In my previous articles, the brilliant use-cases of blockchain are tackled. Now, let’s discuss the on-going practical applications of the method. The following are the best practices of blockchain technology so far:
Smart Contracts
To make it even harder for cyber-criminals to commit any sort of fraud or deception, there is now another scheme called “smart contracts.” These are simple computer programs stored in the blockchain that can be used to automatically exchange digital coins based on specific conditions.
As early as 1997, smart contracts were already developed. Computer scientist and law scholar Nick Szabo is the one credited for such an idea. Mr. Zsabo’s initial thought was to store digital contracts within a public ledger. You can think of smart contracts as just very similar to tangible, paper contracts in the real world. The only obvious difference would that they are completely digital.
If you’ve heard about Kickstarter, you might have known already that it is one of the largest online fundraising platforms ever. Anyone who wants to raise funds for a certain purpose can log on to the website, start a project, set a funding goal, and can start to collect monetary donations from anyone who believes in the idea or the reasons behind why such a fund needs to be raised.
We might say that Kickstarter is a third-party system that acts as a mediator between product teams, and its supporters. This means that both parties must trust that the Kickstarter platform will handle their money efficiently and securely.
If the fundraising transaction goes smoothly, both parties can expect Kickstarter to give them their money. Furthermore, those who donated could also expect to have their money refunded if the fundraising hasn’t reached its goals. The system is built around trust because it wouldn’t work if the supporters don’t have enough faith in Kickstarter as well as the project that’s launched within it.
Peer-to-peer Crowdfunding
With smart-contracts software installed in a Blockchain, raising funds in a more dynamic and transparent way can be done almost by anyone. Any organization or social group, no matter how small they might be can come up with a system very similar to Kickstarter, though smaller and much simpler. With simple programming instructions, we can configure the smart contract to hold the received funds of the supporters.
When the ideal amount is reached, the system can then automatically send the money to the creator of the project. But if the fundraising fails, the respective amount for each donor will be sent back to them. And because smart contracts are stored within a blockchain, everything is completely transparent because all relevant information is distributed among all concerned participants.
One of the best traits of smart contracts, as they are stored in a blockchain, is that they are immutable, which is another way of saying that once created, nobody can change it again. If any single individual or even a group of them would succeed in making some changes, the other greater number of members would flag the change as invalid. That’s a security measure no one can easily get around with.
Just like how Kickstarter projects are managed and popularized, smart contracts can indeed revolutionize the way fundraising campaigns could be handled. By decentralizing such kinds of acts, no one is in direct control of the money. Everyone can monitor it, everyone can validate it– fraudulence will always be kept at a minimum, if not totally impossible.
Digital Tokens
The term “token” is often associated with those metallic or plastic coins that you can use in betting, slot machines, or sing-along bars. But just very recently, there is a thing called “digital tokens” – electronic representations of something valuable, most notably in cryptocurrencies.
Other applications for digital tokens include company shares, loyalty points, gold certificates, and almost any kind of financial asset one may think of.
Also an off-shoot of smart contracts, tokens can also be used to manage monetary transactions, and keep track of people’s balances. The best practitioner or digital tokens so far has been Ethereum. The system works by investors buying some ETH amounts and store them on the platform. In exchange, tokens will be handed over.
By tapping into the Ethereum smart contract scheme, anyone can create his or her own tokens to attract other investors as well. With such a system, it’s like you can create your own cryptocurrency within a thriving crypto-platform. It’s only a matter of starting your own token, establishing trust among your peers, ask them to help them grow the community, and so on.
Some experts claim that this method is a bit risky as of this time because creating your own token would mean that the initial smart contract you’re making could be different from the other smart contracts that other people are making too. In that case, the very concept that makes blockchain a very secure network couldn’t be seamlessly applied.
It could be then declared that tokenization is something that could be applied in a small group of investors only, at least for the time being. But this doesn’t mean that the concept of digital tokens is something that we couldn’t utilize to conduct business. It is proven to be a solid method in both theory and practice, as what the Ethereum platform has been showing – that it is one of the biggest names in the cryptocurrency business.
Digital Wallets
With digitization becoming very commonplace here and there, wallets are now becoming digital too, thanks also to blockchain. If you’ve heard about the likes of Paypal, Venmo, and Coinbase, then you might have known already that they are among the most convenient way of storing those precious numbers that represent your financial assets.
Though not all digital wallets are powered by blockchain technology, the very best ones of them utilize it to maximize security. The great thing about digital wallets compared to traditional money storage systems is that your earnings could be managed more efficiently.
For instance, if you want to purchase some products online, you can pay for them in just a few clicks. All you need to do is key in your username, password, and verification codes. In a matter of minutes, transactions could be processed. All you need to do is just for the product to be delivered to your doorstep.
But that’s not where the power of digital wallets truly lies-- it's in the ease and convenience they offer as you deal with online trading and investing. For instance, if you are into earning with cryptocurrency, you can register to platforms like Coinbase, Trezor, and Mycelium. In there, you can easily convert your Bitcoin profits into other crypto-coins like Ethereum or Ripple.
So if Ethereum is having a great increase in value for a certain period, you can move a certain amount from your Bitcoin Wallet into your ETH wallet to benefit from that increase. Likewise, if the situation gets reversed, you can then move your Ethereum earnings to your BTC wallet again if you’re seeing that the latter is on the rise again.
Many crypto-investors are doing that practice and are becoming truly rich because of their smart decisions. Such an earning method wouldn’t be made possible without blockchain technology.
Electronic Financial Management
Smart contracts can’t be limited to crowdfunding applications only. For instance, banks and other real-world financial institutions could also apply the same concept. They could use it to issue loans and receive automatic payments. Likewise, insurance companies could also use it to speedily deal with insurance claims. Postal companies could also utilize it to process delivery payments as well.
As of this writing, there are lots of cryptocurrency systems that are already implementing smart contracts, while many of those who haven’t are already laying out their plans of doing so. The biggest name so far that’s known to utilize it is Ethereum. As stated in its whitepaper, it is built specifically with smart contracts as one of its core concepts.
The entire platform of ETH was built with its own programming language called “Solidity” – one that specializes in the purpose of making smart contracts efficiently. It is also worth knowing that Bitcoin, the biggest name in the crypto-game has adapted to the method as well and has been taking advantage of the same power that smart contracts can deliver.
