In a smart contract, actions are triggered automatically based on events. An agreement between two people, e.g. to split bills, can be made up of a number of smart contracts to suit their needs all contained in a joint “jam jar”. A smart contract is transparent to everyone involved, so both parties can be confident whether the “terms” are being fulfilled.
The smart contract “events” would include bill payments or card transactions. The “actions” would be the movements of money. Here are some scenarios: -
(1) A and B agree to split grocery bills 50/50, but A does all the shopping and pays at the till using their personal account debit card. A smart contract for payment category “groceries” recognises the card payment and initiates an action to transfer 50% of the amount paid from B to A.
Person A can be confident they aren’t going to be stung for the grocery bill and Person B has not had to hand over money not knowing how it will be spent. Both A and B can see the details of the transaction that triggered the movement of money.
(2) A and B agree to spilt the bill for their Sky package that consists TV, landline telephone and broadband. B only uses the landline for incoming calls but does watch a lot of PPV films. The smart contract is linked to the Sky account. When a bill is paid, the smart contract takes 50% from each personal account for the broadband, telephone line rental and the TV subscription. The smart contract pays all of the PPV charges from B’s personal account and all the outgoing landline call charges from A’s personal account. Each person has paid their “fair share”, as agreed.
(3) A and B have a joint mortgage but it’s agreed that A will make the monthly mortgage payments. B needs the security of knowing the payments are being made on time because they have joint liability. In a smart contract linked to the joint mortgage account, money is moved from A’s personal account to the joint jam jar in time to make the monthly mortgage payment. The transactions recorded in the jam jar are visible to both A and B. Payments are adjusted automatically, e.g. when interest rates change. B can be confident the joint home isn’t going to be repossessed and A has not needed to share their entire bank statement just to prove the mortgage payment was made on time.
Simple smart contracts run outside the scope of the relationship between A and B and respects their mutual independence and privacy, so it does not matter whether it’s a house share, an unmarried couple or parents giving financial support to their children at college. The smart contracts will keep running even if the relationship between A and B breaks down although I appreciate there has to be a mechanism to shut down a smart contract at some point. I’m also aware that many people will argue that lasting relationships are built on a foundation off mutual trust, but a high proportion of those foundations crumble away each year and it can be messy!
I’m no expert on smart contracts and I appreciate there are gaps but I hope my outline makes sense!