What Are Smart Contracts And How Do They Work? 0 54

After hearing about the capabilities of the blockchain and its transparency and decentralization, the next term you’ll come up against is inevitably smart contracts. While you don’t need to know everything about the blockchain technology and how it works, it’s useful to get a feel for what a smart contract is. Not least because they are likely to become the new normal across all industries in the not-too-distant future. So, let’s cut to the chase:

What Are Smart Contracts?

A smart contract is a digital contract that verifies and enforces the agreed-upon terms between the parties involved. Smart contracts allow for fast and efficient transactions to take place without the need for lawyers or other third parties. They are self-enforcing and provide security and transparency, while reducing associated contracting costs and middlemen fees.

They also help with the speed of transactions, since smart contracts can ensure payments are made and terms are respected in real time, with no human interaction. Once a transaction has been made, it is irreversible and all transactions are trackable.

Smart contracts can be put to use in any area that can benefit from efficient documentation and reducing corruption. The agricultural industry is an example in which there are many stakeholders involved in the supply chain and much room for error and corruption.

With smart contracts, every stage of the supply chain is regulated and publicly available for anyone to see. Smart contracts are set to resolve the supply chain problem in the tequila industry, and more and more cryptocurrencies are making use of them.

Smart contracts, as with other aspects of the blockchain, allow for the democratization of many industries and the cutting out of middlemen. In the music industry, for example, smart contracts enable the artist to sell directly to the buyer and receive the payment they deserve. They can also be implemented to make sure that any royalties are automatically paid out, each time a song is played in a public place.

Supporting Instant Payments

Smart contracts are essential to supporting instant payments where certain conditions are met. As more and more enterprise blockchain applications roll out, the majority will certainly use smart contracts.

To simplify the function of a smart contract, you can think of it as a small computer program that follows an If/Then structure. For example, if you allow me to gain access to my favorite song or TV show, then I will transfer the funds into your account. They automatically trigger a transfer of information that can reduce human error and make routine processes simpler.

Transactions can be worth pennies, when it comes to a piece of music or the payment for consumer data, or they can run in the millions of dollars. The security is the same. No billing is needed as everything is recorded and the payment happens instantly, removing the worry and delay that happens with bank transfers. Smart contracts can also verify that adequate funding is available before allowing the transaction to occur.

Smart contracts could be one of the most important factors to come out of cryptocurrency, as they could disrupt the entire way we engage in commerce. Companies could launch their own cryptos and engage consumers in their products and ecosystem, in a world in which fiat currencies can no longer compete.

But will that happen anytime soon?

Volatility of Cryptocurrencies Remains an Issue

When arranging payment in cryptocurrencies, one continued problem is how to price a transaction when its value is fluctuating so dramatically every day. This is still an issue with cryptocurrency and not something anyone has an immediate solution for.

For now, one way around this as payments through smart contracts become more widespread, is to use stable value cryptocurrencies, like Tether, LiteCoin or Monero, rather than volatile ones like Ether and Bitcoin.

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Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.

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After the Death of Net Neutrality, We Need a Decentralized Internet 0 176

Net neutrality died more quietly than expected. It’s been almost two months since the FCC’s ruling to make internet access vulnerable to corporate meddling, thanks to FCC chairman and Verizon advocate Ajit Pai. And not much seems to have changed on the web browsing citizen’s end. Major ISPs Comcast, Verizon and AT&T have all indicated that they have no plans to block or throttle traffic, or to prioritize paid content. So rest easy, dear ones. The sharks have promised not to bite.

Of course, that’s really no reason to celebrate. As of June 11th, “there is nothing legally preventing companies like Comcast, Verizon, and AT&T from arbitrarily censoring entire categories of apps, sites and online services, or charging Internet users expensive new fees to access them,” notes Evan Greer, deputy director of Fight for the Future, a nonprofit advocating for digital equality.

Fight for the Future is just one organization working for a free digital world. All around, and in part thanks to the FCC’s ruling, people are switching on to the notion that open connectivity should be a right and not a privilege. And some folks are getting a crazy idea: if we can’t have net neutrality, we may just have to build another internet.

Building Our Own Internet

That’s exactly what people have been doing in Detroit. To combat the emergence of a “digital class system,” and in response to the scarcity and prohibitive costs of ISP connection, residents and volunteer members of the Equitable Internet Initiative, or EII, are building their own internet infrastructure.

Over on the Pala Reservation in Southern California, meanwhile, indigenous communities are tired of waiting for a connection. So they’re taking matters into their own hands and repurposing unused analog TV channels to broadcast their own free and neutral internet across the rez. They call it Tribal Digital Village.

Efforts like the EII and Tribal Digital Village are proving that we can take control of our connectivity and decouple it from the stratification of economic privilege.

