#Asia Now, herald the age of blockchain smart contracts


A smart contract is a computer programme that automatically executes a contract between two parties. It might soon be used in place of safety locks, loan agreements and more, according to the author


We live in a world of constant technological changes. Tim Berner-Lee’s World Wide Web (WWW) changed our lives forever when it went online in December 1990, for better or worse. And today, there is a technology that is under development that has the same potential to impact our lives all over again.

I am, of course, referring to the smart contract blockchain technology.

What is a smart contract?


A smart contract is a computer programme that automatically executes a contract between two parties. Blockchain was originally created as the MRT track for the transfer of cryptocurrency (virtual money) Bitcoin between two parties. As Bitcoin is a decentralised platform, there had to be a fool-proof method for the transfer. Hence, the blockchain was created to keep records in an electronic ledger that cannot be altered by a number of parties.

Only after the majority of computers have verified that the transaction is valid, then the Bitcoin will move from person to person. The computers that verify the transaction will earn small amounts of Bitcoins along the way. It is based on this foolproof and fraud-proof foundation that the smart contract is created.

Just as computers can verify if the transaction is valid, they can also verify that certain conditions are met before the smart contract is executed.

Case study: Car loan smart contract

Your decision to take a car loan with DBS bank is a contract. The agreement is such that DBS will provide you with an SG$50,000 loan to pay off the car dealer while you agree to pay SG$770 per month for the next 72 months.

In our current manual system, you can choose to drive the car to Johor and then disappear from the face of the earth. DBS is taking the risk of your disappearance and default, so it has to charge higher interest rates. For example, DBS could ask you to pay SG$750 per month if it does not have to take on this risk.

Also Read: Why Bitcoin’s success story has just begun

The question is how can DBS prevent this risk from happening? DBS can use a smart contract application. The smart contract app builds on blockchain technology, which is immutable. This means that you cannot alter the records of the agreement once created, establishing trust.

The smart contract will stipulate that DBS pays your car dealer SG$50,000, and in exchange, you pay SG$770 per month for the next 72 months. So once the smart contract notes that DBS has transferred SG$50,000 to the car dealer’s account, the contract is valid. It is your turn to fulfill your end of the bargain.

DBS can also place restrictions on the car, assuming that the car is fully Internet-enabled. DBS can programme that car such that it will not move once it is within 100 metres of the Woodlands or Tuas checkpoint unless you apply for permission to go to Malaysia. This will prevent you from driving off with the vehicle.

DBS can also programme the car such that if you miss a payment after 14 days, the car is automatically locked and the bank’s repossessing unit can come in to tow it back. This can also apply to other areas such as rental of flats, utilities payments and other payment-related issues. The smart contract will enforce the contract for the owner without third-party intervention.

Progress towards implementation

This will apply equally for both the buyer and the seller. In other words, if you have paid your monthly dues, DBS does not have the right to gain control of your vehicle. If you think this is futuristic and impossible, think again.

IBM is currently working on a proof of concept for car rental companies and even your fridge on a smart concept. IBM envisions car rental companies that will automatically allow you to have your smart keys once you make payments and the blockchain confirms the authenticity of your payment. This technology can easily be applied to car loans, too.

While IBM is still thinking about it, German company Slock has created a blockchain-based locking system. This represents the ultimate pinnacle in the decentralised sharing community. Slock is based on the Ethereum (using Ether instead of Bitcoin cryptocurrency) blockchain technology.


So, instead of going through AirBnB to find your tenant, you can use Slock’s software to search for tenants directly. You don’t even have to be around to pass on the keys. Once your tenant makes payment, the key will automatically be downloaded into his phone.

Once the rental period is up, the keys will automatically be revoked by Slock’s smart contract system.

Also Read: Japanese fintech startup Orb launches new cryptocurrency management platform


Smart contracts will make our world more efficient once it is widely adopted and commercialised. Just like how the vending machines allows you to buy small items once you pay for it without any human intervention, a smart contract will allow you to sell all kinds of items if you have the right smart contract lock.

The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at elaine[at]e27[dot]co

Image Credit: kentoh/Shutterstock

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