Blockchain: Smart Contracts
ABN AMRO Head of Innovation Arjan van Os make a number of excellent comments worth repeating in the blog posting, “The Next Big Thing”:
“Each node maintains an identical copy of a shared transaction ledger – the so-called ‘single source of truth,’” says van Os. “As transactions take place, the nodes communicate with each other to verify that the transaction is valid. If the ledgers don’t match up, the transaction is rejected. That virtually eliminates the single point of failure: If one server is hacked, the other nodes will recognize the intrusion and block the hacking attempt. The more nodes added to the Blockchain, the more security the transaction has.”
Making explicit reference to Smart Contracts:
One of the ‘hidden gems’ of Blockchain technology comes in the form of Smart Contracts. Through specific scripts in the Blockchain, all conditions of any contractual agreement can be stored, verified and secured within the system. In this way, users can program the exact conditions under which a contract can be executed, thereby mitigating risk and increasing trust for all stakeholders.
Its probably an understatement to say that most banks are in a race to identify how to use cryptocurrencies in the financial sector and get ahead of the competition – as noted by Italian banking group Intesa Sanpaolo:
[the bitcoin protocol’s] potential is far from being fully explored especially as a means to transfer rights and value in a very secure way
Richard Brown has a good posting on smart contracts, and shared ledger, and more interestingly, shared business logic – think collateral management and other such business problems.