Autonomous Smart Contracts. Are They the Future of Blockchain?
Blockchain technology has lately been making quite significant strides in transforming the global financial ecosystem. Over the last couple of decades, blockchain technology has progressed from the creation of digital currencies, to the integration of these currencies with the blockchain digital ledger (e.g., Bitcoin), to the introduction of smart contracts on blockchains (e.g., Ethereum), to the more recent innovation of decentralized exchanges (DEX) and the proliferation of decentralized applications (Dapps). Today, driven by a vision of a decentralized and democratized financial sector, several blockchain startups are aiming to prevent recurrent malpractices and even outright fraud by centralized financial institutions.
Smart contracts on the blockchain are central to creating a truly decentralized finance infrastructure. Smart contracts are essentially financial management protocols written in code format that interface between the business and technological aspects of the blockchain network. However, the smart contracts that are currently available on widely used blockchains like Ethereum and Polygon have a centralized management method, which limits their capabilities. Such centralization stifles innovation and contributes to the well-established problem in blockchain technology known as the blockchain trilemma.
The blockchain trilemma states that all currently operational blockchains are sacrificing scalability, security, or decentralization in their operation. In other words, you can have one or even two of those three features, but never all three on one blockchain at the same time. The main tradeoff is between scalability and decentralization. The problem is mostly due to the architecture of existing blockchains, which is designed to validate on-chain activities using a proof-of-work consensus protocol. This protocol can only validate transactions on the blockchain by consulting numerous nodes deployed on it in order to reach a consensus. As you can imagine, such a linear process can take significant amounts of time and computing power, especially on an overloaded network.
Compounding the problem even further is the typically centralized management of smart contracts. Smart contracts need a trigger in order to function. The smart contract code lies dormant on the blockchain until a specific event, such as a transaction, update, or configuration requests, is initiated by users of a blockchain. The appropriate smart contract then awakens and executes the necessary tasks in a process known as triggering. This ideology results in blockchains being managed by centralized servers or bots, which coordinate the functioning of users’ requests and smart contracts, and such centralized control defeats blockchain technology’s singular raison d'etre - achieving truly secure decentralization at scale.
Various approaches are being actively explored to fix the trilemma issue of blockchains and the centralized trigger issue of smart contracts. Recently, a breakthrough solution was presented with the introduction of autonomous smart contracts.
What are autonomous smart contracts?
Sure, all smart contracts are automated but autonomous smart contracts take this automation to the next level. Unlike regular smart contracts, which still rely on human intervention to some extent, autonomous ones are fully self-executing and self-enforcing. It all comes down to the degree of trust required. With regular smart contracts, there is still a degree of trust that needs to be placed in the parties involved in the contract. With autonomous smart contracts, on the other hand, the contract is the ultimate authority. There is no need to trust anyone other than the code itself.
One of the biggest benefits of autonomous smart contracts is their potential to reduce transaction costs and boost efficiency across the network. Since the contract is
self-executing, there is no need for intermediaries or third parties to oversee the process. This can significantly reduce costs and eliminate the risk of human error or fraud. It is this added functionality which holds the potential to streamline, optimize and even revolutionize a number of industries.
Top 10 industries that will benefit greatly by implementing autonomous smart contracts
- Finance
Autonomous smart contracts can automate various financial processes such as payments, settlements, and fund transfers. They eliminate the need for intermediaries and enable instant and secure transactions, reducing the possibility of errors or fraud.
- Supply Chain
Autonomous smart contracts can automate the supply chain by tracking the movement of goods, verifying authenticity, and facilitating payments between parties. This can reduce the cost and time involved in supply chain management and increase transparency and accountability.
- Real Estate
Autonomous smart contracts can be used to automate real estate transactions such as buying, selling, and renting properties. This can reduce the time and cost involved in the process by getting rid of intermediaries such as brokers and lawyers.
- Healthcare
Autonomous smart contracts can automate healthcare processes such as insurance claims and payments, record-keeping, and patient consent. This can streamline healthcare operations, reduce costs, and improve patient outcomes.
- Intellectual Property
Autonomous smart contracts can automate the process of registering and protecting intellectual property such as patents, trademarks, and copyrights. This can reduce the time and cost involved in the process and increase transparency and accountability.
- Energy
Autonomous smart contracts can facilitate the buying and selling of renewable energy certificates, streamline the process of monitoring and managing renewable energy assets, and automate energy trading and settlement.
- E-commerce
Autonomous smart contracts can be used to automate the process of buying and selling goods online, enabling instant payments and reducing the need for intermediaries such as payment gateways and marketplaces.
- Transportation
Autonomous smart contracts can automate various processes involved in transportation, such as managing logistics and supply chain, tracking the movement of goods and vehicles, and facilitating payments.
- Insurance
Autonomous smart contracts can automate insurance processes such as underwriting, claims processing, and premium payments. This can reduce the time and cost involved in the process and increase transparency and trust between insurers and customers.
- Gaming
Autonomous smart contracts can be used in online gaming to automate payments and enable secure and transparent transactions between players, reducing the risk of fraud and cheating. Additionally, they can be used to enforce the rules of a particular multiplayer game and ensure fair play.
About the Author
Authored by Massa
