Removing the Middleman with Smart Contracts
Blockchain technology and smart contracts offer many advantages. One interesting concept is shifting user’s dependencies of centralized authority to decentralized trustless protocol. Currently simple financial products rely on banks and organizations to create or manage these products. I’d like to explore simple applications that can help to answer the question of “Why Blockchain” through the idea of removing the middleman.
The examples fall into two categories, single owner contract with specific funds release event or multiple party contract with a specific funds release event.
For the benefit of this post, “proof of life” is going to be signing a transaction, we all know that bots and scripts can sign and send transactions. There are “anti-bot” technologies being used like retina scanners or other “proof of humanity” methods. These methods would need to be used in order to have a true “proof of life”
Life Insurance
This is a classic concept and flexible, owner creates a contract with specific properties:
- Beneficiaries
- Premium or heart beat time interval, example monthly
- Time interval trigger, example six months
- Payout schedule when payments start
Simple enough, the release of funds event is when the owner does not pay premium or does not submit a heart beat transaction. Example after six months the beneficiaries payout schedule starts. The known accounts can start redrawing funds based on the payout schedule. This removes a trust fund manager, bank or any central authority, …
Time Locked Savings Account
A time lock contract can be used to lock up funds for the user, in affect creating a vault where the funds release event is a specific time. This allows the user to deposit and accumulate funds without risk of authority or intermediary taking ownership if the funds. It even protects the funds from the owner of the contract.
This functionality can be used as a simple retirement account or help diamond hand tokens.
Group/Community Pool
Used when multiple parties need to escrow funds with an agreed upon trigger event for distribution. There are many applications for multiple party escrow.
- Crowdfunding or Charity, if a predetermined funding amount is reached the benefactor could pull the funds. The benefactor could be one or many accounts, the payout could be lump sum or payed out in many payments.
- Friendly Bet, as users contribute to a contract they pick an outcome. The reason for the friendly bet could be sports related or based on a local event. In this case the participants can agree on the outcome and the funds are distributed to the winners. Also, the resolution could be from on-chain data.
- Last One Standing, users pay a premium each month and the last person to pay for multiple months triggers the distribution event, then they can withdraw the funds.
- Peer to Peer swap, user Bob transfers a NFT to the contract and user Sue transfers tokens. Both agree the escrow assets are correct and withdraw the opposite assets. Bob get tokens and Sue gets a NFT. This peer to peer exchange removes the need for a marketplace or central party.
