WHAT ARE SMART CONTRACTS?
The most interesting application of the blockchain after cryptocurrencies lies in the idea of Smart Contracts, aka self-executing contracts, which are contracts between two or more parties, in which the terms and conditions of the smart contract can be set to trigger one clause if the pre-requisite for triggering that particular clause has been met. More specifically, a smart contract comprises code stored on the nodes of a blockchain network. To reach a consensus that the terms and conditions of the smart contract have been met, this smart contract code is run by one or more nodes in the blockchain network, wherein the consensus is achieved if all the verifying nodes arrive at the same result after running the code. The nodes performing verification of the code may get rewards based on their efforts.
One example of the smart contract is that of a rent agreement. For example, if Smith were to rent an apartment from Trump Towers, the clause can be set such that Trump Towers releases/provides the access of the apartment to Smith by a certain date once it receives the payment from Smith. If Trump Towers fail to provide the access to the apartment by the agreed upon date, then the smart contract initiates a refund of the money paid by Smith. All of these events are verified by one or more nodes of the blockchain network, which is required for the purpose of maintaining the blockchain.
Another example of a smart contract is a smart reward code to execute a secure and a transparent reward program between an organization and its customers. The smart contract, in this case, can be coded to store reward points or any other form of a token, which is payable to the participating customer on completion of some tasks. Tasks may include simple operations such as scanning of pictorial codes (barcode, QR codes, and the like), checking-in at a particular location and so on. More specifically, the tasks performed by the customer are processed via a public key owned by the customer to verify the authenticity of the task being performed by the customer. The result of such processing is an encrypted code that is sent as an input function to the smart contract. The smart contract then decrypts this piece of code using embedded logic to validate the pre-set terms of the smart contract for delivering the reward tokens to the customer accordingly.
Examples of other such smart contracts are provided on the official Ethereum website.
The applicability of the smart contract is immense. Some exemplary applications of smart contracts include smart contracts in real estate, automobile industry, healthcare, banking (loans and insurance), and so on. Contact the Irvine Intellectual Property attorneys to discuss implementing smart contracts for your particular business or if you have an invention related to Smart Contract, let our patent attorneys perform a search of the USPTO and WIPO databases to determine whether your invention should be filed as a patent application with the patent office. Finally, if you are implementing a product or service related to Smart Contracts, contact the patent attorneys from our Irvine office to give you a non-infringement opinion or an invalidity opinion so that you can have peace of mind and not a cease and desist letter on your plate. One lawsuit can put a business out of business. Knowing your legal rights and obligations is similar to having the right guide when traveling an African Safari, and so for that reason, you should call David Jafari!