What is a smart contract?
According to Wikipedia, A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are traceable and irreversible. you can read more about a smart contract here.
In our current social setup, almost all contracts are based on an assumption of trust. A landlord assumes that a tenant will pay their rent as spelt out in their lease, and a victim assumes that an insurance company will pay out their claim. If that assumption turns out to be false and one party defaults, then a third party like a court system is involved to try to force the issue.
Smart contracts execute exactly as they are programmed, so there is no assumption of trust. So long as both parties agree to their terms, they are guaranteed to be satisfied in how the contract is carried out, without the involvement of a third party.
Blockchain and smart contracts take the way people trust each other to a new level, which is especially acute for social and labour relations. First of all, it’s about communication in social media where users have been frequently faced massive data breaches and fake profiles. Take, for example, the recent Facebook hack which has allegedly impacted nearly 30 million user accounts. Six months earlier the company discovered a bug that made at least 14 million users private posts publicly viewable for days. The survey made by Marketing Charts demonstrated that 55% of respondents were concerned about their data being used by or sold to other companies.
The labour market is another example of where trust matters. Earlier, when hiring an employee, we had to be critical of the description of his skills, competencies, and recommendations. With smart contracts and blockchain, there is no reason to doubt the information that we see in CVs. Unverified accounts are not allowed since the evaluation of reputation and payment deals are controlled by smart contracts. This is what Humans.net are working on right now. The initial trial of job search service run in the USA only has attracted over 200,000 users and demonstrated the demand in decentralizing the way humans live, work and relate to one another.
The promise smart contract option on blockchain aims to deliver is something that the world craves for and would represent a fix for the way we conduct business with third parties, while its true nature is a change of paradigm. We were running a business for so long using third parties for trust, that when we have the option of by-passing those third parties, we think twice before jumping on that wagon.
By concept, a smart contract resolves the trust issue between the participants, but this implies that all the participants are part of the same ecosystem. For now, the bridge between day-to-day life and crypto world was not built and it’s hard to cross that border(for example there is no smart contract to use when using AirBnB services, that would automate and bring trust to the whole process of renting, paying and review giving) because the end of the process represents a payment in local currency and the payment actors have not joined yet the blockchain “wave”.
But, once the smart contracts are used at wide scale, the trust issue would not be any more about personal feelings and reputation but an automatic process that follows an all parties agreed on a flow that executes no matter what.
So, I think that the smart contracts do not change the way we trust people but assures us that no matter what happens down the road, the process and the rules will be applied to all the players as the players agreed upon.
We will continue to trust people, because that initial trust in the individual’s or the entity that the individual is representing capability to deliver, made us be part of that smart contract, but we won’t need to bother anymore about all the process/flows that make the relationship working.
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