Information Systems Integration – Tony Messina

The Implications of Ethereum Smart Contracts

Ethereum smart contracts are a key innovation in the technological arena. They are immortal, unalterable, codified agreements between participating parties in which the terms of the contract determine the distribution of tokens. These tokens are impossible to counterfeit and can be exchanged for a generally accepted currency or represent an internally relevant commodity. Examples of such commodities could include equity in a company, rewards points, or corporate funds. Dividend payouts can be coded into the agreements for token holders. The completed token distribution paths are currently recorded for eternity, but future technologies may allow the programmer to choose if these paths should be obfuscated beyond recovery.

Because the agreements cannot be changed after they are executed, the participating parties no longer need to trust their partners. Traditionally in business, transactions are invoiced to be hopefully paid at a later date; smart contracts eliminate the requirement for this “leap of faith.” Lines of credit, insurance contracts, and lease agreements can be issued without a fear of insolvency on behalf of either party.

Any agreement which has hitherto relied on the courts system to bind the parties to their word can now be programmatically guaranteed. Plus, the involved parties no longer necessarily have to identify themselves to take part in such an agreement.

In my next post, I will talk about the value of sending live data feeds to these Ethereum smart contracts via a decentralized network of oracles.

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