A study on the application area of blockchain smart contract technology

Smart contract as a relatively popular technology of blockchain, what fields and scenarios it can be applied to, this paper analyzes the application scenarios of smart contract through each field.

A study on the application area of blockchain smart contract technology

With the popularity and application of blockchain technology, smart contracts, as one of the underlying technologies of blockchain technology, have attracted great attention both in the academic and industrial sectors. The reason why smart contracts are generally concerned, the technical research department of Hairball Technology believes that it is mainly attributed to the characteristics of smart contracts such as decentralization, de-trust, autonomy and self-sufficiency, and non-tamperability.

This is because these features support the ability of smart contracts to complete transactions without any underlying trust or supervision by third-party authorities. At the same time, smart contracts can be embedded in digital form, capable of programming assets intelligently and digitally, so that they can be applied to many traditional fields, such as finance, management, healthcare, Internet of Things, etc.

I. Smart contract concept
The concept of “Smart contract” was introduced by Nick Szabo, a computer scientist and cryptographer, in 1993, and he wrote the paper “Smart contracts” in 1994, which is the pioneer of smart contracts.

Nick Szabo is well known for his research in the field of digital contracts and digital currencies, and he coined the term “Smart contracts” and related concepts. Smart contracts are a key feature of cryptocurrencies and the E programming language. The concept of smart contracts has been gradually enriched through refinement and defined as “a smart contract is a computational transaction protocol that enforces the terms of a contract”.

Smart contracts are typically designed to meet general contractual conditions (such as payment terms, seizure orders, privacy, and even enforcement), minimize malicious and accidental situations, and minimize the use of trusted intermediaries. Related economic goals include reducing fraud losses, arbitration and enforcement costs, and other transaction costs.

A closer look at smart contracts reveals that they are similar to the vending machines in our daily lives. Vending machines allow for the buying and selling of goods through an automated process that requires no manual involvement, with the entire process being executed by a pre-written program, and smart contracts operate on the same mechanism.

But the difference is that once a smart contract is completed, its code cannot be changed, such as the smart contract in Ether, each smart contract in Ether has its own account, which is equivalent to a vending machine with its own ID. When an external account invokes its selected smart contract with a certain tip, it is equivalent to starting the switch of automatic control, and the smart contract will be executed automatically according to its code definition.

Although the smart contract can not be like a vending machine, can be higher at any time program, but also because of this advantage can be applied to the contract terms of the scenario, such as electronic contracts, banking terms and so on, smart contracts applied to these scenarios can effectively reduce malicious tampering, reduce human intervention.

Overview of the application areas of smart contracts
In recent years, with the rise of blockchain concept, smart contract has been amplified by the momentum of blockchain. As a new and rapidly developing technology, its possible applications will be expanded to the traditional fields of finance, medical care, Internet of Things, etc.

(i) Digital notes

Since the blockchain electronic invoices began to be piloted in August 2018, digital bills have gradually been reflected in the eyes of the world. And just on May 27 this year, Shenzhen Window of the World officially issued the first blockchain electronic invoice, becoming the first 5A-level scenic spot in South China to provide blockchain electronic invoice service.

We all know that digital invoices are the application of smart contract technology to trigger the corresponding automated realization through the satisfaction of pre-set conditions while keeping the existing invoice properties, legal rules and market operation rules unchanged.

Although the previous electronic commercial bills of exchange can solve the problems of slow speed, easy forgery and easy loss of paper bills of exchange, they cannot fundamentally solve the problem of being cloned, or tampered with, and cannot be supervised because they are still in the hands of central institutions.

Digital bills operate with smart contract technology, which can simplify the transmission path of electronic commercial bills of exchange and reduce costs. At the same time, because of the application of timestamp, peer-to-peer transmission and encryption technology, it is able to track the whole transaction process of the bill, which is the whole process becomes clear and visible, and the digital bill can establish a common binding code in the whole block chain through smart contract, which can realize the intelligence of the digital bill transaction and the supervision of the whole process.

The technical research department of Maohuo Technology believes that the nodes of digital bills are recorded by common and non-tamperable, and each link is checkable, verifiable and traceable, which ensures the authenticity and validity of bills, solves the pain and difficulty of high cost and low management efficiency of manual checking of invoices, and avoids the risk of violation brought by false invoices and non-compliant invoices.

(ii) Internet of Things

In the leap development of information society from Internet era to Internet of Things era, Internet of Things is penetrating into work, life and society by osmosis. However, from the current point of view, IoT still faces some pain points in practical application, and blockchain smart contract with its decentralized, open and transparent, non-tamperable features is expected to help IoT solve many difficulties, and there are already cases of “IoT + blockchain” dual technology applications. For example, IBM’s decentralized P2P automatic telemetry system.

IBM’s decentralized P2P automatic telemetry system (Adept), based on three protocols: Blockchain (blockchain), BitTorrent (file sharing), and TeleHash (P2P messaging system). When the product is sold, the consumer can register it into a local (e.g., a city or province) blockchain to receive after-sales service. Samsung has incorporated the W9000 washing machine into the Adept system. Using smart contracts, this washing machine will automatically send order forms to laundry detergent retailers and can automatically pay the bills to the retailers.

The Internet of Things is a time of linking other entities such as devices, vehicles, buildings, etc., and embedding software, sensors and network connections. Because IoT is the entity into the network, through the network to generate, transmit and share data, to support such a huge network, the number of devices needed will be immeasurable, if still operating with the current centralized data center to run, the efficiency will be greatly reduced, and a large amount of data will require a sufficient number of data centers to support, the investment required to build the data center and the later operation and maintenance costs are incalculable.

