It seems Bitcoin and all the hubbub about cryptocurrency is ‘back on’ now, and there’s a renewed general interest in mining for digital currency. The one takeaway anyone who’s developing an interest in this should take is that this is not a way to get rich quick, and that bitcoin mining is much more labour-intensive than you think. Blockchain technology is integrally important to managing cryptocurrencies, so f you’re still not dissuaded and you’d like to start amassing cryptocurrency for yourself then you’re encouraged to read on.
Here at 4GoodHosting, we join every other Canadian web hosting provider in understanding the way many of our customers have real interest in taking advantage of everything that’s there for discovery in the digital world. It’s likely more than a few are taking more than a passing interest in cryptocurrency mining, so today we’ll share some information these folks are going to find valuable.
Smart contracts have the potential to be one of the most useful tools associated with blockchain, and it’s almost certain that they’re going to take off right along the cryptocurrencies they’re designed to manage. So what exactly are smart contracts then?
No Administration Required
Smart contracts are self-executing, business automation applications that run on a decentralized network, such as blockchain. The appeal of them is specifically in the way they’re able to remove administrative overhead. Indeed, smart contracts are one of most attractive features associated with blockchain technology. Blockchain functions as a database, and confirms that transactions have taken place, while smart contracts execute pre-determined conditions at the same time. They’re not unlike a when a computer executes on “if/then,” or conditional, in programming.
The way all of this works is once certain conditions of a smart contract are met – and related to our discussion here that’ll be two parties agreeing to an exchange in cryptocurrency – they can automate the transfer of bitcoin, fiat money, or the receipt of a shipment of goods that makes it possible for them to continue on their journey.
The workings of that will reveal a blockchain ledger that stores the state of the smart contract.
Tokens and Smart Contracts
The different applications for smart contracts are pretty much endless. Let’s take the insurance industry; an insurance company could use smart contracts to automate the release of claim money paid out for events like large-scale floods, hurricanes or droughts. Another example would be when a cargo shipment enters a port and IoT sensors inside the container relay a confirmation that the contents have been unopened and stored properly along the entirety of the journey.
This means a bill of lading can then be issued without any manual – and time consuming – inspection of the goods being required.
As mentioned, smart contracts are also now creating the basis for the transferring of cryptocurrency and digital tokens. Which function as a representation of a physical asset or utility. The best-known example these days is Ethereum blockchain’s ERC-20 and ERC-721 tokens. Both are smart contracts.
However, don’t think all smart contracts are tokens. It’s possible to have smart contracts running on Ethereum that trigger an action based on a condition without an ERC-20 or ERC-721 being involved.
How Smart Contracts Mimic Business Rules
For all intents and purposes, smart contracts are business rules translated into software. If you compare them to business rules automation software or stored procedures, smart contracts can support automating processes stretching across corporate boundaries and involving multiple organizations in ways the automation software can’t.
The major functional difference is that rules can be applied not only within the corporation that coded the smart contract, but to other business partners approved to be on the blockchain.
Importance of Good Data, and ‘Oracles’ in Smart Contracts
Smart contracts are great, but each one is only as good as the rules that dictate its automating processes. Quality programming is crucial, as is the accuracy of the data fed into a smart contract. The nature of smart contract rules make it so that once they’re in place, they can’t be altered in any way. After a contract is written, no on – not even the programmer – can change it.
If it tuns out that the data isn’t true – and being on a blockchain doesn’t necessarily make it so that it is – the smart contract will be unable to work properly.
Why is this? Well, data fed into blockchains and used for smart contract execution is sourced externally, and from data feeds and APIs most notably – a blockchain is not able to ‘fetch’ data directly. Real-time data feeds for blockchains are referred to as oracles.
Little Disputability with Smart Contract Data
Oracles have traditionally transmitted data from a single source, and as such there is no data that’s entirely trustworthy. It can be benignly or maliciously corrupted due to faulty web sites, cheating service providers, or even by unintentional mistakes.
The way regular contracts function today can be problematic. This is because one party may perform a task, but after that the other party may decide not to pay, or there may be assumptions made by one of the parties about complexities of the contract that may not even be true.
The issue here is that those contracts are not rigorously enforceable, but smart contracts are. A smart contract is deterministic, and can absolutely be enforced as long as the events related to its contractual clauses happen.
Edge Computing, IoT and future of Smart Contracts
Within the next 5 to 7 years we should see a massive growth in IoT connected devices spurring greater use of smart contracts. It’s projected that the majority of the estimated 46 billion industrial and enterprise devices connected in 2023 will be dependent on edge computing. Addressing standardization and deployment issues will be crucial.
How smart contracts will benefit here is by offering a standardized method for accelerating data exchange and enabling processes between IoT devices. Essentially they’ll be removing the middleman – the server or cloud service that acts as the central communication spoke for requests and other traffic among IoT devices on a network.
Add this to blockchain ledgers decreasing the time required to complete IoT device information exchange and processing time, and the collective promise between both technologies becoming prominent is something to definitely keep an eye on. With the focus on process efficiency, supply chain and logistics opportunities smart contracts will almost certainly become more ubiquitous in the years ahead.