Smart Contracts are the heart of blockchain technologies. They ensure decentralized execution of „contracts“ and are intended to ensure consistency in the network.

A conventional contract outside of blockchain technologies consists of an agreement between several persons. Usually, the contract ensures that both parties can insist on their claims and present the contract as evidence in case of dispute to justify certain claims and rights. A classic contract is the rental agreement, which, to put it simply, consists of two elements:

The tenant transfers the rent to the landlord
The landlord leaves the apartment to the tenant
Contracts often consist of sequences in „if-then“ form. When the tenant pays his rent (for the first time), he receives the key for the apartment. This process can be simplified by Smart-Contracts, as the sequence can be automated. A Smart-Contract means nothing other than a sequence of activities that are carried out when a particular event occurs. This can range from rental contracts to complex financial transactions.

What is the difference between Smart-Contracts and Bitcoin loophole contracts?

1. third parties are omitted
The decisive factor is that Smart-Contracts generally do not involve third Bitcoin loophole parties. In order to conclude a Bitcoin loophole Smart-Contract, a notary is not necessary, as would be the case, for example, with property transfers with conventional contracts. Instead, the Smart-Contract is executed by the nodes in the network.

2. activities are performed automatically
The if-then structures ensure that, as soon as the event occurs, the subsequent activity is executed. If person A and person B close a Smart-Contract and A fulfills his condition, then the necessary action will be executed automatically in the network. It is not necessary for B to become active at this point or for a third party to be informed. Instead, the nodes can check the status themselves at any time.

3. all participants are informed about status changes
The decentralized structure requires that the individual nodes process consistent information. This means that all nodes know about status changes when an event occurs.

How is a Smart-Contract executed?

There are different types of Smart-Contracts. The best known platform is Ethereum. There, Smart-Contracts themselves are treated like an account that acts autonomously. So there are no single individuals who have access to this account. Instead, the actions to be performed are performed in the network. This account can be simplified as a set of instructions (program code) that are executed. These include performing calculations, storing information, and sending transactions to other accounts.
Although the Smart-Contracts are written by humans and stored on the blockchain, after that the execution is solely up to the network and the user has no more possibility to make changes. This means that errors can still occur due to incorrect programming.

BTC-ECHO in conversation with the Forschungsstelle für Energiewirtschaft e.V. (Research Centre for Energy Economics). The energy industry is often cited as an industry that could benefit immensely from blockchain technology. At the same time, criticism is growing of extremely energy-intensive mining processes such as those used at Bitcoin. BTC-ECHO author Phillip Horch has signed an agreement with the Forschungsstelle für Energiewirtschaft e.V. (Research Centre for Energy Economics). (FfE) on how blockchain and energy sector are compatible with each other – and what challenges lie ahead for the still young technology.

Bitcoin mining is repeatedly criticised for consuming a lot of energy and for being highly polluting. The underlying blockchain technology, on the other hand, offers advantages that can be advantageous for the energy sector.

What contribution can research make to bringing the energy sector and the Bitcoin secret closer together?

Blockchain technology as infrastructure and Bitcoin secret platform technology can form the basis for a large number of applications like this: Is Bitcoin Secret a Scam? Beware, Read our Review First The first and most prominent example is Bitcoin. In our project, however, we are only marginally concerned with the topic of Bitcoin, since its applications in the energy industry are extremely small. The problem of the massive energy demand of the Bitcoin blockchain certainly poses a special challenge with regard to its ecological consequences. However, thanks to alternative consensus mechanisms, the problem of high energy consumption can be solved depending on the blockchain design and application.

In the context of the energy industry and especially in our project we focus on the chances of technology, new developments and the optimization potentials in a digitalized energy supply. Our recently published technology report will provide the basis for this.

What challenges do you see as groundbreaking developments in blockchain technology for the future?

Blockchain technology is already capable of guaranteeing data integrity, manipulation security, reliability, high availability, transparency and pseudonymity in digital processes. For applications in the energy industry, requirements regarding transaction speeds and costs as well as data protection are of particular relevance. It is to be expected that new developments will improve user-friendliness, create interoperability and drastically reduce the energy consumption of public blockchains through alternative consensus mechanisms. Even if the concepts could in principle be transferred to other protocols, there is still a lack of standardisation. An examination of current further developments shows that the technology is subject to an enormous innovation push, but is sometimes fragmented and many different blockchain protocols exist. The focus of many developments is on different goals. These are sometimes multi-layered and aim primarily at the large limitations in terms of scalability, interoperability and anonymity.

Keyword standardization: Do you think regulation at the national level would be sensible here?

Standardisation is conducive to broad application. The fact that the topic is also taken up at national level in the standardisation committees is certainly helpful in this respect. The Bundesverband Blockchain is already successfully demonstrating this. In future, however, standardisation will also have to take place with regard to technology. In the energy sector in particular, it is necessary to fall back on verifiable and uniform standards. As already mentioned, in our understanding the blockchain is a platform technology that benefits from efficiently linking a large number of participants and users and offering easy access.

A spokesman for the Chinese Financial Market Authority has issued a warning against Security Token Offerings. In a speech in Beijing, Huo Xuewen advised investors not to deal with the new financing method.

When China issued an ICO ban towards the end of last year, the Bitcoin formula space was hit by high waves

The Bitcoin formula share price reacted immediately with a sharp bend: As a result, many Chinese blockchain companies migrated – destinations included Japan and the Hong Kong Special Administrative Region. Now the financial supervisory authorities have also commented on security token offerings – but so far there have been no major reactions.

Security token offerings are currently on the rise – at least that’s what many investors say. The idea behind this sounds very promising: Investors acquire company shares with the security tokens. This should ultimately offer more security than is the case with ICOs, for example. Initial coin offerings do not have the best reputation in the Bitcoin community, as they are often only used to quickly generate capital without actually performing.

Nevertheless, Huo Xuewen of the Chinese Financial Market Authority issued a warning to investors. According to this, interested parties should only invest as soon as STOs are legal – but this is not the case at the moment:

„I hereby warn all those who issue and advertise STOs in Beijing. My advice is to only invest in such projects if the government has declared them legal.“

Control should remain with financial supervision

Finally, it is in the interest of financial supervision to retain control over people’s asset management:

„We must manage the wealth of high-end clients, wealthy individuals and the wealth of people – that is the responsibility of all asset managers in Beijing. From this perspective, we need a diversified asset management organization that requires the management of more than $30 million of wealthy client assets and the wealth of ordinary people,

a Chinese news portal quotes him. Security Token Offerings therefore do not fit into this concept.