Blockchain technology is often only associated with cryptocurrencies like Bitcoin, and for the first generation of blockchains, that was true. The technology behind Bitcoin was designed purely as a payment processor, allowing participants to send and receive digital currency, nothing more. However, the blockchain has evolved two more generations since then, and 'second generation' blockchains like Ethereum have come with various game-changing capabilities. Developers could create blockchain-based applications, raise funds for their projects through Initial Coin Offerings (ICOs), and most importantly create smart contracts. Smart contracts basically do what they say on the tin. These are digital contracts "smart" enough to activate automatically when the terms of their associated agreement are met. While it sounds simple, this technology has the potential to completely transform the way business is done around the world. Contracts eliminate the need for an intermediary, such as a bank or legal representative, in transactions and agreements that use blockchain technology. Contracts and agreement terms are written directly in lines of code and will be executed automatically once these criteria are met. Since the code and corresponding agreements are maintained on a distributed, decentralized blockchain, they do not need to be held by a central party to an agreement, and transactions are traceable and irreversible. About the Author Aparna Jue is Product Manager at IOHK
What are the benefits?
Eliminating the need for a middleman has a wide range of benefits for businesses and consumers. This not only reduces costs by eliminating the often exorbitant fees of third parties such as notaries, estate agents or consultants, but also saves time and resources normally wasted on manual processing or transporting paper documents. This means that many expensive and inefficient business processes can be automated, eliminating the possibility of human error and greatly reducing the cost of doing business. Crucially, contracts also eliminate the need for trust, because having a central, constantly updated version of the contract means that neither party can handle, steal, or lose documents. When implemented correctly, smart contracts are also extremely difficult to hack, meaning documents will stay secure.
How can they be used?
These benefits have applications in almost every industry when it comes to improving the speed and security of record keeping. Take the example of healthcare. Today, the world's healthcare computer systems store vast amounts of patient medical records. Although healthcare organizations are beginning to invest more in security, they remain vulnerable to cyberattacks, as evidenced by the 2017 NHS "WannaCry" hack in the UK, which had 19.500 medical appointments. cancelled, the computers in the surgeries of 600 GPs blocked and five hospitals to divert ambulances to other places. Blockchain technology could ensure that these hacks are a thing of the past by allowing entire databases of personal medical records to be encrypted and securely stored. By implementing smart contracts, things like prescriptions can also be filled automatically, saving valuable admin time and streamlining the patient experience. Going further, the technology could also return control of health records back to patients, allowing them to decide who accesses their records and who can make changes, and even which providers can access sensitive data. The technology can also be used to vote. For the United States, which recently experienced a roller coaster of voter fraud allegations after the presidential election, blockchain-based voting could have meant avoiding complications altogether. Using smart contracts, governments can validate a voter's identity and record their vote. They can then use this information to trigger action once the voting is over. As the blocks on a blockchain cannot be changed once they have been registered, it would be nearly impossible to hack, making remote voting, which became so essential during Covid-19, a much more secure process. And if the opposition calls for a recount, it can be done in minutes instead of days. These use cases are only a fraction of what the technology can achieve. Smart contracts can be used for everything from employee pay to the ability for e-commerce companies to eliminate expensive payment processors and even allow door-to-door salespeople to handle transactions on their own, ensuring a record. . secure and immutable transaction without the need for a high cost. services of lawyers or housing brokers.
When will we see widespread adoption?
Despite its promise, the second generation of the blockchain faced a number of issues related to scalability, cost, speed of transactions, and network efficiency. On Ethereum, for example, currently the largest platform for smart contracts, transactions are still very slow because the public blockchain can only process around 15-20 transactions per second (TPS), while Visa can process 45,000. GST. This has hampered widespread adoption, as systems cannot scale to deliver on the promise of smart contracts for transformational change. As a result, the blockchain industry has worked to mature the technology and develop a third generation that can fully evolve to replace existing global systems. This ``third generation'' consists of blockchains like Cardano, EOS, and Aion, decentralized software architectures that are nearly infinitely scalable, have instant transactions, nearly infinite decentralization, much lower fees, and use only a millionth of the energy of the original bitcoin block chain. Ethereum has also recently started the transition to its next-generation form, Ethereum 2.0, which will offer much higher transaction speeds.
Blockchain has 'come of age'
With third-generation blockchains finally becoming a reality, the technology has come of age and we can finally see smart contracts implemented globally in thousands of companies and government organizations. This could have a transformative impact for entire segments of the population, expanding access to financial services for those previously excluded by exorbitant fees, reducing the cost of entry for those looking to start a business and provide services. vital as more efficient and effective healthcare. insured.