Real-World Applications of Smart Contracts

In the two previous articles, we’ve delved into the what and how of smart contracts. Now, it's time to explore the where and why. 

Our objective is to showcase how these digital agreements are revolutionizing business processes, enhancing transparency, and creating new opportunities across sectors. By understanding these real-world applications, you'll get a front-row seat to the potential impact of smart contracts on our daily lives and the future of business.

Finance and Banking

The financial sector is experiencing a seismic shift thanks to smart contracts. From cutting out middlemen to creating entirely new financial products, these self-executing agreements are redefining what's possible in the world of money.

Decentralized Finance (DeFi)

DeFi is like the Wild West of finance, and smart contracts are the new sheriff in town. These self-executing agreements are the backbone of DeFi platforms, enabling:

1. Lending and Borrowing: Platforms like Aave and Compound use smart contracts to automate lending processes. Users can lend their crypto assets and earn interest, or borrow assets by providing collateral. And all this is done without the need of traditional banks.

2. Decentralized Exchanges (DEXs): Uniswap, the poster child of DEXs, uses smart contracts to facilitate peer-to-peer trading of cryptocurrencies without intermediaries.

3. Yield Farming: Smart contracts automate the process of moving assets between different protocols to maximize returns, giving birth to a whole new way of earning in the crypto space.

Automated Payments

Smart contracts are revolutionizing payment systems:

1. Subscription Services: smart contracts eliminate the need for manual payments or third-party billing services. The smart contract handles the subscription renewals seamlessly. For instance, platforms like Spotify have explored blockchain technology for streaming payments to artists. While not fully implemented, it shows industry interest.

2. Escrow Services: Companies like Propy are using smart contracts to hold and release funds in real estate transactions, eliminating the need for traditional escrow agents.Funds are securely held within a smart contract and are automatically released when both the buyer and seller meet the agreed-upon conditions.

3. Payroll Management: Organizations can automate salary payments, ensuring employees are paid on time, every time, based on predefined conditions. Smart contracts can handle complex payroll calculations, including bonuses and deductions, reducing administrative workload and errors.

Insurance

The insurance industry is getting a smart upgrade too. Companies like Etherisc, for example, are using smart contracts to offer flight delay insurance. If your flight is delayed, the smart contract automatically triggers a payout without you needing to file a claim.

Another use-case is the Blockchain Climate Risk Crop Insurance. Farmers can now get insurance policies that automatically pay out based on weather data, thanks to smart contracts and oracle services like Chainlink.

Supply Chain Management

In traditional supply chains, lack of visibility can lead to issues like fraud, delays, and quality problems. Smart contracts provide a transparent ledger accessible to all authorized parties. Furthermore, the automated processes reduce manual errors, speed up transactions, and lower operational costs.

Tracking and Transparency

Smart contracts are bringing trust and traceability to supply chains. Here are some examples.:

Food Traceability: Walmart has partnered with IBM to use blockchain and smart contracts to track the journey of food products from farm to shelf. By recording each step of a food product's journey on a blockchain, Walmart can quickly trace the origin of contaminated food, reducing the time it takes from weeks to seconds. This enhances food safety and consumer trust.

Luxury Goods Authentication: LVMH, the parent company of Louis Vuitton and other luxury brands, is using smart contracts to prove the authenticity of high-end products. Each luxury item is assigned a unique digital identity recorded on the blockchain. This makes it nearly impossible to counterfeit products, as customers can verify authenticity through a transparent and tamper-proof system.

Automated Processes

Smart contracts are streamlining supply chain quality control operations too, by triggering alerts or rejections if shipped goods don't meet predefined quality standards. Sensors can monitor conditions like temperature and humidity during transit. If these conditions deviate from the set parameters, the smart contract can automatically notify stakeholders or halt payment until issues are resolved. 

Real Estate

The property market is getting a blockchain makeover. Smart contracts are simplifying transactions, enabling fractional ownership, and bringing liquidity to a traditionally illiquid asset class.

Let’s look at some use cases in this sector.

Property Title Transfers: Traditionally, transferring a property title involves a lot of paperwork, intermediaries, and can take weeks or even months. With smart contracts, the terms of the sale are coded into a self-executing contract. Once the conditions are met, the property title is automatically transferred to the buyer, recorded on the blockchain, and accessible to all relevant parties. This reduces the risk of fraud and errors, and significantly speeds up the transaction process. Companies like Propy are using smart contracts to automate property title transfers, reducing paperwork and speeding up the process.

Fractional Ownership: Thanks to tokenization, real-world assets, such as a property, can be represented by digital tokens on a blockchain. Each token represents a fraction of the property's value. This allows investors to buy and sell small portions of a property, lowering the barrier to entry for real estate investment. It also provides liquidity, as these tokens can be traded more easily than traditional property assets. Platforms like RealT are enabling fractional ownership of properties through tokenization, making real estate investment more accessible.

Rental Agreements: Smart contracts can automatically collect rent and release it to landlords on specified dates. This ensures timely payments and reduces the administrative burden on landlords. It also provides transparency to both parties, as all transactions are recorded on the blockchain. 

Security deposits can be held in escrow within a smart contract. The funds are automatically released at the end of the lease based on predefined conditions, such as the property passing an inspection for damages. This reduces disputes over security deposits, as the terms are transparent and enforced automatically.

Healthcare

In an industry where data privacy and efficiency are paramount, smart contracts are proving to be a game-changer. From managing patient records to streamlining insurance claims, they're helping to create a more connected and efficient healthcare ecosystem.

