Smart contracts, a feature of “Bitcoin 2.0” technologies such as Ethereum, could soon operate on the Internet of Things (IoT), control objects in the physical world, and power a new decentralized version of the sharing economy, for example sharing services similar to Uber and Airbnb that operate in pure P2P mode without centralized management.
Smart contracts represent a disruptive innovation with a huge potential. In 2001, legendary cryptographer Nick Szabo spoke of smart contracts that solved the problem of trust by being self-executing and having property embedded with information about who owns it. For example, the key to a car might operate only if the car has been paid for according to the terms of a contract.
“[Smart contracts] embed contracts in all sorts of property that is valuable and controlled by digital means,” wrote Szabo in 1997. “Smart contracts reference that property in a dynamic, often proactively enforced form, and provide much better observation and verification where proactive measures must fall short. [These protocols] would give control of the cryptographic keys for operating the property to the person who rightfully owns that property, based on the terms of the contract.”
Now Slock.it, a German startup specialized in blockchain and IoT applications, is moving to realize Szabo’s vision of smart contracts embedded in IoT-enabled devices. The company will sell smart locks linked to the Ethereum blockchain. “If you can lock it, we will let you rent, sell or share it,” promises the company’s website.
“When someone purchases a Slock, it will be connected to the Slock smart contract in the Ethereum blockchain and controlled by it,” says Slock.it co-founder Christoph Jentzsch. “The owner of a Slock can set a deposit amount and a price for renting his property, and the user will pay that deposit through a transaction to the Ethereum blockchain (without us), thereby getting permission to open and close that smart lock through their smart phone.”
“The deposit will be locked in the Ethereum blockchain until the user decides to return the virtual key by sending another transaction to the Ethereum blockchain,” continues Jentzsch. “Then the contract will be automatically enforced. The deposit will be sent back to the user minus the price for the rental, which will be automatically sent to the owner of the Slock. All of this happens without any assistance from a third party!”
International Business Times notes that smart-lock technology could decentralize the sharing economy, empowering anyone to easily rent, share or sell anything that can be locked, which means disrupting the disruptors, including companies such as Airbnb and other intermediaries based around some form of physical access.
“I use [Uber and Airbnb] and appreciate the progress they are making in bringing awareness to the sharing economy, but I would prefer a system that would allow me to deal directly with the owner without any third parties skimming off the top,” says Jentzsch.
Smart locks could also control access to cars, bicycles and storage units. While bicycles and storage units are ideal initial use cases, unlikely to present too many regulatory obstacles, cars with smart locks for access control are a potentially disruptive use case that could threaten the business model of Uber and Zipcar.
Cars could be parked in city roads waiting for the next customer, located with a phone app, rented by the hour and unlocked with the app by “paying the lock” in the Ethereum blockchain, used, and parked again. Around 2020, rental cars with smart locks could be also self-driving and pick up new customers autonomously. It’s evident that these innovations could radically change city life.
Jentzsch is scheduled to unveil more information in a talk at Ethereum’s Developer Conference, DEVCON , in London on Thursday, November 12.
“Could the existing ‘sharing economy’ companies soon become irrelevant?” reads the announcement of the talk . “That’s what the German startup Slock.it hopes to demonstrate next week when it unveils a technology promising to empower anyone to easily rent, share or sell anything that can be locked.”
Giulio Prisco is a writer specialized in science, technology and business. He is persuaded that Bitcoin and its underlying technology are about to bring disruptive positive changes to finance, business, and society.