3 Ethereum Smart Contract Use Cases
Ethereum smart contracts are a key component of any Initial Coin Offering (ICO) created on the Ethereum platform. Their self-executing nature allow for the terms of any agreement between two parties to be enforced in a trustless manner. A key advantage of this setup is the elimination of a middle man. Because of this, smart contracts are usually the tool of choice when it comes to blockchain development.
Ethereum smart contracts on the other hand, are Turing-complete, and therefore offer a wide variety of use cases. In this article I will cover what some of those uses cases are, the very first being general purpose contracts.
General purpose contracts
General purpose contracts are straightforward in nature and can range from legal contracts to loan contracts. These contracts usually have a defined set of requirements that must be met in order to be valid, however, they require the presence of a middleman to check that such requirements have been met. Smart contracts can therefore be easily implemented to replace a middleman, as the requirements can be checked algorithmically.
For example, consider a scenario in which a house is being purchased. This process would require various intermediaries such as lawyers and estate agents who would settle the purchase. However, with the use smart contracts, the process need only involve the buyer and the seller. Once all the necessary conditions have been met, the smart contract would execute, and the money would be transferred to the seller’s bank account.
Smart contracts also allow individuals to take control of their own identity. Within these “Identity contracts”, users can store key information about themselves such as: Medical records, employment history and financial information. Users can then choose to reveal parts of this information to relevant parties at any given time.
For example, consider an individual having a routine medical check-up. Instead of having the hospital store all his medical records, through the use of a self-executing Ethereum smart contract, he can store his medical information on the blockchain, and instead, choose to grant the hospital access to this information at any given time. Such a setup gives individuals greater control over their own information, as well as an increased level of security due to the immutable property of blockchain-based technologies.
Prediction markets are market places where users can go and trade on the outcome of an event. Such events can range from the winner of a football match, to the winner of the next US presidential election. These markets have very clear ways in which smart contracts could be implemented in order to make processes more trustless. One prime example is automating the payout method once the outcome of an event has been determined.
To illustrate, consider the scenario that Bob made a bet that Team A will win a football match. Conventionally, if Team A did win, a central party must be trusted to first determine that Team A did in fact win, as well as be trusted to pay Bob his winnings. However, with the use of smart contracts, this process can be completely automated. Funds would be stored in a smart contract which would then automatically payout depending on the outcome of the event. This setup has the benefit of eliminating counterparty risk, which would reduce the overall risk that Bob takes on when using prediction markets.
Smart contracts have proven to be an incredibly key development within the cryptocurrency space. They have allowed for the elimination of middlemen, given back users control over their information, as well as redefined what is possible with blockchain-based technologies.
It is likely that as the number of smart contract technologies continue to increase, so too will their number of use cases.