What is blockchain technology?
Blockchain is a decentralized, distributed ledger technology. It records transactions across a network of computers, providing transparency, security, and immutability through various cryptographic techniques that clearly document actions taken by various participants on the chain.
Blockchain technology is perhaps most notable for its ability to facilitate peer-to-peer financial transactions without the need for intermediaries like banks or governments.
Most blockchains (including popular ones like Bitcoin) are also completely programmable. This means that the ledger itself and the assets it holds can be programmed to behave a certain way when triggers are set off. Let’s take a closer look with the help of an example.
Owing to its blockchain’s programmability, crypto token X can be programmed to pay the original owner (the miner) a certain amount of “tax” each time it is transferred to people. Here, the token being transacted with is the trigger that results in payments being transferred to the miner’s wallet.
This unique ability of blockchains to become malleable to business processes makes possible the existence of smart contracts. Smart contracts are instructions written into a token’s blockchain, which govern its trade. They ensure the automatic fulfillment of specified conditions every time a token is traded. What does this mean for users? Monetary transactions can now be monitored without the need for governing third parties, i.e., banks and federal reserves. Simply put, smart contracts have the potential to make global trade more functionally and legally efficient.
It’s important to note, however, that smart contracts are currently only capable of processing simple “triggers” and executing rudimentary steps such as transferring a specified amount of money from one account to another. While research on improvements is underway, these contracts are still a few years away from being able to factor in subjective criteria such as the presence of commercially reasonable efforts when actual legal requirements remain unfulfilled by a party.
Are smart contracts enough to establish long-term utility for cryptocurrency? Perhaps.
Smart contracts’ revolutionary potential and impact on cryptocurrency’s future can be better understood with the help of real-world use cases.
9 Blockchain Use Cases that Suggest Crypto Is the Future
Given the relative nascency of cryptocurrency, the potential use cases for blockchain are too numerous to list in this post. Truly, imagination is the limit. That said, here are nine promising use cases for blockchain and smart contracts that give many reason to believe crypto is the future:
- Improving physical supply chains
- Streamlining healthcare billing
- Enabling decentralized finance (DeFi), decoupling individuals from institutions
- Enabling commercial transactions in and for the video gaming industry
- Rewarding sustainability practices
- Revolutionizing real estate investment and transaction
- Making advertising more efficient and transparent
- Empowering content creators with new monetization opportunities
- Providing a store of value for long term holders