Smart contracts are a lot more diverse and useful than they were even five years ago. New companies are finding creative applications for enforced, decentralized agreements, bringing the distributed future closer every day.
Smart Contracts in Depth
Smart contracts are simple in their most basic form, just technologically enforced agreements with terms, conditions, and a schedule -- but the blockchain space has been evolving for years, now. That initial, most basic definition is still relevant, but it doesn’t encompass nearly the breadth of the applications that are out there today.
The first and most important smart contract platform was Ethereum -- and while it has been incredibly influential, it is also limited. Ethereum only accepts code in a proprietary format called Solidity. Both the inherent limitations of Solidity, and the lack of wide familiarity with its features, mean that the so-called Ethereum Virtual Machine has struggled to produce the truly world-changing blockchain products that were prophesied.
Next came more advanced platforms that could accept smart contract coding in a wide variety of languages. Platforms like EOS and NEO allow the input of code in widely used languages like C and C++, though EOS does compile this into its own format, automatically.
The NEO blockchain, in particular, is focused on being widely accessible and widely useable -- and that goes beyond the level of just code.
Digitization of non-Digital Assets
NEO has significant backing from the Chinese government -- a body that has surveillance and general oversight goals that seem to be in direct conflict with those of the blockchain. But there’s a reason the blockchain community is excited about a government-backed blockchain: it has a much better chance of being able to administer the behavior of physical assets, one of the core goals of blockchain products since the beginning.
Since the very beginning, blockchain companies have been working to revolutionize everything from inheritance to real estate, but in all cases the problem comes down to registration. Land, family estates, and others fall within the purview of government regulation, meaning that a blockchain-based smart contract meant to divvy up a person’s assets upon their death isn’t legal and usable simply because the deceased is the one who commissioned it. Smart contracts that deal with government regulated processes have to abide by those government regulations or authority-- a need that has stymied blockchain projects from the very beginning.
Modern blockchain platforms, and in particular the NEO blockchain, is focused on maintaining regulatory compliance. That seemingly prosaic goal is proving to be crucially important, since the majority of blockchain projects aim to disrupt traditional industries and interests. That means playing by the traditional rules, as well. NEO has also put significant resources into developing a proprietary identification standard via THEKEY, which will also be crucial to ensuring government assent to a wide variety of blockchain services.
More Knowledge Means More Abilities
One big limitation of the blockchain is that it has trouble dealing with the world outside of itself-- but most of the applications have to do with that very world. To get around this, modern blockchains have developed the concept of a “blockchain Oracle” which has the sole job of collecting information from the internet beyond the blockchain in question, and reporting that information to a smart contract so it can be used.
Any smart contract that watches, say, the state of a particular stock to dictate its behavior, needs an Oracle to report the ongoing state of that stock, in order for the contract to work.
Side Chains Have Side Benefits
Another crucial new concept is that of a side-chain -- or one blockchain working in tandem with a different, separate blockchain. A sidechain is an interoperable blockchain that is produced from the code of the main chain but which allows for unique and independent operations. This not only allows competing networks to share information for mutual benefit, but also allows single projects to set up multiple blockchains with different strengths and weaknesses, and to use each where it can have the greatest effect.
Sidechains are revolutionary additions to the blockchain ecosystem since they allow developers to silo different functions and create systems of networked blockchains. This allows the wide breadth of blockchain abilities to finally complement one another, becoming not mutually exclusive feature choices but options available to be added to an ever-growing feature-set available, directly or indirectly, to every blockchain project in the world.
There are an untold number of blockchain projects in the world right now -- including the IBM- and Microsoft-backed Hyperledger project. There are many different approaches to a truly advanced smart contract platform, and only time will tell which of them has found the formula that can finally unlock the full potential of smart contracts, and of the blockchain in general.