How Ethereum Cryptocurrency Smart Contracts are Disrupting Industries
The cryptocurrency market made massive waves in 2017, and analysts expect an even more erratic 2018 as investors double down, and blockchain networks continue to expand. However, there’s one open-source platform based on blockchain technology that is continuing to attract the attention of startups and even enterprises like JPMorgan Chase, Mastercard, Cisco, and more. It’s called Ethereum, and its innovative smart contract platform has separated it from even the most trendy cryptocurrencies like Bitcoin, Ripple, and Cardano. While these cryptocurrencies act more as digital payment systems, Ethereum smart contracts can manage agreements, store valuable information, and much more. Let’s look at how smart contracts can potentially disrupt many industries, and the different ways companies are applying smart contracts technology.
Ethereum Versus Other Cryptocurrencies
Bitcoin, the cryptocurrency that amassed the most attention in 2017, was designed to be a peer-to-peer digital payment system. It was the first decentralized cryptocurrency without a central bank or single administrator. However, the capabilities of Bitcoin and other cryptocurrencies like it are limited to the exchanging of digital currency.
To its core, Ethereum has a significantly different purpose than Bitcoin. While Bitcoin’s blockchain solely tracks its digital currency, Ethereum’s smart contract-based blockchain allows for the exchange of assets (equity) between parties under certain conditions. These assets, referred to as contracts, are stored on a decentralized ledger and run through the Ethereum Virtual Machine (EVM). Ethereum’s Turing Complete programming language is also much more complex than that of Bitcoin, as it is computationally universal. This allows any user to run any program at any time, regardless of programming language.
Generally, there are three applications for Ethereum.
- Financial applications that provide better ways for users to enter into contracts. This pertains to everything from hedging contracts and trust funds, to wills and futures contracts. Eventually, research analysts predict that Ethereum may even be used for employment contracts.
- The second application is a semi-financial application. An example of this is a self-enforcing agreement contract between two parties that ensures the contract is valid so long as both parties believe they’re benefiting mutually. This contract cannot be inhibited by a third-party.
- The last application is completely non-financial, and focuses more on identity and reputation systems. These contracts can be used in terms of online voting and decentralized governance.
Another array of benefits for Ethereum’s decentralized smart contract platform is its persistence and tamper resistance. With no central point of failure, third-parties cannot corrupt or makes changes to the data. This also means applications are consistently running with security against hacking and other fraudulent activities.
Ultimately, more and more companies are seeing the potential of Ethereum smart contracts because it’s changing the ways we distribute loans, sign insurance policies, finance equity, cast our votes, and more — not just how we exchange currency. Developers are using this technology to build innovative decentralized programs.
Projects Built on Ethereum’s Platform
There are currently many businesses looking to stay ahead of the innovation curve, and they are utilizing the power and versatility of Ethereum smart contracts to create disruption in their respective industries.
Uber, Lyft, and Gett.com have provided top ride-share service to cities across the U.S. and UK, but the need for cross-country rideshare transportation is becoming more relevant. Los Angeles-based SnagRide is combining AI and blockchain technology through Ethereum smart contracts to provide users with the first-ever long-distance ride-sharing platform.
SangRide recognized the growing need for reliable transportation and utilized Ethereum’s smart contract technology to securely connect drivers and passengers who are willing to travel together for between cities. This is made possible through SnagRide’s AI technology, which pairs drivers and passengers based on their demonstrated habits and preferences from prior SnagRide journeys.
In the banking industry, Swiss bank UBS is tapping Ethereum smart contracts to improve data quality, strengthen investor protection, and improve the function of financial markets. Evidently, banks like Barclays, Credit Suisse, KBC, SIX, and Reuters are endorsing the use of this technology.
In these financial institutions, the specific reference data for each Legal Entity is cryptographically concealed through hashing, while the source data is held and confined within the participating institution.
For extra security, the hashed data is anonymously submitted to an Ethereum private blockchain. Next, the smart contracts reconcile the data against the consensus and provide each participant the ability to search and view their own specific data in real-time via user interface. The user can then see where the irregularities lie in the data.
Edgeless has been granted its license in Curacao and is scheduled to launch in late January of 2018 — making it the first-ever decentralized, Ethereum smart contract-based casino. The name “Edgeless” refers to the casino’s claim that there is no house edge or built-in advantage over gamblers thanks to smart contract technology.
Cryptography allows players to know that they are playing as fair of a game as possible. Edgeless calls this “provably fair”, a method that proves that the random number generator is truly random and fair. This is just one of the many ways Edgeless is aiming for an even playing field. Their process is described more in-depth here.
Players will be able to deposit and withdraw crypto-coins, and will also be able to deposit using other cryptocurrencies like Bitcoin in what Edgeless calls “shapeshift integration”. At the moment, it is unclear precisely how winnings will be processed.
Creators of New York-based ShelterZoom, an Ethereum-powered platform that is built to be Real Estate Standards Organization (RESO) data dictionary-compliant, say that their company is primed to completely disrupt the real estate industry. Through Ethereum smart contract technology, ShelterZoom significantly refines and streamlines the making of real estate offers — and reduces mountains of paperwork in the process.
ShelterZoom provides a service called “Offer NOW” that connects potential buyers and agents so they can instantly submit and review offers on real estate listings faster than previously possible.
This early-stage startup has also released a second service, “Rent NOW”, which shares a similar framework with “Offer NOW”. These services have an iOS and Android-compatible widget that can be installed on nearly any real estate rental website. Once installed, the widget enables a prospective tenant to instantly submit a secure rental application on a property, which then generates an Ethereum smart contract.
The Future of Smart Contracts and Blockchains
As with all technology, there’s always room for improvements — especially in the volatile market of cryptocurrencies. Although smart contracts seem to be at the forefront of innovative disruption, what technological improvements need to be made to ensure a more secure and steady growth? Here are some questions that may need to be answered before we smart contracts
How do we maintain the integrity of the code with little-to-no fault, while remaining completely decentralized?
Applications built on the Ethereum smart contract platform can be susceptible to error because they are coded by humans. This opens up the possibility of code being exploited. A simple way to resolve this is centralization, but that goes against the nature of the Ethereum blockchain.
How do we gain a better understanding of the security faults behind smart contract technology?
For example, sending digital currency can fail, there some are hidden problems with reentrancy in smart contracts, crypto-miners can manipulate timestamps if not careful, and more. These are just a few of the security problems one can run into if they don’t have an expert grasp on the language behind smart contracts.
Remember, being careful with smart contracts is essential because we’re not just dealing with personal funds; but contractual agreements, loans, insurance policies, and more.
The short answer is, we’re still learning about cryptocurrencies, smart contracts, and the advantages of having a decentralized ledger. That being said, smart contracts probably won’t take over by tomorrow, but solutions are on the horizon. One thing is for certain, smart contracts are the future.