At the same time, the IoT is also vulnerable to malicious attacks by management systems, easily causing data and information loss, and security is difficult to guarantee. The decentralization and tamper-proof technology of smart contract can solve the problems of information loss and privacy protection in IoT, and at the same time, the reduced centralized circulation link also greatly reduces the time cost of information circulation.

Although “blockchain + IoT” can end many technical problems that exist now, there are still some challenges to the real application, firstly, blockchain technology is still immature; secondly, the life of physical network devices (sensors).

(iii) Securities

Credit is the foundation of securities, and clearing and settlement are the core of securities. Now, the vast majority of countries have one institution for securities registration, custody, clearing and settlement, leading to the problem of gradual centralization, ineffectiveness and efficiency, and increased costs and risks.

The “carrot stamp” incident in the securities industry in 2016 sounded an alarm to securities companies at the time, as a result of the private engraving of seals by employees of Guohai Securities, which triggered bonds with a size of 16.5 billion, causing a strain on the market capital chain at the time. This incident raised concerns about the security and compliance of transactions in the securities industry, and the foundation of integrity was widely questioned.

While blockchain smart contract technology is based on timestamp to form a database with non-tamperable and non-falsifiable, to tamper with the historical information, 51% of the nodes of the whole system must be controlled, and it will consume huge computing power and input cost.

Building a universal distributed brokerage trading system based on blockchain technology can significantly reduce the cost of value transfer, significantly improve the efficiency of the clearing and settlement process, shorten the clearing and settlement time, and enhance investors’ confidence through the improvement of efficiency and transparency by introducing centralized elements and automatically establishing trust in a quasi-real-time manner to realize value transfer by transforming the assets traded into “smart contracts” through blockchain technology to complete peer-to-peer real-time trading, clearing and settlement.

(iv) Finance

Smart contracts applied to financial transactions have obvious natural advantages, because the essence of financial transactions is the transfer of value, the nature of the assets being traded in financial transactions determines the type of agreement chosen by both parties to the transaction. If one of the parties involved in the transaction does not perform according to the terms of the agreement between them, the automatic execution of the contract does not kick in, thus protecting the rights of the party complying with the agreement.

Financial transactions require high density of personal privacy and information security, as well as transaction efficiency and security. Because smart contracts are defined and enforced by code, there is no need for mutual trust between the parties to a smart contract; it is fully automatic and non-interruptible. Financial institutions can apply smart contracts to distributed bookkeeping in the blockchain or to stocks and financial assets, for example, by establishing rules and representing them in code instead of contracts.

At the same time, smart contracts recorded on the blockchain are not modifiable and do not require auditing, improving the efficiency of transactions. As can be seen, smart contracts constrain and guide public behavior, making information more transparent, data more traceable, transactions more secure, and reducing the cost of contract enforcement.

Because of these advantages, the RJ3 blockchain consortium formed by Goldman Sachs, JPMorgan Chase and other consortia is the first to try to apply smart contracts in the field of asset mastering, using smart contracts to perform peer-to-peer clearing on the blockchain platform Corda to solve the inefficiency caused by the traditional clearing method that involves a large number of institutions to complete complex approvals and reconciliations. Meanwhile, it is estimated that more than 200 banks, financial institutions and securities institutions have already participated in the clearing and settlement test of Corda.

(V) Healthcare

In the current healthcare system, there are multiple stakeholders with complex relationships and sensitive interactions, resulting in inefficient operation of the entire system and difficulty in guaranteeing security and privacy when healthcare data is used by multiple parties. Therefore, how to ensure the security of patients’ medical data and prevent the leakage of privacy information, as well as to improve the efficiency of the whole medical system has become an urgent problem to be solved.

In addition, the combination of blockchain and smart contracts can reduce disputes and strengthen supervision in the medical industry, improve the operational efficiency of the medical industry, and promote the innovation of medical services.

From this we can see that blockchain and smart contracts can significantly facilitate the sharing of medical information and create secure, trustworthy and convenient medical records with high integrity and trustworthiness. Hairball Technology Rush Research believes that the use of blockchain technology and smart contract technology can solve the problem of data interoperability by connecting all the important data of medical platform data together.

III. Conclusion
Through the analysis of the above application areas, smart contracts will complete the contract on their own in accordance with the agreement. Smart contracts can be used for a wide range of purposes. Any transaction that requires authenticity, multi-party access, origin tracing, or compliance can be applied to maintain the authenticity and reliability of the data in the system and not be tampered with. Of course, the application prospect of smart contracts does not go beyond the above listed fields, such as payment exchange, registration and settlement, data deposition, intellectual property protection, traceability, anti-counterfeiting and supply chain, identity authentication and citizen services can be applied.

References.

  1. Jie Li, Yanming Chai, Yan Yang, Fan Bai, et al, “Principles and Applications of Blockchain Smart Contract Technology
  2. Ouyang, Li Wei, Wang Shuai, Yuan Yong, etc., “Smart Contracts: Architecture and Progress”.
  3. Yang Chi Chi, “Forerunner of IoT+Blockchain Technology
  4. Wang Yuyang, “Blockchain + Internet of Things: Emerging Prospects, Technology and Integration Barriers Still to be Cracked”.
  5. Dong Fangfang, “Shenzhen Window of the World Opens the First Blockchain Electronic Invoice for 5A Scenic Area in South China”.

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