Contracts and regular people
What do we know about contracts? First of all, what happened to you physically when you read that question? Did you, perhaps, wince slightly, tense-up? Maybe not a physical response: a slight switching-off in the brain, maybe even a desire to cry? Well, that’s all perfectly normal because, let’s face it, for a lot of people contracts are a notorious pain in the neck. For many who hear the word ‘smart contract’ their first thought is that contracts are already too smart for their own good.
Quick review of the blockchain
Originally created in order to facilitate the cryptocurrency, Bitcoin (note – you don’t have to own or be in any way interested in cryptocurrency in order to make use of smart contracts), a blockchain-based process is inherently resistant to modification of data – which is critical for trust in contract agreements. If you’re interested to learn more check out our A to Z blockchain.
How does this transfer to ‘contracts’?
Smart contracts operate on an ‘if this happens then that automatically happens’ basis.
The nature of blockchain means that the terms of a contract, once agreed on, can be implemented through the public, decentralized network of peers maintaining a ledger and can’t be tampered with. A bit like a vending machine: put your money (conditions/ contract) in and, if it meets requirements, get the thing you paid for out. No “middleman cashier “asking you if you want to supersize anything or taking a cut for him or herself…
So, smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman. This significantly reduces cost and time for processing.
Smart contracts use-cases in the professional services
Smart contracts can be most useful in those instances where the fulfilment or process of the contract takes a long time – and in the professional services that’s almost all the time. Applying for a mortgage or a credit card, insurance claims, drawing up and implementing legal agreements etc. are all long-winded, expensive processes that could be heavily streamlined.
Insurance policy claims offer a good example (which I’ve borrowed from an article boldly titled: Smart Contracts: The Blockchain Technology that Will Replace Lawyers): currently insurance policies require a lot of manual human intervention. Using smart contracts, the blockchain can contain measurable parameters, for example the magnitude of an earthquake, wind-speed or location of a hurricane and can release compensation immediately when a claim is filed as long as it meets certain verifiable parameters: if this than that.
In mortgage processing, Smart contracts could reduce the price and time involved through automation, process redesign, providing shared access to electronic versions of legal documents and access to external sources of information.
Last example for the purpose of this article is Lenovo who have registered a patent to use blockchain to create a technology that “works by encoding a digital signature into documents. By using a digital signature instead of a physically printed mark, the recipient can be confident the document was not modified after it was created.” The aim is to solve the problem of the vulnerability to tampering inherent in ink-signed documents.
As with all use-cases for blockchain tech outside of cryptocurrency, we are by and large dealing with speculation. As is the way in this landscape – we keep watch with a sense of enthusiasm, if somewhat tempered by a sense of reality.
Mad4digital is a tech marketing company curious about the technology of everything. We are proud partners of The Coin Lab Europe’s first end-to-end Blockchain consultancy.