Smart Contracts Will Change the World: Here's Why

Bitcoin was the first cryptocurrency to be created and to gain meaningful adoption. People tried to make other coins similar to Bitcoin but failed quickly. All you could do was trade these coins, but there was no other use case. Until Ethereum was created.

Ethereum was launched in 2014 being the first blockchain with smart contracts. This changed the crypto industry forever. Let me explain why.

What Are Smart Contracts?

A smart contract is an agreement that is coded on the blockchain that executes based on certain conditions. To put it simply, smart contracts allow you to code how money and value move. It may be easier to explain by using an example:

Let’s say we have a father named Bob who wants to pass on his $10 million inheritance to his son. Bob wants his son to receive 20 payments of $500k over 10 years instead of the $10 million at once (so his son doesn’t spend it all at the casino).

Usually, a lawyer would be required to facilitate these payments.

Using a smart contract, Bob can allow his son’s wallet to incrementally withdraw the money over 10 years. Bob can decide the number of payments and the payout dates all in the code. No lawyer or middle man required.

Why Should I Care?

Our world today is filled with intermediaries that take a cut out of every transaction. Uber and Lyft take a cut out of every ride. Real estate agents take a cut out of every house they sell. Banks offer low-interest rates on deposits to keep the rest for profit.

These middlemen provide a needed benefit to society, but they can create inefficiencies in the economy.

What if drivers received their full payment without Uber and Lyft taking a cut? What if people could sell their house and not lose 3% on the transaction to the agent? What if banks paid an interest rate that is above 0.6%? I’ll explain how this is possible.

Ride Sharing

Let’s start with ride-sharing. Instead of Uber and Lyft facilitating the transaction, a smart contract can achieve the same outcome. When the rider books their ride, the money is held in a wallet until the ride is complete.

Once the ride is complete, then the contract will pay the driver. This allows the driver to receive the full payment and be able to set their own rates. The winner? The driver.

Decentralized Ride-Sharing using Smart Contracts (source: Oodles Blockchain)

Real Estate

Real estate is another industry that smart contracts will disrupt. Real estate agents typically take 2–3% of the home’s price when buying or selling. Using a smart contract, buyers and sellers can complete this transaction without an agent.

This would save over $100 billion a year in real estate commissions. The winners? The buyers and sellers.'

I coded a smart contract that demonstrates this exact use case. In addition to matching buyers and sellers, the original owner of the home can set a royalty they receive when the house is sold in the future. All of this is open source and can be found on my GitHub here.

Real Estate NFT Marketplace using Smart Contracts (source: GitHub)

Decentralized Finance

Smart contracts can replace banking services as well. Most banks have very low-interest rates for deposits (<1%) and command high-interest rates for loans (>5%).

Decentralized finance (DeFi) is a sector in crypto that seeks to replace traditional banking services with smart contracts. Instead of lending or borrowing from a bank, the user is able to generate interest or take out a loan through a protocol. No permission from a bank required.

Dashboard of DeFi Protocol Compound Finance

Some examples of DeFi protocols are Compound Finance and Aave. These protocols allow users to deposit crypto and stablecoins (tokens pegged to $1) to generate interest without banks.

The deposit interest rates on USD stablecoins (typically 5% to 10%) are much higher than what you would get at a bank. The winner? The depositor.

Smart Contracts Give Power Back to People

In the 3 examples above, you might notice a pattern. The beneficiaries are the people who use the protocol. This was a lightbulb moment for me. This is what got me excited about this technology.

Our society has been built on centralized entities. Banks. Brokerages. Social media platforms. Vacation rental companies. These companies take a cut out of every transaction and funnel billions of profits to their shareholders and executives.

They tell us when we aren’t allowed to buy GameStop or what we aren’t allowed to post on YouTube. We can stand up to these companies. We can build our own future.

Smart Contracts are the Foundation of Web 3.0

Web 1.0 was defined by static web pages. Web 2.0 was defined by user-generated content and social media. Web 3.0 is defined by digital ownership and smart contracts.

The Progression from Web 1.0 to Web 3.0 (thank you to Mach37 for this image)

Web 1.0: Companies create, Companies profit

Web 2.0: People create, Companies profit

Web 3.0: People create, People profit

If we can create an Internet that everyone owns, then the people will benefit instead of large corporations. This is what Web 3.0 is about.

How Can I Contribute to Web 3.0?

Web 3.0 is primarily being built by two types of people: developers and community members.

Development

Developers are coding the applications. Protocols are hiring for all types of developers from frontend to backend development.

Most smart contract development is done through a programming language called Solidity. Demand for smart contract developers has been high while supply has been low. According to web3.career, the average starting salary for a Solidity Developer is $100,000 and is rising.

If you don’t know where to start, you can find app examples on my GitHub or check out DappUniversity.

Salary data for developers working in Web 3.0 (source: web3.career)

If you are a teacher, now is a great time to introduce blockchain and smart contracts in a lesson or two. This industry is only growing faster and cryptocurrency job postings are exploding. According to LinkedIn, crypto job postings soared 395% in 2021. Talent is flooding into the space.

Community

Community members in crypto can play a role in many ways. There are content creators, developers, investors, and even community managers. Everyone plays a part and can decide how involved they want to be.

Find a protocol you like. Join their Discord. Chat with community members. Give your thoughts on proposals. Post memes. Create content. Some communities will even reward members with tokens or NFTs for contributions.

This is Only the Beginning

Smart contracts have only been around for ~7 years. In comparison to the Internet, we are in the year 1990. This technology is going to revolutionize the world. Few are ready for it.

You don’t have to take my word for it. Here is what billionaire entrepreneur Mark Cuban thinks about smart contracts:

I recommend keeping close eye on this industry. Eventually, I believe all companies will utilize smart contracts in some form. From banking to social media to insurance, be prepared for it to disrupt industries. Most people don’t know what’s coming.

Opportunities are everywhere in life. This is just the biggest one I’ve seen so far.

Disclaimer: Any views or opinions expressed in this post are personal and belong solely to me and do not represent the views or opinions of my employer. You should not treat any opinion expressed by Josh as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This article is for informational purposes only.

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Photo by Cytonn Photography on Unsplash