Ethereum is considered to be the second generation of the blockchain. Wondering what the 1st generation is?
Well, it is Bitcoin, but that has limited scripting abilities. Hence, to make smart contracts in a way that can be done on the Ethereum blockchain is impossible on the Bitcoin blockchain.
That is why Vitalik Buterin, the founder of Ethereum, thought of a blockchain like Ethereum that has advanced scripting abilities such as turning completeness along with smart contracts.
And particularly due to this ability of the Ethereum blockchain, many use cases of Ethereum smart contracts are possible in today’s world.
However, I am not ignorant of the scaling problems that Ethereum is facing but it still makes sense in talking about the use cases of Ethereum smart contracts because it is very well on its way to scale with ‘Sharding‘.
5 Ultra Useful use cases of Ethereum SmartContracts:
1. Banking & Financial Services Contracts
Ethereum smart contracts have many smart use cases for the banking and finance sector. Smart contracts can be applied to areas such as in mortgages, national bonds, payments and settlements, and Insurance claims etc.
For example, let assume that a person fails to pay ‘x’ number of EMIs consecutively without any notice to the bank. In such a scenario, instead of a foreclosure, a full-length smart contract can be written which will enforce the rules and conditions.
Or let us say there is a government bond that is about to mature which and if written and maintained with smart contracts, will disburse the maturity amount to the bearer upon maturity.
Isn’t that an incredible application of smart contracts!
2. ICOs or DAICOs
Ethereum smart contracts can make the whole process of ICOs or token sales more effective, transparent, democratic and fair.
Recently, Vitalik Buterin, the founder of Ethereum, suggested a DIACO model which is nothing but a hybrid model of a DAO and ICO.
DAO + ICO = DAICO
In a DAICO, the intending development team launches a DAICO smart contract on the Ethereum blockchain with DAICO variable called ‘tap’. This is slightly different when compared to the old ICO contract but it also starts in ‘Contribution mode’ only just like the old ICO contracts where investors can contribute Ether according to the rules of the ICO.
But here the variable in the DAICo contract, the ‘tap’ (units: Wei / sec) determines how much Ether the developers will be able to withdraw from the contract per second and this tap limit is governed by the DAICO contributors. (This keeps a check on the developers as they can’t withdraw the whole contributed amount at once and run away with the contributed money.)
So you see how efficient the ICOs or token sale model can become with advanced Ethereum smart contracts.
3. Prediction Markets
The prediction market is another wonderful use case of Ethereum smart contracts.
There are quite a few platforms on the Ethereum blockchain that have implemented the use case of prediction markets, namely Gnosis and Augur.
The prediction market idea can be applied to places such as where you need to know the future outcome of a football match, an Election campaign in a country, price discovery point of an auction, chances of Elon Musk succeeding in colonizing Mars etc.
In such setups, participants are incentivized for participating in predictions and when some of these predict accurately, they are further rewarded via trustless smart contracts hosted on Ethereum blockchain.
These predictions can be used in betting, gambling or even in deciding whether a company should launch a particular product or not thereby making the whole process rewarding and cheap.
4. Replacing Escrow
Smart contracts can be applied where you have escrow services and middlemen because now you can replace them with smart contracts.
But the smart contracts, in this case, need to be really smart and should be thoroughly equipped with all the conditions and scenarios and, needless to say, well tested.
For example, you have Ethereum smart contracts acting as an Escrow in p2p Ethereum exchange service called LocalEthereum.
Similarly, one can implement smart contracts in real estates, wills and inheritance, and in places where there are nominees.
Another example can be that you make a smart contract based jobs marketplace like Upwork where smart contract acts like the escrow and not the centralized platform that takes commissions on each piece of work done through them.
5. Digital Identity Management
Digital identities can also be managed through smart contracts to solve the billion dollar problem of identity theft and data monopoly.
Through smart contract-based identity management projects like uPort which will give the option of self-sovereign identity to its users.
For example, let us say you are traveling abroad and you have your passport inbuilt in uPort and now at the checkpoints, you are revealing your chosen and required details at the airport for boarding.
No one else can see or copy this unless you authenticate it through your uPort app in the mobile and it is always stored in the Ethereum blockchain which becomes a trusted source for the requestor of the information too.
A total of more than 999999 accounts are found on Etherscan.io that have implemented some or the other form of smart contracts and this number is only growing exponentially day by day.
Moreover, the number of DApps on the Ethereum is also increasing. There are more than 1300 DApps on Ethereum some of which are live and some are in development or in proof of concept stage.
Both these indicators are a healthy sign that 2018 will be a year of smart contracts and DApps that will find their niches in even more diverse verticals of different industries.
This is what makes me excited about Ethereum smart contracts.
Now you tell us: What do you like about the Ethereum smart contracts? Are there any other viable use cases of smart contracts? Let us know in the comment section below.
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