This article first appeared in Digital Edge, The Edge Malaysia Weekly on February 27, 2023 - March 5, 2023

Bitcoin (BTC) is a term that is familiar to many at this point, with the cryptocurrency gaining fame in the past decade for myriad reasons. While many may also know other cryptocurrencies such as Ether (ETH) and Ripple (XRP), the technology behind it is still not as well understood. To put it simply, Bitcoin and other cryptocurrencies are based on blockchain technology, a type of digital ledger that stores and records data. It is a distributed database that maintains an ongoing and ever-growing list of ordered records, called blocks. Each block contains a cryptographic hash of the previous block, a timestamp and transaction data.

Blockchain’s ability to add and store data has more uses beyond its most common association with the digital asset market. It can serve many other functions across a variety of industries. The benefits of utilising blockchain technology are many, with transparency, accountability and convenience chief among them. By removing the need for intermediaries like banks, this peer-to-peer network cuts out the middleman while maintaining security and remaining cost-effective in a transparent manner.

Within the cryptocurrency market, there are more uses for cryptos than just as a store of value or for investment purposes. This is where the concept of “smart contracts” comes into the picture. For instance, Ethereum was purposefully created in 2013 for creating smart contracts; Bitcoin was also intended to support basic smart contracts, though it adopts a more restrictive programming language.

So, what are smart contracts? The “contract” part is similar to any other contract, binding two or more parties to a common agreement. Where it differs from regular contracts is that blockchain technology allows for bypassing any intermediaries (such as lawyers). The terms and agreements within a smart contract are verified by a computer programme, and any transactions are automatically executed once the necessary conditions are met.

As we are already familiar with the primary use of cryptocurrencies in the Malaysian market as a form of investment, we must also understand the importance of other blockchain use cases as it becomes increasingly popular over the years. Some of these potential industry use cases include:

(i) Real estate

Smart contracts can help tokenise property, allowing blockchain technology to facilitate record-keeping. This could reduce reliance on legal counsel and advisory services for home ownership, home rental and other complex mortgage agreements. On the other hand, intricately designed smart contracts can also advance fractional asset ownership, further lowering the barrier of entry for investment by allowing more people to own smaller pieces of the proverbial pie.

(ii) Healthcare

Using blockchain technology, patient information can be stored for the use of doctors anywhere and almost immediately. This would allow emergency cases to be treated much more quickly, saving precious minutes and sometimes hours where travel time and data transfer are concerned. Smart contracts can help limit who has access to this information to only healthcare professionals who treat the specific patient, which can alleviate privacy concerns about such transparent technology.

(iii) Administration and payments

Currently, we see payments moving well into the digital world, but even so, the human touch is still needed to oversee the transactions. Smart contracts in this space will take it a step further by streamlining administrative processes, thereby speeding up the process of payment to contractors and even employees, which will also be trackable in real time.

(iv) Agriculture and logistics

Blockchain technology could also help better track shipments of items and even the movements of animals, along with improving financial inclusion for underserved farmers. Using blockchain, unbanked farmers across the world can safely store information using a tag on their animals, allowing insurers to then leverage the animal as a legitimate asset. Details of said animal will be documented and be forever immutable — or, rather, unchanged — while unbanked farmers gain access to financial services that safeguard their assets.

(v) Art and gaming

Non-fungible tokens (NFT) also rely on smart contracts to work and have proven their worth, especially in the art scene, with millions of dollars in transactions recorded for various forms of content. In the gaming scene, in-game purchases or art can be tokenised and moved around to other platforms and games. Because NFTs are unique and can be designed to retain value beyond the game in which they originated, we could see a future in which elements of games can be transferable to other games seamlessly, opening up the possibility of true platform-less gaming.

It is important to note that many of the use cases above are currently still in the experimental and prototype stages. While blockchain technology has the potential to improve many industries, it is not a magical silver bullet. Much like any other technological innovation, there will likely be more failures than successes.

Nevertheless, with blockchain capabilities evolving every day, there is no telling what lies ahead. From lifesaving medical procedures enabled through rapid information accessibility to enabling financially inclusive services for underbanked farmers to multi-platform art and gaming, the future possibilities are indeed endless. This is why we have consistently advised investors to adopt a long-term horizon for crypto investment.

Other technological advancements, such as the rollout of 5G connectivity and Internet-of-Things-enabled solutions will further drive the digitalisation of our societies, furthering a conducive ecosystem for the mainstream adoption of blockchain, smart contracts and cryptocurrencies. Existing applications already paint a rosy picture of how smart contracts can become an integral part of our lives in the future.

Aaron Tang is country manager at Luno Malaysia, the country’s first regulated cryptocurrency exchange

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