What is the Blockchain: Transactions and Smart Contracts

What is the Blockchain: Transactions and Smart Contracts

What is the Blockchain: Transactions and Smart Contracts
Blockchain is rapidly gaining attention from organisations in every industry. However, it is a difficult to understand technology that, if not executed correctly could result in serious harm for your organisation. Therefore, in this series of posts on the blockchain, I explain what the Blockchain is and how it affects your organisation. The first part was a generic introduction on the Blockchain, while the second part focused on different types of blockchains and dApps. The third blog provided insights in several startups that are working hard on developing the required technology as well as several Blockchain challenges that need to be overcome before we will see wide-scale adoption of the Blockchain. In this fourth post, I will dive deeper in the different type of transactions that can be recorded on the blockchain as well as one particular type of transactions; smart contracts.

A key characteristic of the blockchain is that it removes the need for trusted intermediaries; centralised organisations that take a fee for verifying transactions. Removing the middlemen, completely changes the game for organisations that want to do business with each other. Last week, for the first time, a transaction took place between two organisations across the globe which was paid for using the blockchain and smart contracts. The Commonwealth Bank from Australia and Wells Fargo from the USA used blockchain in, according to them, the world’s first global trade transaction between independent banks for a shipment of cotton from Texas to Qingdao in China.

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Bitcoin transactions are still the majority of transactions being registered on the blockchain, but the possibilities of the Blockchain go a lot further. Basically, any financial transaction, whether these are financial contracts, settlements, transactions related to other currencies or exchange of assets can be recorded on the blockchain. In fact, any type of deal can be recorded on the blockchain, ranging from exchange of ownership of physical products such as houses art or rental cars, exchange of ownership of digital assets such as domain names or patents, land registration, attestation documents such as notarised documents, tracking of products within the global supply chain, connected devices or copyright of digital content. The list is endless and a complete overview can be viewed at the website of Ledra Capital, who have an ongoing attempt to collect the wide range of potential uses of the Blockchain.

In the case of physical products being recorded on the blockchain that use smart contracts to automatically exchange ownership when certain pre-conditions, subject to existing law, are met, we are talking about smart property. An example is the ownership of a car being automatically transferred from a car leasing company to the individual owner when all monthly instalments have been completed. Smart property works with public/private keys and ownership is exchanged by transferring the private key that is linked to a physical asset from one owner to another owner.

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