The advantages of cryptocurrencies have the potential to be immense. The first thing that people notice is that there are no transaction fees. If one wants to email someone 20 dollars, all they need to do is convert 20 dollars to bitcoin, send the bitcoin, and exchange back to dollars – no brokers, no bankers, no fees, no taxes.
People also realized that by keeping their money in Bitcoin, they could buy and sell goods and services without credit card fees, bank fees, or sales tax. They could even send micro-payments directly to an artist for a copy of a song – no record label, no iTunes, no banks, no taxes, etc.
This functionally resembles the ease with which a corporation can transfer resources internally. It didn’t take long for people to realize that any kind of contract can be entered into a block chain and irrevocably time stamped. This includes patents, and trademarks, notary, and business agreements, etc.– Nick Szabo
Now people are looking at the possibility to transmitting even more complicated contracts across block chains; such as an escrow service and insurance. For example, a buyer could convert cash to crypto coin, and lock it to an escrow contract. If the product checks out, the program passes the payment to the seller. If it does not, the algorithms sends it back to the buyer.
Next, an insurance product is not much more than an escrow account between multiple persons. Theoretically, people can form their own insurance pools – good drivers can team up and self-insure, no longer needing to subsidize poor drivers.
The blockchain can scale magnificently with near zero marginal cost per transaction. It is easy to see how this innovation would have profound implications for Banking and Insurance. This brings us back to the engineering profession and the 3-legged stool.
Banks and insurance companies fought bitcoin at first. But now, they are rapidly trying to incorporate blockchain technology into their business system. This allows them to make a quantum technological leap out of legacy data systems while also enabling them to eliminate their own legions of brokers. The potential profits for the banking and insurance industry are staggering.
Bitcoin 2.0 Smart Contracts About What ?– Nick Szabo
Unfortunately, they will eventually run into a problem which would be extremely difficult for them to solve. Crypto-currencies are virtual – they don’t actually exist. They can only represent something that actually exists.
It is precisely this “representation” that is the domain of the engineering profession. The engineer, in their capacity to design and build things is the proxy that can bridge this extremely important gap. A some point, a crypto contract needs to interact with something that does actually exists.