Smart contracts are often cited as one of the most disruptive tools brought to us by blockchain technology. And one of the reasons why it can claim this fame, is that it cuts out intermediaries and thus reduces charges on transactions.
Furthermore, when a smart contract is in play, parties can exchange goods and services without having to rely on a mediator and therefore reduce the risk of any party misbehaving. This is because there is no one entity controlling the transaction — it is entirely decentralised.
For example, if you wanted to create a digital magazine subscription service, you could use a smart contract to remove the need for any third party involvement. Once the required amount of a specified digital currency is sent to your business account, the smart contract would automatically send the buyer a link to your digital magazine.
But, smart contracts are not just going to disrupt merchant payments; there are other scenarios where the decentralisation will rebuild trust.
Trust is in short supply
Trust is in short supply these days. In the last few weeks, consumers in a significant number of countries have experienced problems with Visa and in Canada, two major financial institutions, the Bank of Montreal (BMO) and the Canadian Imperial Bank of Commerce (CIBC) were targeted in a cyber attack. These breaches compromised thousands of customers’ information.
So it is unsurprising that the 2017 Edelman Trust Barometer, which measures a country’s trust in the government, businesses, the media, and NGOs found that only 40% of Canadians expressed confidence in the media, 38% expressed confidence in Federal Parliament, and only 30% have faith in major corporations. And, trust in Financial Industry Analysts and CEOs is at an all-time low.
Smart contracts rebuild trust
These breaches are a ‘breach of trust’, and sometimes it isn’t just happening at banks. Health service and tax data are also open to abuse. But with the use of blockchain technology, people can feel that their data is more secure; in other words they can have more trust, which is why the technology is often referred to as ‘trustless’.
Of course, smart contracts are still in their early days and we are likely to see even more sophisticated versions in the future. But the move towards a ‘trustless’ world seems ever more compelling as we become more fully aware of the damage that centralised system inflict on us.