Blockchain 2.0: Smart Contracts

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Blockchain 1.0 applications are represented by Bitcoin. In order to solve the decentralization of currency and payment methods, blockchain 2.0 is a more macro-level decentralization of the entire market, using blockchain technology to convert many different assets rather than just Bitcoin, and to create the value of different asset units through transfers.

The decentralized ledger function of blockchain technology can be used to register, confirm, and transfer various types of assets and contracts. All financial transactions can be transformed for use on the blockchain, including stocks, private equity, crowdfunding, bonds, hedge funds, and all types of financial derivatives: futures, options, etc.

Blockchain applications beyond currency:

Financial Services:

An important direction of blockchain is to use digital currency to connect with traditional banks and financial markets.

Ripple Labs is using blockchain technology to reshape the banking ecosystem. Using the Ripple payment network allows multinational banks to directly transfer and conduct foreign exchange transactions without the need for third-party intermediaries. Ripple has also developed a smart contract and its own programming language Codius.

Paypal is working on solutions to connect Bitcoin with traditional finance and payment markets.

BTCjam is engaged in decentralized P2P lending based on blockchain.

Overstock is working on Medici, a blockchain-based decentralized stock exchange.

Smart Assets:

Blockchain can be used for any asset registration, storage and transaction, including all areas of finance, economy and currency; tangible assets, intangible assets. Blockchain opens up different types of industry application functions at all levels, involving currency, market and financial transactions. Assets encoded using blockchain become smart assets through smart contracts.

Smart assets refer to all types of assets that can be traded based on blockchain, including tangible and intangible assets. Smart assets control ownership through blockchain. And comply with existing laws through contracts. For example, a pre-established smart contract can automatically transfer the ownership of a vehicle from a finance company to an individual when someone has repaid the entire loan. This process is fully automatic.
Smart assets have the potential to allow us to build a trustless, decentralized asset management system.

Smart Contracts:

Smart contracts mean that blockchain transactions are far more than just buying and selling currencies. There will be more extensive instructions embedded in the blockchain. Traditional contracts refer to two or more parties agreeing to do or not do something in exchange for something, and each party must trust each other to fulfill their obligations. Smart contracts do not require mutual trust, because smart contracts are not only defined by code, but also enforced by code, which is completely automatic and cannot be intervened.

Crowdfunding:

Blockchain-based crowdfunding platforms allow startups to raise funds by creating their own digital currencies and distributing their own "digital equity" to early backers. These digital currencies serve as certificates for the shares they should receive for supporting the startups.

Bitcoin Prediction Market:

By predicting the outcomes of things that might happen in real life, such as elections, sporting events, etc.

Trustless lending:

The trustless network of blockchain is an important driving force for the development of smart assets and smart contracts. This allows strangers to lend you money on the Internet, and you can use your smart assets as collateral, which will inevitably significantly reduce the cost of borrowing and lending, making lending more competitive. The non-human intervention mechanism also greatly reduces the dispute rate.

Ethereum: A Turing-complete virtual machine

Blockchain technology combines concepts and operations from multiple fields, including computing, communication networks, cryptography, and artificial intelligence.
In blockchain 2.0, we need to record and transfer more complex asset types through smart contracts and smart assets, so we need the third step - a more powerful scripting system - to finally achieve Turing completeness (able to run any currency, protocol and blockchain). Ethereum is a blockchain-based project that aims to provide a Turing complete scripting language and a Turing complete platform.

Blockchain 2.0 involves more extensive fields, which will be discussed later.

Original text: http://wangxiaoming.com/blog/2016/03/03/blockchain-2-0-he-yue