As a decentralized currency, Bitcoin removes central points of failure and offers an objective transaction record. Visit the Immediate Edge site to access the best-automated trading platform for cryptocurrency trading. Blockchain, the technology behind bitcoin transactions, is reliable and tamper-proof – with only an identifiably unique fingerprint to match transactions with their corresponding owner.
This new model can offer increased security and transparency to asset owners and investors through digital ownership certificates, which provide proof of who owns which amount at any given time in a robustly auditable ecosystem – all without relying on trust or interference from third parties such as banks or governments. This article will outline the reasons for a transition from the current financial infrastructure to one that embraces bitcoin and smart contracts.
Basics of smart contracts:
Smart contracts are essentially algorithms that users can code to manage the movement of assets. Smart contracts are designed to execute transactions based on input parameters and their rules. A simple example is a contract for use in legal matters – an escrow service for a real estate purchase, with digital funds being released upon contractual completion of inspections and payment from the buyer to seller.
Users could map out the steps in a predefined way, executing payments based on inputs such as time, temperature and even tone of voice captured in phone conversations. Specific predetermined criteria can trigger payments upon confirmation by multiple parties.
Application of intelligent contracts in finance:
Industries can apply this functionality to the finance industry in various forms. The first is creating unique ‘digital wallets’ that could be assigned to each security or investment asset, like the existing paper proof of ownership system.
These wallets would contain unique digital fingerprints and be authenticated via blockchain systems on both sides of a trade. It protects against theft as with bitcoin and allows for brilliant contract execution based on predetermined criteria. Users could also use smart contracts to create transparent and secure electronic allocation models for invested capital, such as venture capital funds.
Initial coin offering is based upon smart contracts?
Initial coin offerings are just the beginning of a new market growing worldwide. Ecosystems embracing intelligent contracts and digital currencies have been increasing for some time. Many projects and companies like Ethereum, Master coin, Maid safe, Shift or Trusted Coin include intelligent contract functionality.
Smart contract buzz:
It is difficult to determine where this paradigm shift will go, but it represents a change in the financial system. Traditional systems rely on trust to run smoothly but provide no transparency over how funds are raised or spent, and intelligent contracts do it very gracefully.
A deadly combination of bitcoin and smart contracts:
In the finance industry, the next big step will be the combination of bitcoin and smart contracts. The first-mover advantage is that bitcoin has given it a leg up in becoming the world’s de facto currency. However, if bitcoin becomes a global payment system, why not issue a digital ledger that stores all financial transactions transparent and frictionlessly? It would eliminate banks and even more intermediaries from an already highly inefficient system.
Undeniably this new financial infrastructure will require a lot of work to build. Still, if adequately put into action it could eliminate costly fees for both small and large investors alike.
When can we see intelligent contracts on the bitcoin blockchain?
The infrastructure is there, and it will happen soon, but do not expect to have complete transparent access to all your financial holdings any time soon. Instantaneous transactions over public ledger systems would need to be addressed to be used by the bitcoin network, and issues of legitimacy will persist. Nevertheless, smart contracts will continue to grow in acceptance with bitcoin as a payment method, smart contracts can help bring about more excellent stability in today’s economy.
The bitcoin blockchain is not intended to be a single global ledger for all assets but an Internet of value that can facilitate trust in bitcoins and intelligent contracts. Using blockchains removes the need for third parties and limitations on what can be recorded. Therefore, brilliant contract execution can occur directly on the bitcoin blockchain and many other blockchains.
Bitcoin’s immutable data storage and smart contracts will provide a complete picture of financial activity. This system will then start to link identity with financial activity, offering users a way to prove their right to transact over digital assets – without relying on intermediaries such as banks or governments.
One of the biggest problems facing the world today is how to provide transparency in transactions and ownership – and this can be solved with bitcoin as a payment method and smart contracts as an authentication system.