Mediablocks Newsletter #4: What are Smart Contracts?

Bi-weekly newsletter from Bloomen.io, EU co-funded research project.
Issue #4 • April 5, 2019 

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UPDATE

Testing, testing…

Situational awareness: Current blockchain development is two-fold. There are new organisations forming to collaborate on blockchain. At the same time, there are growing doubts whether blockchain technologies are mature enough.

EU Blockchain Initiatives

  • New European Blockchain Initiatives: Launched by the European Commission around a 100 companies have joined a new association. International Association of Trusted Blockchain Applications (INATBA). Members include Swift, IBM, Ripple. The goal is to bring together developers and companies interested in blockchain potential. Coindesk
  • There is another, recently started EU initiative called European Blockchain Partnership with 22 members. Goal here is to support cross-border digital public services.
  • A third EU Blockchain initiative is the EU Blockchain Observatory and Forum, which is a good destination for market studies.
  • Bloomen is already using partial services and platforms from Alastria, the Spanish national blockchain platform.

Central Banks experimenting

Central banks play an important role in their countries, as they influence many policies and the economy. According to a report from the World Economic Forum 40 Central banks worldwide are testing blockchain. World Economic Forum

Maturity questions

With all the activity above, there is still a lot of work ahead. Blockchain is still a developing technology, despite all the (theoretical) promises.

  • Key quote from a McKinsey article: “From an economic theory perspective, the stuttering blockchain development path is not entirely surprising. It is an infant technology that is relatively unstable, expensive, and complex. It is also unregulated and selectively distrusted.” McKinsey: Blockchain’s Occam problem 

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PROJECT

Mid-term review: The entire Bloomen consortium gathered in Barcelona at the end of March to present the project to reviewers from the EU. Every EU co-funded project has to regularly report, based on work packages in written form – or through presentations in a review.

Bloomen Photo Use Case: We made considerable progress with the demonstrator, which aims to explore the use of Blockchain for selling and buying photos for news publication. The software can now show the entire workflow for both sides involved: Photographers can offer photos, media companies can select and buy, all based on Blockchain transactions. Next steps are more tests and implementation of advanced features, such as rating, contracting, copyrights and management of metadata. If you are buying or selling photos, get in touch. We love to hear what you think after testing the demonstrator.

Blockchain Summit, Frankfurt: Birgit Gray, Innovation Manager from Deutsche Welle and member of the Bloomen consortium presented the project at the Blockchain Summit in Frankfurt.

  • Impression: Big event, with many participants from a variety of industries. Just one impression: Participants reacted positive regarding the very practical focus of Bloomen as a project.
  • Observation: Many companies considering blockchain are in a conceptual business planning stage, with few pilots that practically implement demo solutions on a blockchain infrastructure. Blockchain Summit Frankfurt 

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KNOW-HOW

What are “smart contracts”?

Based on a variety of sources (linked below), here is what you need to know.

  • “Smart” or  “self-executing” contracts are potentially one the most interesting elements of blockchain technology.

A good comparison is that of a vending machine related to a sale by a person. Instead of having to wait in line you go to a machine, put in a coin and get something – a drink or a new passport or payment for something you delivered. The concept is not new. Cryptographer Nick Szabo is credited to have coined the term, already in 1994.

Main point: Blockchain technology is well suited to implement smart contracts, for a number of reasons:

  1. The cryptography elements of blockchain are foundational. For example, a shared contract can still be private, not revealing who are the contractual partners by name.
  2. Blockchains are often described as “distributed ledgers”, meaning that the software has all the elements needed to record transactions already implemented. This is key to understand how blockchain technologies are different from traditional databases.
  3. There is a big incentive to make transactions simpler. That could be a powerful driver for adoption.
  4. Important for the future: The cryptographic elements are central. Smart contracts can be anonymous regarding the individuals involved, but can display in public what was negotiated and the value of the transaction. This means that governments and tax authorities could validate the transactions, in terms of taxes to be paid. This last bit will take a lot of time, but it is a possible future for smart contracts. Bloomen partner Antenna recently had a meeting with authorities in Cyprus.

In summary:

  • So far, Ethereum is the  platform where smart contracts are central and well implemented. But other blockchain alternatives either already have or prepare for similar features. It can be assumed that automated contracts are so important that they will be implemented everywhere.
  • Smart contracts are a topic in the Bloomen project, too. The project explores how to simplify management and distribution of media assets such as music, photos and videos.

Go deeper: Some links to articles about the topic below.

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Thanks for reading. If you have questions, any comments or something was not as it should be, please get in touch via info@bloomen.io

Photo by Mari Helin on Unsplash