Emerging financial technologies go well beyond the international banking system. Some of them start with disrupting the world of finance and then stretch their fingers into other markets and industries.
Here are a few examples of one such technology; the blockchain “smart contract” –poised to take over a job near you.
Blockchain smart contracts are a sudden death for many different jobs and tasks typically reserved for humans of the white collar variety.
From within every niche market, smart contracts have the potential to disrupt or further automate jobs to the point where they may just put people out of a job; lawyers, asset managers, accountants, supply chain controllers, record keepers, dispatchers, lab assistants, warehouse managers, election officers, insurance brokers, Agile scrum masters, travel agents — even historians — could have their jobs forced below their current pay grade or automated entirely.
Yes, many of these jobs are already automated. However, they often still rely on the accountability of a signature and a last name. Smart contracts have finally cracked one thing humans have relied on to justify their salaries: accountability.
What is a Smart Contract?
Wikipedia has a pretty straightforward definition of what a smart contract is; “A smart contract is a computer protocol intended to facilitate, verify, or enforce the negotiation or performance of a contract”.
Simply put; a smart contract can facilitate the numerous touch points in a contract process, verify, and then enforce them.
And since every process can be mapped, this means that any process a human can do, a smart contract can do just as well, if not faster, and much more efficiently. In essence, they’re apps that run on a blockchain.
Understanding Smart Contracts
By the year 2017, just about everything in the physical world has had a digital representation created to turn it into a data point.
The most rudimentary example of this is a library book; for every library book printed and stocked onto a shelf, there’s a data point that represents that book. Each book even has a complete digital copy that can be read without reading the physical book.
A library book’s data point can be shuffled around a digital world — it can be checked in, checked out, associated to the profile of a borrower, or the library itself. The status of said data point can mean late charges to a borrower’s profile (account), or it can mean it is free for another borrower. It’s digital status defines its place in the physical world, and vice versa.
Perhaps somewhere along the way the book has been damaged, its condition noted as an attribute on its data point, and it will then be sent off for rebinding automatically.
Today, with human oversight and a range of proprietary softwares linked together, grocery stores automatically order new stock, insurance policies are written, paid for, and activated, assets are tracked and sent back to their leasing companies when their lease has ended.
You’re probably thinking, yes, these things have been automated for quite some time. Today’s processes run inside inefficient closed software that is horrendously integrated to allow them to talk to each other and verification of many processes are placed in a queue awaiting human eyes. It’s a bit of a mess.
Related: What is Blockchain Technology?
Benefits of a Smart Contract
Smart contracts live on a shared database where all parties have a copy –unlike today’s systems where every company keeps and stores their own records.
If anything in the physical world can represent a data point with attributes and rules, then it can be organized into a smart contract.
With this in mind, here are some key benefits of a smart contract:
1. Instant Verification
With smart contracts, transactions occur the moment contract terms are fulfilled. At the time of writing, it can still potentially take months for an asset to be moved from one point to another after a contract is signed. Like sitting on a runway waiting for the go-ahead for a takeoff.
There is no long-winded verification process to cover asses or appease an insurance company with a smart contract. Approvals are verified in real-time, based on present conditions without a human bottleneck or a signature — without a name.
Where complex “agreements” need a second or third set of eyes, smart contracts move forward with the utmost speed and efficiency.
Why trust a smart contract? Smart contracts are stored on a blockchain that is duplicated into a series of copies stored across a network of separate machines. In other words, it’s immutable.
If one copy is hacked or incorrectly altered by a human, the majority eliminates the anomaly.
The processing power required to fudge a blockchain ledger entry doesn’t exist today. And as new technologies arise, the complexity required to administer changes to the blockchain can, too.
In other words, trust is built into the system. Unlike anything seen before.
When all smart contracts are transacted without any ambiguity on a transparent system that keeps a digital ledger that cannot be compromised because it’s backed up across a massive network hundreds or thousands of times, all data can be reviewed, and reviewed, and reviewed.
In other words, a building can’t get hit by a mysterious gas leak and disappear with all the records it contained. There’s an audit trail that cannot be corrupted with existing technologies.
In the least, this simplifies dispute resolution to a T.
4. Enhanced Privacy Structure
Existing blockchain technologies are fully transparent. In fact, if you come across a blockchain address you can scan it or enter it into a corresponding database and view transactions. You might not know who owns it, though.
The Ethereum address account QR code below can be scanned to reveal the balance of its account. But who owns that account?
In a sea of somewhat anonymous addresses, general privacy exists today. However, new smart contract technologies leverage privacy permissions to ensure that they are only seen by those which possess the proper roles or levels of access.
As smart contracts continue to find their way into the homes of reputable business, the security and privacy of smart contracts will become more standardized and trustworthy.
In a nutshell, smart contracts tighten the laces of existing processes and allow for more autonomy.
Sharing a database with all related parties and allowing them all to keep an up-to-date copy ensure trust and transparency while adding speed and efficiency to any process they facilitate.
Can you think of any other reasons smart contracts will change the world?