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Use cases for smart contracts and dApps



SUMMARY


A smart contract is a self-executing code that executes a set of instructions that are then verified in the blockchain. They are a key technological element of many decentralised applications (dApps). A key feature of smart contracts is that they are trustless, meaning they can reduce or even eliminate the need for intermediaries. Read on to learn how smart contracts are impacting the world of finance, real estate, healthcare, gaming and more.



CONTENT

  • What are smart contracts?

  • Use cases of smart contracts in finance

  • NFTs and Smart Contracts

  • Smart Contracts and Blockchain in the Legal Industry

  • Blockchain in the real estate sector

  • Smart Contracts Applications in Corporate Structures: DAOs

  • Applications of smart contracts in emerging technologies

  • Potential benefits of smart contracts in other industries


WHAT ARE SMART CONTRACTS?


Smart contracts are one of the most important components of many blockchain-based ecosystems and a particularly important element of many application-oriented blockchains such as Ethereum. These digital contracts are trustless, autonomous, decentralised and transparent - and typically irreversible and immutable once deployed. Among the advantages of smart contracts is that they reduce or even eliminate the need for intermediaries and the enforcement of contracts in an agreement or transaction. This is because, in a smart contract, the code defines the mechanics of the transaction and makes the final decision on the terms. For this reason, smart contracts have become the building blocks of an entire ecosystem of decentralised applications (dApps) and are a major focus of blockchain development in general.


A single smart contract can only be used for one type of transaction: When something happens, something else happens. However, most dApps work by bundling smart contracts to enable a sophisticated, synergistic set of functions. There are thousands of dApps on various blockchain networks, e.g. in finance, gaming, exchanges and media - and they can all use smart contracts in different ways and for different purposes. Examples of smart contract applications include financial purposes such as trading, investing, lending and borrowing. They can be used for applications in gambling, healthcare and real estate, and can even shape entire corporate structures. In this article, we present some real-world examples of smart contracts and dApps and explore their potential to shape the future as well.



USE CASES FOR SMART CONTRACTS IN FINANCE


Decentralised finance (DeFi) apps are a great alternative to traditional financial services and are growing in popularity thanks to the trusted, immutable and transparent properties of blockchain and smart contract technology. DeFi dApps offer parallel services to the banking and financial services industry - such as lending, borrowing, trading and a variety of other financial services - as well as entirely new types of products and decentralised business models that can offer users significant advantages and benefits. With the increased transparency that smart contracts offer (along with 24/7 functionality and reduced costs), dApps have the potential to lower the barriers to entry into the financial services industry for people around the world.


DeFi projects have already reached a value of several billion US dollars and this trend will continue as more and more people become familiar with the unique benefits of the sector. Users can participate in this new generation of financial services without the need for central custody or fees from intermediaries. Although the DeFi sector is only a few years old, the impact of smart-contract-based dApps on the financial industry is already being felt, given the many innovative dApps that are already adding value and benefits to consumers.



NFTS AND SMART CONTRACTS


The global gaming industry is a hundred-billion dollar ecosystem that continues to grow rapidly, but the way value is created and distributed in the industry can be inequitable. Developers create and publish games, and players pay to play and interact with those games. This leads to a one-way flow of value, where players spend money to gain access to game assets and configurations. In contrast, blockchain technology can enable players to more effectively capture the utility and value of in-game purchases and asset acquisitions.


Blockchain technology in games is typically powered by non-fungible tokens (NFTs) - unique digital assets that represent game content. NFTs are based on smart contracts. These tokens are unique, rare and indivisible, while the blockchain networks underlying NFTs enable player ownership, verifiable scarcity, interoperability and immutability. Together, these features of blockchain in gaming have the potential to drive mainstream adoption and create a more equitable value model.


Thanks to the implementation of blockchain technology in the gaming industry, you can store in-game purchases, sell them to other players or transfer them to other supported games. The scarcity of NFTs purchased in-game is verifiable through the immutable records in the underlying blockchain network - as is the history of ownership of the NFTs. Because NFTs are unique and can be designed to retain their value beyond the game in which they were created, blockchain-based games and dApps have the potential to expand the game economy, establish new game categories and drive the development of new games. Blockchains with significant game development include Ethereum, TRON, EOSIO and NEO.



