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The Use Of Smart Contracts Is Revolutionizing The World Around Us
The smart contract is a self-executing set of instructions carried out by a code, which are then verified on the blockchain. This technology is a key component of many decentralized applications (dApps). Smart contracts have the advantage of being trustless, in other words, they can reduce or even eliminate the need for third-party intermediaries. This article outlines how smart contracts are affecting the worlds of finance, real estate, healthcare, and gaming.
Smart Contracts: What Are They?
Smart contracts are among the key components of many blockchain-based ecosystems, and they are particularly critical elements of application-specific blockchains like Ethereum. In general, these digital contracts are trustless, autonomous, decentralized, and transparent — and they are generally irreversible and unmodifiable once implemented. The advantages of smart contracts include the reduction — or even elimination — of the need for intermediaries and contract enforcement. A smart contract is defined by the code, which is the final arbiter of the terms of the transaction. This is one of the reasons why smart contracts have become the building blocks of an entire ecosystem of decentralized applications (dApps) and represent a major focus of blockchain development in general.
The smart contract can be used only for one transaction type: If one thing happens, then another occurs. In contrast, most dApps rely on smart contracts to provide a sophisticated, synergistic set of functions. There are thousands of dApps across multiple blockchain networks, including finance, gaming, exchanges, and media — and all can utilize smart contracts in different ways and to different ends.
Some smart contract applications include financial activities such as trading, investing, lending, and borrowing. The technology can be applied to many different fields, including gaming, healthcare, and real estate. Furthermore, the technology can be used to configure entire corporate structures. We will examine some real-world examples of smart contracts and decentralized applications (dApps) in this article, as well as explore how they could be used to shape the future.
Use Cases For Smart Contracts In Finance
Decentralized finance (Defi) dApps represent an alternative to traditional financial services, and their popularity is growing as a result of the trustless, immutable, and transparent characteristics of blockchain technology and smart contracts. In addition to providing alternate services to the banking and financial services industry — such as lending, borrowing, trading, and a host of other financial services — Defi dApps offer completely new types of products and decentralized business models that can be of tremendous value and utility to users. The increased transparency provided by smart contracts (along with 24/7 functionality and reduced costs) have the potential to lower the entry barriers for people all over the world to gain access to financial services.
A number of Defi projects have already generated billions of dollars in value and are expected to continue this trend as more people become aware of the sector’s unique value proposition. Users have the opportunity to participate in this new generation of financial services without having to rely on centralized custody or pay fees to intermediaries. Even though the Defi industry is only a few years old, and given the number of dApps that are already providing value and utility to consumers, it is already evident that smart-contract-based dApps are having an impact on the financial industry.
NFTs and Smart Contracts In The Gaming Industry
Global Gaming is a $100 billion industry that continues to grow rapidly. However, the process by which value is created and distributed in this sector can be inequitable. Developers make and release games, and players pay to play and interact with those games. Players are thereby perpetuating a one-directional flow of value in which they must pay to gain access to in-game assets and gameplay configurations. The use of blockchain technology in gaming can allow players to capture the utility and value of in-game purchases and asset acquisitions more efficiently.
In the gaming industry, blockchain technology is commonly used to identify non-fungible tokens (NFTs) — digital assets that represent in-game content. NFTs are based on smart contracts. NFTs are unique, rare, and indivisible, while the blockchain networks that support them facilitate player ownership, provable scarcity, interoperability, and immutability. In gaming, these characteristics of blockchain have the potential to drive mainstream adoption and a more equitable value model.
Blockchain technology allows you to store in-game purchases, sell them to other players, or transfer them to other supported games thanks to its implementation in the gaming industry. Furthermore, the scarcity of in-game NFT purchases can be proven through the immutable records embedded in an NFT’s underlying blockchain — as well as its own history. Blockchain-based games and dApps are unique in that they can be designed to retain value beyond the game in which they were developed. These features have the potential to create new game categories, expand gaming economies, and stimulate the development of new games. Gaming-focused blockchains include Ethereum, TRON, EOSIO, and NEO.
The Legal Industry and Smart Contracts
One of the most promising real-world applications of smart contracts is their ability to function as legally binding contracts — the type that governs most contemporary business interactions. Most recently, technology has been driving innovation in the legal industry with the introduction of electronic signatures for binding legal contracts. Among the many new developments in this area, smart contracts may soon become an option for parties to legal agreements, reducing the cost of using lawyers and other intermediaries.