Reinventing the Internet Altogether

Radical community efforts to build DIY networks are inspiring and powerful. But perhaps we can go even farther. The internet still works on an old model that has plenty of room for improvement. Let’s say you’re sitting in a public library, messaging your zine collaborator across the table. There’s no direct internet connection between your phones, so your message has to go up into the nebulous cloud of internet before it bounces back down to their phone. Not entirely efficient, considering they’re sitting right there.

If you had a direct connection, the signal could just travel across the table. That would be possible using a mesh network, like the one proposed by RightMesh. In their mesh network model, every device becomes a hotspot in a decentralized connective network.

Why volunteer your device as a public hotspot? Because you get tokens, of course. This is blockchain! Like the EII and Tribal Digital Village, this is a cooperative and participatory system that relies on no centralized authority (like a corporate ISP). Everyone volunteers their device as a hotspot, gets rewarded with tokens, and just like that, we have a decentralized internet.

Without the need for ISPs, we would be free from Verizon, Comcast, and AT&T. We could run open-armed through the proverbial fields of digital wildflowers. The possibilities of this go well beyond urbanite convenience. A global mesh network could bring internet connection to any part of the globe where there are phones—even phones not connected to wifi. In this system, the phones create the wifi.

An Off-the-Grid Internet

RightMesh’s stated goal is to “connect the next billion people and lift 100 million out of poverty.” They claim to be the first P2P network that requires neither infrastructure nor network connectivity to operate.

That said, they’re not alone. Blockmesh is doing something similar. Moeco’s ‘global IoT connectivity platform’ uses mesh network principles for IoT gadgets. And Open Garden allows ISP customers to ‘sell’ your underutilized connection (extra bandwidth at home, or unused data from your mobile plan) to your neighbors for tokens.

All these ideas are packed with possibility. But the point is, with the grassroots efforts of groups like the EII and Tribal Digital Village, and with blockchain innovation pushing the definition of the internet forward, we’re looking at a future where the connection is universal, accessible, fast, cheap, self-generating, decentralized and off the grid. Someday soon we might be thanking the FCC for spurring these advances.

Blockchain and Cryptocurrency Are Bringing Transparency and Verifiability to Loyalty Programs 1 4662

New blockchain apps using cryptocurrency as rewards and cash back have the potential to improve the loyalty space. Read on to learn how.

Blockchain, Cryptocurrency, and Loyalty Programs

The International Council of Shopping Centers reports that the loyalty space grows by about 30% every year, with 85% of consumers belonging to at least one loyalty program, circulating $300 billion between them annually. With so many users and so much money circulating through loyalty programs, adding blockchain-related features and cryptocurrency mechanics would help companies offload complexity and interact with crucial partners and customers, taking stress off of core loyalty programs.

Blockchain technology would also allow companies with large balance sheet liabilities stemming from redemption bottlenecks to open up redemption options, widening these bottlenecks to increase revenues. Lastly, incorporating blockchain tech into loyalty programs would allow partners to integrate loyalty programs seamlessly regardless of their size, helping them craft trendy offers more easily and eliminate back-end redemption problems.

The largest problem loyalty programs face today is a dual one: they are being used at an all-time high rate, while the total number of unredeemed points (and the cost of managing them) is growing. The average US household today participates in an average of 29 different loyalty programs, according to the 2015 Colloquy Loyalty Census. New accounting standards, however, state that revenue attributed to loyalty points must be deferred until the redemption conditions are met.

With so many overlapping and often confusing rules and regulations for redeeming points, rewards, and cash back in so many places, companies operating loyalty programs are losing money from consumers’ analysis paralysis. People aren’t redeeming to their full potential due to the large and confusing web of guidelines associated with doing so; most people don’t have the bandwidth to understand all of them.

Blockchain, the distributed ledger technology behind cryptocurrencies like Bitcoin, could improve loyalty programs with enhanced features like instant rewards redemption and loyalty point currency exchanges, centralizing them and making them more accountable and transparent. Blockchains improve transaction verifiability, integrity, and transparency by grouping transactions into blocks confirmed by a wide public network, or chain, of participants (hence the term “blockchain”). Afterwards, every ledger in the blockchain is updated to reflect the new transaction(s).

This is an improvement upon centralized databases, where intermediaries with full control over databases and the data they contain create, read, update, and even delete data as single points of failure. In contrast, blockchains rely on a network of people to verify transactions by validating and writing new data. Past entries never change, and new entries are written to update the state of past entries. This secures and strengthens the record of each one through consensus.

In the end, blockchains allow for decentralized control while traditional databases use centralized control to manage data, which is more fallible since a database administrator constitutes a single point of failure for everyone’s data security, were the security infrastructure to fail. On a blockchain, there is no single point of failure, improving data security and integrity.