Patient Data Management

Smart contracts are giving patients control over their data:

1. Consent Management: Patients can use smart contracts to grant and revoke access to their medical records. Instead of filling out consent forms at every doctor's visit, a patient could use a smart contract to authorize specific healthcare providers to access their medical history. This access can be time-limited or purpose-specific, and patients can revoke it at any time, enhancing privacy and control over personal information.

2. Interoperability: Different healthcare providers can securely share patient data based on smart contract conditions. Hospitals, clinics, and laboratories can use smart contracts to share test results and medical records seamlessly. If a patient is referred to a specialist, the smart contract ensures that only the necessary information is shared with authorized parties, improving care coordination while maintaining data security.

Medicalchain, for example, is a platform that uses blockchain technology to securely store health records and maintain a single version of the truth.

Insurance Claims

Smart contracts can verify policy conditions and automatically process insurance claims, reducing administrative overhead and delays. When a patient receives treatment, the smart contract can automatically check if the procedure is covered under their insurance policy. If it is, the claim is processed instantly, and payment is initiated without manual intervention, reducing delays and errors.

Clinical Trials

Smart contracts can ensure that clinical trial data isn't tampered with, thus enhancing transparency and efficiency in research. 

Data collected during a clinical trial can be recorded on the blockchain in real-time. Since blockchain records are immutable, researchers and regulators can trust that the data hasn't been altered, which is crucial for the validity of the trial.

Added to this, smart contracts facilitate automated payments. If a participant completes a survey or attends a scheduled appointment, the smart contract automatically triggers a payment to their account. This ensures timely compensation and reduces administrative tasks for the research team.

Government and Public Services

Smart contracts have the potential to transform how we interact with government services. By increasing transparency and reducing bureaucracy, they're paving the way for more efficient and trustworthy public institutions.

Voting Systems

Countries like Estonia are exploring blockchain-based voting systems that use smart contracts to ensure vote integrity. Making elections more secure and transparent. 

Electronic voting (e-voting) systems can utilize blockchain technology and smart contracts to automate the casting and counting of votes, ensuring that each vote is recorded accurately and cannot be altered or deleted. This increases trust in the electoral process by providing transparency and reducing the risk of fraud and manipulation.

Decentralized Autonomous Organizations (DAOs)

Smart contracts enable new forms of governance where token holders can vote on proposals.

Examples of these are DAOs, which in essence, are organizations governed by code rather than traditional hierarchical structures. Members hold tokens that represent their stake or voting power. Through smart contracts, they can propose changes, vote on initiatives, and implement decisions automatically. This model can inspire more participatory and transparent governance systems in the public sector.

Intellectual Property and Content Creation

With the ease of copying and sharing digital content, creators often struggle to receive fair compensation and maintain control over their work. Smart contracts are offering new solutions by automating transactions, enforcing licensing agreements, and ensuring that creators get fair compensation.

For example, in the music industry, platforms like Ujo Music use smart contracts to automatically distribute royalties to artists when their music is played. Every time a song is played or purchased, the smart contract automatically calculates and distributes payments directly to the artist and any other rights holders. This process is transparent, efficient, and reduces the need for middlemen.

This works also for book publishing authors. When a reader purchases an e-book, the smart contract automatically transfers the payment to the author, and the reader gains access to the content. This model allows authors to retain a larger portion of the sales revenue and have more control over pricing and distribution.

Smart contracts are also being used in patent licensing. When a company licenses a patent from another entity, a smart contract can automate royalty payments based on usage or predefined schedules. The smart contract enforces the agreement by restricting access or usage if terms are violated. This automation reduces legal complexities and fosters trust between parties.

Gaming and Entertainment

The world of gaming and entertainment is being revolutionized by smart contracts. From truly owning in-game assets to creating fair betting platforms, they're changing how we play and interact in digital spaces.

In-Game Assets

Games like Axie Infinity and CryptoKitties use smart contracts to create unique, tradeable in-game assets that players truly own. 

Traditionally, in-game items are stored on company servers, and players don't have actual ownership, meaning they can't sell or transfer items outside the game environment. With Non-Fungible Tokens (NFTs), each in-game asset is represented by a unique token on the blockchain. 

Smart contracts govern the creation, ownership, and transfer of these tokens. This means players can buy, sell, or trade their assets on open marketplaces, and they retain ownership even if the game shuts down.

But we can take this a step further. Imagine owning a unique sword in one game and being able to use it in another game developed by a different company. This is possible when games are built on the same blockchain platform and adhere to common standards (like the ERC-721 token standard on Ethereum). 

Smart contracts manage the interoperability of assets, allowing for a more integrated and personalized gaming experience.

Betting and Gambling

Traditional online casinos require players to trust that the games are fair and that payouts will be honored. They rely that the gambling authority where the casino is licensed is actually verifying the fairness of the casino. 

Decentralized casinos, on the other hand, leverage smart contracts to automate game outcomes and payouts. The rules of the game are coded into the smart contract, and once a bet is placed, the outcome is determined by a transparent algorithm, often using blockchain-based randomness that can't be tampered with. 

Platforms like FunFair use smart contracts to ensure fair gameplay and automatic payouts. Winnings are automatically transferred to the player's wallet, eliminating the need for intermediaries and increasing trust. 

Conclusion

As you can see smart contracts are becoming a transformative force reshaping industries and redefining how we conduct business and interact with digital systems. These self-executing agreements are streamlining processes, enhancing transparency, and creating new possibilities.

As blockchain technology continues to evolve and smart contract platforms become more sophisticated, we're bound to see even more innovative applications emerge.