Instead, the priority areas for development should be those in which technology has not yet been used to optimize processes and those in which technology has caused difficulties and high-friction losses. Smart contracts should not come into play where proven technical solutions are already ensuring smooth processes. In the coming months, we expect to see more conditional statements being replaced by complex AI-based algorithms. Smart contract logic is another area in which we expect further evolution to occur. As the internet of things (IOT) enters the mainstream, the need for a common interface will become more pressing and any object that has a unique digital identifier will be a candidate for incorporation into a smart contract. Similarly, smart contracts do not share a common interface that facilitates communication between the various objects. Even two different models produced by the same manufacturer can sometimes have different charging ports. If the battery dies on your Samsung phone, you will not be able to charge it using your friend’s iPhone charger because the charging ports are different. To understand interoperability issues, think about your mobile phone charger. In computing terms, this is known as an application programming interface (API): an interface that enables interoperability. Nonetheless, although we are already seeing tangible progress towards the realization of the “smart home”, smart contracts will need to continue to evolve both from technical and legal standpoints.įrom a technical standpoint, smart contracts require a widely accepted industry standard interface to facilitate communication between smart contracts and objects in the transaction workflow. In this environment, the only thing a client would need is a secure digital wallet that could be referenced by the relevant smart contract to close off the transaction loop and send or receive the crypto-assets (tokens, bitcoin, Ethereum, etc.) specified in the smart contract. At the point of purchase, the property may already be connected to automated utilities (such as on-demand smart contracts to buy water, electricity, and gas), solar panel smart contracts that automatically sell excess electricity at the desired rate, automated cleaning robots that are activated at the most convenient time of the day, automated insurance policies against burglaries, and many more automated smart contract services. In the not-too-distant future, we will be able to buy houses through smart contract-enabled securitized loans coupled with legal paperless deeds. The following are just some of the examples of how embedding smart contracts in the transaction flow has the potential to reduce costs, accelerate transactions, and increase efficiency. These properties are leading to an ever-increasing number of use cases and companies are now using smart contracts to solve problems and automate processes in areas in which technology had not been used for this purpose previously. The properties of the underlying DLT (digital ledger technology) ensure that smart contracts can validate transactions, verify the legitimacy of counterparties, and perform routine account administration tasks almost instantly. Once a smart contract has been set in motion to complete a transaction, the transaction will be completed exactly as coded in the smart contract and no parties can interfere or change the result once it has been executed. Blockchain, the technology that underpins smart contracts, was designed to “create trust” through inherent properties including immutability, the consensus algorithm, non-repudiation, and encryption.
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