Business is made possible by contracts, both written and verbal.
In the past, lawyers made a living drawing up contracts that stipulated expected actions on the part of various parties, payments that should be made, dates and times for payment, and consequences if the terms are violated.
As I’ve written about previously, smart contracts build on top of this concept to increase efficiency, increase reliability and reduce costs.
Smart contracts are based on digital coding in blockchain, which is the technology that empowers bitcoin and other cryptocurrencies along with smart contracts. The most popular of the cryptocurrencies associated with smart contracts is Ethereum.
Ethereum allows developers to write their own smart contract, called “autonomous agents” in the founding white paper for this cryptocurrency. These autonomous agents include the various tasks that will be assigned and how each party will implement what needs to be done. Payments are stipulated based on the fulfillment of select, quantifiable objectives.
Ethereum is a cryptocurrency that holds the No. 2 place in market value behind bitcoin. A recently released competitor to Ethereum is EOS, designed to further enhance smart contracts.
Smart contracts are also called self-executing contracts. They take the place of traditional agreements by being able to self-execute and self-enforce. Self-execution is the reason we see strong benefits of smart contracts.
Where smart contracts excel
Recently, I had the opportunity to talk to the CEO of SmartContract.com, Sergey Nazarov, and he explained the business benefits of smart contracts and where they excel. You can see the full video of our conversation here.
Nazarov details what makes some industries ideal and others not so useful today for smart contracts.
During the interview, I suggested hypothetically that a smart contract would be good if I were to agree to clean his windows. We could have a smart contract that would pay me if I performed as I said I would and not pay if I did not.
He agreed that a smart contract follows that basic idea, but it would be very difficult to ascertain something as qualitative as cleaning windows. Smart contracts operate better when there is a rich data set from which you can derive information.