In this article, we will look at what applications are being developed using smart contracts, what are the current challenges and our view on the future of smart Contracts.<\/p>\n\n\n\n
First, let\u2019s understand the role of smart contract. Smart contract\ndefines and executes transactions in the form of a software code. It comprises\nof operations that act on the state of the blockchain ledger. So, the current\ncapability is to manipulate and view the state in the blockchain and ensure\nthat the shared ledger stays consistent across all the nodes in the network. <\/p>\n\n\n\n
If we decide to extend the behavior of smart contract beyond just\nmanipulating and retrieving the ledger state, like interacting with external\nsystems for data or a third-party service, then these new requirements or\nextensions can impose challenges that need to be addressed. To understand this\nin detail, let\u2019s take an example of a DApp, where there is a requirement to\nread data from a public website (say stock price or forecast) as part of the\nsmart contract functionality. Even if the data may not change in the future,\nhow can one verify and confirm that the data received is same, genuine and\nunaltered throughout the network. In such a scenario, we would need a\nthird-party system, which provides a transaction proof of the data that was\naccessed and retrieved at that moment. This third-party system providing\nsecured transactions and value is referred to as oracle in blockchain\nterminology. So instead of smart contract accessing the public feed, the oracles\nextract the information and push the data into the smart contract.<\/p>\n\n\n\n
Let\u2019s take another example of an existing business network or multiple\nnetworks, already having its own set of enterprise data maintained in a data\nstore like relational databases or some legacy systems. How it can leverage\nblockchain technology for trust, visibility and speedy settlement and how smart\ncontract can play a role here? Do we end up replacing legacy systems to make it\nwork with the blockchain network or do we find out a way to achieve consensus\non the existing enterprise data without replacing old systems? <\/p>\n\n\n\n
To understand this, let\u2019s take an example of a trade finance\napplication where multiple entities like banks (consortium of importer and\nexporter banks), shipment and logistic firms, custom\/port authorities, buyers\nand sellers – all maintaining their own respective systems. They are looking to\nform a consortium of a trade finance network with the objective to devise a\ncommon smart contract that can be made accessible and visible to all the\nentities along with enforcing trust and speedy settlement.<\/p>\n\n\n\n
In order to realize this use case, each system would need to provide\ntheir respective data in the form of attributes (we will refer to this as\nshared business attributes) which is essential for trade to happen. Think of\nshared business attributes as a common schema definition for a trade, where\neach entity owns and provides their respective data and make updates to it. The\nsmart contract would then be bootstrapped with shared business attributes from\neach system. Each entity based on where they are in the trade process, would\nmake necessary state changes to the smart contract and update the ledger and\ntheir respective backend systems. For example, once the goods are delivered,\nthe shipment vendor would need to update their backend system, say a SAP\napplication (for their actual processing and reporting). In order for the\nexternal application to receive data or attributes value via smart contract, it\nneeds to listen to the events generated from the blockchain network (say order\nreceived event) and accordingly make updates to their backend system.<\/p>\n\n\n\n
So, in a nutshell, the current generation of smart contracts and its\nuse cases would be around providing shared business attributes that will be\nvisible to all the concerned entities, while the rest of the functionality would\nstill happen in their respective systems (like SAP, CRM or Mainframe\nsystem). The smart contracts of today\nwould need to work in tandem with external systems, be it a SAP or a bank\nlegacy application and not to replace existing systems. <\/p>\n\n\n\n
In the future as blockchain platforms and smart contract technology\nevolves, we envision a seamless integration between smart contracts and the\nexternal systems. Most importantly the application integration should not break\nthe consensus and therefore there is a need to create a secured environment\n(using crypto materials) that can seamlessly communicate with external systems.\nWe will refer to this as an \u2018external contract container\u2019 responsible for\nintegrating with the outside world. As we dwell deeper into this integration\nscenario, it might also make sense that the \u2018external contract container\u2019\nshould not run on all the nodes. For example, the shipment entity or node\nupdating its SAP system need to happen only once and not by all the nodes\n(other participants of the blockchain network). So we are looking at only\ncertain nodes, which are authorized based on their roles, running the \u2018external\ncontract container\u2019 to communicate with external systems. We provided only one\nintegration scenario, but there would be many such integrations patterns\nemerging in the future.<\/p>\n\n\n\n
As you see the function of smart contract will evolve in future to\ncater to many such requirements, we are probably looking at the first\ngenerations of blockchain smart contract technology. We also envision new\nblockchain platforms with new consensus algorithms addressing external\napplication integration using smart contract technologies and many more\ninnovations in this space that will enable the business and consumer networks\nperform business with trust and transparency as part of next generation\ninternet applications.<\/p>\n\n\n\n
To conclude this section, the golden rule for any blockchain transaction is that it should be deterministic in nature. Using smart contracts allows us to manipulate the state in the blockchain in a consistent way. This is ideal for any use cases, which require shared visibility and trust across parties, where collaboration happens through an automated workflow and updates to the blockchain state is handled by smart contracts. <\/p>\n\n\n\n