is a new way of making decisions in organisations. It implements decision markets to determine the most successful course of action.
Futarchy started as an idea developed by economist Robin Hanson, the model allows any participants, employees or voters to buy stock in an idea. This idea may or may not be accepted or incorporated over time. All proposals or policies, as well as their actions are then tested to predict their success rates.
An organisation could use futarchy to decide which product to build next, what business strategy to pursue or even what colour to make their logo or what party theme to vote for.
Oracles
Oracles are a step between the real world and the blockchain. The idea is that real-world data is fed into the blockchain, so smart contracts can execute when certain criteria are met. The technical term for this is “oracle”, as they are like intermediaries between the real world and the blockchain. One of the most well-known examples of an oracle is Augur, a prediction market platform which is powered by Ethereum smart contracts.
Another example are insurance claims. e.g. if an insurance company wants to give you a payout, they will use an oracle to check the weather report and see if it was indeed stormy that day. If it was, you get your money.
Token sales
A token sale is just another way to raise funds for a project. Rather than selling shares in the company, the project creates and sells its own digital tokens. The tokens can be sold directly to investors or traded on an online exchange afterwards, just like any other cryptocurrency. Many token sales are built on Ethereum smart contracts to issue, track and trade tokens.
Distributed Autonomous Organizations (DAOs)
A DAO is like a corporation, run by computer code and made up of smart contracts instead of people. It’s owned by everyone who holds its tokens, but it doesn’t have a management or board of directors, it just runs itself.
The involved team of community members creates or outsource development of a smart contract which is then in charge of the functioning of a DAO without needing any human involvement.
The Future Of Real Estate
Let's say you're buying a house, and you set up your escrow in the agreement to ensure that both you and the seller get paid at the same time. This can be done through your bank, with a third party acting as the intermediary. However, this is all very inefficient in terms of time, resources and money - not to mention that it leaves room for mistakes and exploitation.
In an ideal world, you'd have a decentralized escrow that allows you to set up the agreement directly with the seller. That way, when you pay for the house, the money will go directly to the seller, and vice versa - no excessive fees and no risk of being cheated. This is exactly what smart contracts allow people to do.
In a smart contract you can specify the conditions for transferring funds and when the contract will be executed, which can be months or even years after it was signed. And the blockchain makes sure that everything happens exactly as described in the contract - no one can cheat, no one can change the rules, and no one can stop that from happening.
Voting
Blockchain technology has gained popularity over the years, and now it is possible to run an election in a very simple way. Each voter only needs a smartphone to be able to vote from anywhere. A blockchain platform is then used to store all records and votes. This system is more transparent than traditional voting methods, as no one can change the results or tamper with any information.
In this era of advanced technology, it is important for people to be actively involved in the electoral process. This is especially true of people who are in positions of influence, such as company owners or company executives. An online voting system will allow them to make decisions based on the preferences of their employees.
In the context of elections in a company environment, smart contract voting is a way to vote on a ballot electronically, securely, and anonymously. After the election results become available and verified, a candidate will receive an encrypted message (EVM) to confirm their win.
Deal done?
There are still some issues with smart contracts that need to be solved before they can be implemented on a large scale throughout your organisation. The main question is whether or not they can be hacked. If someone gets into the system and changes the rules of a contract, everyone will think that this is what the contract actually says.
If this happens, then the blockchain becomes useless in a way. It's like having a contract that no one thinks will be executed. That's why it is so important that smart contracts require as much involvement, audits and security checks as possible.
When creating a smart contract, you need to be very sure that its terms are clear and unambiguous. There should be no way to misinterpret them. It is also important to involve real people in the process of signing the contract - this is the only way to make sure that both parties understand the rules and agree to them.
Nevertheless, smart contracts are an incredibly powerful technology. They can completely change the way we do business and interact with each other.