Smart Contracts: Blockchain technology solves the problem of inadequate financial services

The recent excitement surrounding smart contracts has fueled growing interest in this still relatively new innovation.

In my opinion, smart contracts can solve the problem of inadequate financial services. Here, I will explain what inadequate financial services are. It not only includes users who lack mainstream banking services, but also includes some gray area business activities (such as gambling, prediction markets, etc.). Due to regulatory risks, these industries are often restricted by conventional services. So what is smart contract technology and why can it solve this problem?

One of the main features provided by smart contracts is that payments from one party to another do not need to go through an intermediary institution. With smart contracts, the remitter can hold funds directly in the blockchain without the need for an intermediary bank institution.

Custody funds for prediction markets are in a harsh regulatory environment or simply impossible to implement. With smart contracts, investors and market participants can guarantee the security and availability of funds through the peer-to-peer network itself.

The growing popularity of P2P markets provides fertile ground for the adoption of smart contract technology, and even further. As smart contracts mature, web browsers, forums, and chat software will begin to provide seamless integration for their users. It can be expected that users of these platforms will be able to conduct more customized price transactions simply through information exchange providers, without the need to deposit funds with financial institutions. And reduce the overhead of many forms of financial regulation and related compliance.

Some projects have begun to exploit P2P networks or blockchains to develop systems to serve derivatives clients. The Veritaseum project uses a smart way to match derivatives clients without the need for a custodian to manage or control traders' funds. The project facilitates matching between peers and simply passes market information between the two parties to announce the "winner" in the derivative transaction, allowing the winning bidder to receive chain benefits through this announcement. Other companies use similar systems that facilitate peer-to-peer value transfer for the benefits of derivative settlement. For example, Streamum allows users to pay for video content in one second. Joystream is still an ambitious company to use peer-to-peer network reward payment by publishing the number of bytes transferred between users.

Smart contracts are expected to expand the range of “microtransaction” services using cryptocurrencies to execute payments of less than a dollar and as low as single-digit cents. The existing system is too difficult and inefficient to manipulate for those who wish to operate with small amounts of money.

The Blockstream platform has the much-anticipated Lightning Network system, which is leading the way in this field. It uses a complex network of interconnected accounting centers that is much faster than the current Bitcoin network. Once completed, the network will allow web content providers to quickly send small amounts of funds through the Bitcoin network without regulatory risks. The ultimate potential of this method remains to be seen, but integration into web browsers may make this feature frictionless and universal.

While some companies have taken bold steps in the field of smart technology, Bitcoin’s once global success has been gradually limited. Many providers have abolished the potential of exploring smart technology to improve service levels, including abolishing the ability to continue to explore and deliver value. These companies include Eris Industries, R3cev and DAH. These companies aim to provide programmatic applications to obtain income, but actually do not provide any value. It is unknown whether this method can improve service efficiency, because registered assets traded on their platforms will prevent the incumbent system from being stressed by serving such customers.

In the smart technology environment, it is still uncertain whether personal network accounts can function in the smart contract environment stipulated by the current network regulation. In contrast, there is no shortage of public network services developed by smart programmers. Their success currently seems to be on a growing trend.

Original: http://www.americanbanker.com
Translator: slieta5
Editor: Kyle
Source (translation): Babbitt Information (http://www.8btc.com/smart-contract-opinion)