The widespread use of customized smart contracts for myriad types of transactions that can reduce transaction costs and increase transaction speed may be closer than you think. In certain contexts, some U.S. states have begun to permit the use of smart contracts and blockchain in the legal industry. In Arizona, smart contracts may be used to create enforceable legal agreements, and in California, marriage licenses may be issued using blockchain technology. Globally, there is movement.
Real Estate and Blockchain
With tokenization, smart contracts are advancing fractional ownership of assets and thus lowering the entry barrier for many to invest in real estate through the integration of blockchain technology and real estate transactions. There have been a number of successful ventures in tokenizing real estate assets, including those involving platforms such as RealT and SolidBlock, which combine blockchain technology with real estate. A smart contract can also revolutionize the documentation and transaction processes for real estate transactions by incorporating blockchain technology. As an example, the Republic of Georgia has been developing a blockchain-based land title registry since 2016, and similar projects are underway in other jurisdictions such as the United Arab Emirates (UAE).
Anyone who has purchased a home or other property is likely aware of the potential for hidden costs associated with closing fees, title transfers, and broker fees. Smart contracts, which operate without intermediaries, may be able to reduce or even eliminate these costs. The tokenization of property allows much of the required record-keeping to take place via associated smart contracts, which can save the parties both time and money. It has even been suggested by some experts that smart contracts can benefit parties by streamlining rental agreements, complex credit or mortgage agreements, as well as warranties and insurance policies. The use of smart contracts and blockchain in real estate could potentially reduce the necessity of legal counsel or other advisory services, thereby reducing costs across the board.
Building Decentralized Autonomous Organizations (DAOs) Using Smart Contracts
A law passed by Delaware in 2017 allows businesses to be incorporated and managed through the use of blockchain technology. This bill paved the way for the proliferation of decentralized autonomous organizations (DAOs), which operate as a type of corporation with ownership and compensation embedded in smart contracts. Through the use of smart contracts to encode corporate structures, DAOs can enable sophisticated, automatically enforced incentive structures within an organization. Through incentive structures that may not include formal employment contracts, DAOs can also reduce administrative costs, including office space, hiring, and payroll.
Emerging Technologies and Smart Contracts
Blockchain technology and associated smart contract technology are ideally suited to facilitate complex computational tasks like those involved in machine learning and artificial intelligence (AI). There is potential for creating AI-powered smart contracts when data-intensive AI processing is combined with the immutability and decentralization of blockchain technology. As smart contract applications are implemented across a broad range of sectors, they will need to become increasingly complex in order to fulfill their new roles. Despite the fact that rudimentary smart contract use cases can be manually designed, AI-enabled smart contracts may be able to create highly complex, more responsive, enterprise-grade smart contracts and dApps that have the potential to expand the potential of the technology considerably.
According to many experts, the fields of AI and blockchain could benefit from each other’s unique characteristics. Smart contracts may benefit from the advanced computational capabilities and adaptive systems of AI technology, while AI implementations can benefit from smart contract technology for autonomous execution of sets of rules and for providing a secure environment with which to keep sensitive and valuable machine learning data. With its proprietary smart contract programming language, Scilla, and advanced parallel processing structure based on sharding, Zilliqa is one of the many blockchain platforms developing advanced computational capabilities.
Advantages Of Smart Contracts In Other Industries
It goes without saying that this list of real-world smart contract applications is by no means exhaustive, and smart contract technology will continue to improve upon countless other industries for years to come. In order to meet the needs of the growing Internet of Things (IoT), researchers and developers are eager to make use of smart contract technology. As blockchain technology, in general, is already being used to give security and transparency to IoT devices, smart contracts may further this integration.
Healthcare is another industry that has begun to utilize blockchain technology for secure, trustless, transparent data sharing. A strong relationship between healthcare and blockchain technology can also be facilitated by the integration of smart contracts and entire dApps designed to solve key healthcare challenges such as interoperability, identification, and authentication. As a result of all of these established use cases and the discovery and development of many more, smart contracts and dApps will continue to revolutionize the world of digital agreements.