SMART CONTRACTS AND BLOCKCHAIN IN THE LEGAL INDUSTRY


Perhaps one of the most promising use cases for smart contracts in the real world is their potential to act as legally binding contracts - the type of contracts that underpin most business relationships today. Technology has driven innovation in the legal industry, most recently with the introduction of electronic signatures for legally binding contracts. Smart contracts are another new development in this area and may soon be an option for contracting parties to reduce the cost of using lawyers and other intermediaries.


The widespread use of customised smart contracts for myriad types of transactions, which can reduce costs and increase transaction speed, may be closer than you think. Some US states have begun to allow the use of smart contracts and blockchain in the legal industry in certain contexts. For example, in Arizona, enforceable legal agreements can be created using smart contracts, and in California, marriage certificates can be issued using blockchain technology.



BLOCKCHAIN IN THE REAL ESTATE INDUSTRY


Through tokenisation, smart contracts are advancing fractional ownership of assets, lowering the barrier to entry for investment by connecting blockchain and real estate transactions. There have been a number of successful efforts in real estate tokenisation in particular, including through platforms such as RealT and SolidBlock, which connect blockchain and real estate. Smart contract technology can also overhaul documentation and transaction processes by incorporating blockchain into real estate transactions. For example, the Republic of Georgia (in the Caucasus region) has been developing a Blockchain-based land registry since 2016, and similar projects are underway in other countries such as the United Arab Emirates (UAE).


Anyone who has ever bought a house or other property is aware of the potential hidden costs that can arise from closing fees, conveyancing and estate agent fees. These costs could be reduced or even eliminated through the automatic execution of smart contracts that work without intermediaries. When a property is tokenised, much of the required record-keeping can be done through associated smart contracts, which can save parties time and money. Some experts even claim that smart contracts can help parties simplify leases, complex loan or mortgage agreements, and guarantees and insurance. The use of smart contracts and blockchain in the real estate industry will reduce the need for legal counsel or other advisory services, which can reduce costs down the line.



USE OF SMART CONTRACTS IN CORPORATE STRUCTURES: DAOS


In 2017, Delaware passed Senate Bill 69, which allows for the creation and management of companies using blockchain technology. This law opened the door for the proliferation of decentralised autonomous organisations (DAOs) that function like businesses, where ownership and compensation can be regulated in smart contracts. DAOs that use smart contracts to encode corporate structures can enable sophisticated, automatically enforced incentive structures within a corporate framework. DAOs can also lead to savings in administrative costs, such as office space, hiring and payroll through incentive structures that do not involve formal employment contracts.



APPLICATIONS OF SMART CONTRACTS IN EMERGING TECHNOLOGIES


One of the most exciting applications of blockchain technology and related smart contracts technology is the ability to facilitate complex computational tasks such as machine learning and artificial intelligence (AI). By combining the data-intensive processing of AI with the decentralised security and immutability of blockchain technology, AI-powered smart contracts can be developed. As smart contract applications are introduced in various industries, they are becoming more complex to meet their new roles. While rudimentary smart contract use cases can be designed manually, AI-powered smart contracts could enable the construction of highly complex, more responsive smart contracts and dApps for businesses that have the potential to dramatically expand the capabilities of the technology.


Many experts believe that the AI and blockchain fields can benefit from each other's features. Smart contracts can benefit from the advanced computational capabilities and adaptive systems of AI technology, while AI implementations could use smart contract technology to autonomously execute rule sets and provide a secure environment for sensitive and valuable machine learning data. Zilliqa is one of the many blockchain platforms developing advanced computing capabilities with its proprietary smart contract programming language Scilla and advanced parallel processing structure enabled by sharding.



POTENTIAL BENEFITS OF SMART CONTRACTS IN OTHER INDUSTRIES


This list of real-world applications of smart contracts is by no means exhaustive, and smart contract technology will improve countless other industries in the future. Many researchers and developers are looking to take advantage of smart contract technology to meet the needs of the growing Internet of Things (IoT). While blockchain technology in general is already being used to make IoT devices more secure and transparent, the benefits of smart contracts could drive this integration even further.


Healthcare is another industry that has begun to use blockchain technology to exchange data in a secure, trustworthy and transparent way. The relationship between healthcare and blockchain technology could also be strengthened through the integration of smart contracts and entire dApps that aim to solve important healthcare problems such as interoperability, identification and authentication. With all these established use cases and the ongoing discovery and development of many more, smart contracts and dApps are poised to further revolutionise the world of digital agreements.



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