Fast forward 20 years and the only people being ridiculed are the extinct companies that refused to embrace it.
Bitcoin and the Block Chain are the Internet of 20 years ago. We are just beginning to unlock the potential of this powerful new technology.
As we scratch beneath the surface of the Bitcoin protocol, the application that we at HEDGY are most excited about is the “Smart Contract”.Imagine entering into a contract with a guarantee that both sides would perform as outlined. Imagine getting paid to rent out your internet connection like a WiFi Airbnb. Imagine an artificially intelligent bank that can issue loans on its own and shut down your car if you fail to make a lease payment.
Package Delivery Drone
Google’s Self Driving Car
Imagine a self-driving car that can park, charge up, drive for uber and pay for repairs all on its own.
Imagine replacing escrow agents with programmable arbitration robots.
Imagine a network of courier drones that you can bid on in real time to make last mile deliveries.
With block chain and smart contract technology, you could run Swaziland’s entire stock market on smart phones and a network of Amazon Web Servers with minimal overhead costs.
Smart contracts have the ability to drastically reduce the size and costs of the financial services industry. The potential possibilities for the use of smart contracts and bitcoin are endless. So what the heck is a smart contract?
A smart contract is a digital contract that enforces itself.
No human intervention required. That means no participation from the contracting parties. No middleman and it can’t be cancelled or modified once set in motion. We are talking about a new way of doing business, one the world has never seen before…well almost.
Enter the Vending Machine
A vending machine is actually a dumbed down version of a smart contact. You put money in, select your item and a computer program enforces the contract releasing you the item. There is no human middleman. Once you pay for and select your item there is no way for you to cancel or modify the contract.
Now imagine the dollar bill you inserted is bitcoin and the vending items are contractual agreements.
So, Why Now?
When evaluating new technology I like to as the question “Why now?” Why was Uber only created after smartphones reached wide spread adoption? Why was Airbnb only created after the sharing economy began to take off?
Smart contracts were originally proposed by Nick Szabo in the late 1990’s. They didn’t take off because there was no way to monetarily enforce a smart contract via a computer protocol. It could tell you that Alice must pay Bob, but there is nothing preventing Alice from walking away. Additionally, Alice’s bank must also agree to send the funds to Bob. Until the advent of bitcoin and the block chain protocol, there was no way for a digital program to take custody of money. So all you have is a non self-enforcing contract.
Enter Bitcoin and the block chain.
Now we can have digital programs and machines take custody of money and self enforce digital contracts.
Surprisingly, this is not a new idea.
When the creators of the web set out to build HTTP they actually sought to build in a digital payment system. They left the project unfinished because they didn’t have a solution to creating a secure, trustworthy and legal digital currency. HTTP error 402 is the error code that still exists today.
This is the “why now” reason for smart contracts. Bitcoin has solved the internet’s digital cash void.
Some massively disruptive businesses that are enabled for the first time:
- Programmatically governed corporations & contracts
Imagine autonomous corporations that hire employees, manage teams and pay dividends without any traditional corporate management. The By Laws and Articles of Incorporation are programmable scripts.
5. Internet connected appliances that can optimize themselves, negotiate and transact with each other. (Internet of Things)
The birth of the M2M market. A new payment channel is emerging: Machine to Machine commerce. Imagine a car that can sense its dirty and hire itself a mobile car wash during a break in your schedule.
IBM’s Bitcoin Internet of Things Experiment: http://www-935.ibm.com/services/us/gbs/thoughtleadership/internetofthings/
4. Programmable, streamlined, non custodial financial products (Derivatives, ETF’s, loans, Purchase Agreements, bonds)
Expand accessibility to financial services, reduce counter-party risk, decrease the need for trust and increase transparency.
6. Pay per MB Airbnb style Wifi
Rent our your internet connection over a mesh network for side income.
Right now we are still in the experimentation phase of smart contracts. We have this incredible technology at our fingertips and we’re applying it to decade old problems. Many will fail but the ones that succeed will transform trillion dollar sectors of the economy.