Loyalty programs that grouped point currencies, rewards redemption options, and rules into one digital wallet would encourage companies to cooperate with one another to create shared value, since siloing loyalty programs over multiple blockchains creates saturation and detracts from consumer value. Instead, companies could co-create loyalty programs in partnership with blockchain platform developers to centralize information people need in order to easily reconcile all of the point options, redemption systems and point exchanges. This would help people make quicker and smarter decisions on which loyalty programs are best for their shopping habits and preferences. This would also make points and rewards redemption easier and more consistent, allowing consumers to redeem more rewards and points.

For businesses, blockchain tech would enable greater revenues by alleviating the balance sheet bottleneck created by unredeemed points. It would also let businesses explore new loyalty program models incorporating large and small business partners, allowing them to integrate seamlessly with loyalty programs. This could help businesses craft popular offers more easily and make it easier on businesses to distribute points since the entire process would be outsourced to the blockchains their programs were on. Blockchains’ decentralized nature allows greater verifiability and transparency of points distribution and rewards redemption by a wide network, freeing up back-end costs for other needs.

Blockchains aren’t infallible. With so many out there today, creating new blockchains on which to operate loyalty programs could create program saturation, detracting from loyalty programs’ ability to deliver value to customers. In addition, the blockchain-based transaction layer between consumers and loyalty program operators would, on paper, generate a small per-transaction cost for transactions associated with these loyalty programs, which could grow over time. Customer data could become available to other participants in the loyalty network, or to competitors. And, rewards currency could devalue in what would be an open marketplace for trading points.

The most basic way for companies to eliminate these risks is to take a ground-floor role in structuring commercial agreements and partnerships to protect the core components—currency value, customer data and relationships, and transaction costs—of their loyalty programs when creating or choosing a blockchain platform to run their loyalty programs.

Blockchain apps using cryptocurrency to power rewards and cash back have great potential to deliver new value to consumers, such as passive income, savings, and compound interest to help them buy more with less. This is because cryptocurrencies—not only Bitcoin, but also Ether, Litecoin, Ripple and others—are just as much assets as digital money with which to buy and sell things. Since blockchains are at the heart of many cryptocurrencies, loyalty programs can use them to turn everyday shoppers into investors, giving them a single place to redeem all of their rewards and get cash back in the form of crypto, creating more convenience and more value. Several disruptive use cases, such as BitRewards, FluzFluz, and Rewards.com are already putting these ideas into action.

Use Cases

BitRewards is a rewards network that works with token holders to confirm liquidity contracts between itself and partner cryptocurrency exchanges, allowing the platform to deliver rewards in cryptocurrency. Operating on the Ethereum blockchain, the BitRewards network uses a distributed system of nodes, or cryptocurrency-holding professionals operating on the platform, to fund rewards through their cryptocurrency exchanges through smart contracts that allow rewards to flow through the system, creating a liquid system of cryptocurrency rewards.

FluzFluz operates a global co-op network between merchants and consumers on JP Morgan’s Quorum blockchain, letting consumers build their own shopper networks and make passive cash back-based cryptocurrency income, both when shopping and when members of their networks shop. Each co-op member group (up to a maximum of 65,535 people) shares cash back internally, with 50% going to the purchaser and the rest being split equally among the members of the co-op. The FLUZ token is tradable for cash back rewards and gift cards, and helps fund network transparency and lower transaction costs.

Maurice Harary, Founder of Fluz Fluz, says, “A good leader creates followers, whereas a great leader creates other leaders. The global cash back rewards co-op technology at FluzFluz lets average consumers empower others to become influencers, grow the rewards network, and increase each member’s buying power and cash back potential as a result.”

Rewards.com recently incorporated cryptocurrency into its online rewards platform as well. Since it has thousands of retail partners across the country, its new RWRD token is redeemable at any one of them. By incorporating it as the platform’s core store of value with its enormous network of partners, Rewards.com is helping to put cryptocurrency into the wallets of more mainstream consumers by powering everything from cash back rewards to discounts on its platform.

These are all examples of ways in which blockchain technology and cryptocurrency are already beginning to impact the loyalty industry. Their founders have so much confidence in their products that they’ve all opened themselves up to questions on platforms like Telegram and Slack to help refine their products.

Looking Ahead

Blockchains and cryptocurrency have the potential to reshape the loyalty industry, helping consumers use multiple rewards programs across stores, making rewards transactions securer and more transparent, and centralizing cryptocurrency rewards programs in one place. Verifiability is an important part of this equation as well. Blockchain’s decentralized and transparent nature can allow loyalty programs to be used in one place and be open source. That adds accountability to these programs, since everyone monitoring a loyalty program’s blockchain would be responsible for verifying points, rewards redemption, and cash back transactions.

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