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“In finance, things take longer to happen than you think, and then they happen faster than you think.”
– Rudiger Dornbusch
The opening of Philip K. Dick’s 1969 sci-fi classic Ubik it has a house door that requires money from the owner.
Joe Chip, in the back of his rental, trying to open the door for a stranger, replies, “Five cents, please.”
Soon, he offers to pay tomorrow, but his credit score is so high that the door is ignored.
He tries to reason with it: “What I pay you,” he told them, “is in the form of interest;
“I think otherwise,” the door replies, before telling Chip to check his contract.
“You know I’m telling the truth,” says the door. It sounds disgusting.
As Chip begins to loosen the bolt mechanism with the knife, the door threatens to take action, but Chip is undeterred – “I’ve never been tied to a door. But I think I can handle it.”
Before it can be destroyed, Chip’s guest pays from the other side and the door opens.
After that, the refrigerator, coffee maker and shower all require payment before they can perform their functions – and the guest must pay at the door to leave.
This was Philip Dick’s dystopian vision of the future: Rooms turned into vending machines that pay.
But this can also be u-Topian The Future of Decentralized Finance.
The dream of decentralized finance is to transform every economy into a sustainable financial instrument that only adheres to the terms of its contract.
The problem with decentralized finance in this area is that it is limited to crypto assets, because smart contracts cannot reach the world to repossess a car or foreclose on a lender.
But what if a smart contract could lock the door of your house, car or refrigerator?
In that country, a lender can accept real-world assets – anything that can be locked – as collateral for onchain loans.
It is not a new idea.
Back in 1997, Nick Szabo he explained useful for turning smart contracts into smart locks: “Many types of contracts (such as collateral, security, specifying property rights, etc.) can be integrated into the hardware and software we deal with, in a way that makes breaking the contract expensive (if desired, sometimes illegal) for the violator.”
“These policies may direct the private keys to use the property to the person who owns the property,” he added, “depending on the terms of the agreement.”
At present, the property has become only a token, because it is the only place whose ownership can be included in a smart contract.
But smart locksgoverned by smart contracts with definitive, immutable rules, it could turn the entire world into a vending machine.
Szabo called trading machines “the ancestors of smart contracts”: a mechanical contract that holds an asset (a can of soda, say) and delivers it to whoever fulfills the terms of the contract (an investment). No person or business is necessary.
Rules-based systems become vendors – like Joe Chip’s door becomes his landlord.
Szabo thought that something like the latter is where we’re headed: “Smart contracts are bypassing vending machines to put contracts into all kinds of things that are valuable and digitally driven.”
Sixteen years before Ethereum, Szabo envisioned smart locks providing digital control of real-world assets, citing cars as “the most straightforward way” to use smart locks.
“We can create a smart communication system: If the owner fails to pay back, the smart contract calls a protocol, which returns the car keys to the bank.”
Nothing like that has happened, but Szabo was straightforwardly right – on two counts: Smart contracts exist, in Ethereum and elsewhere, and borrowers secure their collateral with remote locks.
Disruptive start devices (SIDs) that allow lenders to park a car remotely when a borrower has fallen behind on their payments have become popular with small car lenders in recent years.
This raises obvious questions: What if you need a car to get to work to make money to pay off your loan? What if you’re doing 80 on the freeway when a tow truck decides to stop your car?
Unlike Joe Chip’s door, you can’t drop a coin into a disabled SID car to open it. And good luck getting someone on the phone at the lender to plead your case or pay.
You can, however, increase your payment quickly by using a smart contract, on a smartphone with a digital wallet.
This is not a new idea either.
In 2015, Slock.it promised exactly the kind of digital lock (Ma Slock) that Joe Chip talked about: “With Slock, the person who rents your house pays directly for the lock.
For reasons still unknown, Slocks didn’t catch on – or make it, either.
(The Slock.it team must have taken their eye off the ball when their side project, The DAO, nearly sank Ethereum.)
But it could also be that he was just getting started.
If so, now may be a good time to develop smart blockchain locks.
The infrastructure is built: The chain is fast, the products are cheap, the basics are easy to use.
TradFi wants to invest everything: Crypto assets have fallen this year, but interest in bringing real wealth to the world has grown.
Marketers want more: Demand for quality produce outside of a shrinking world of human capital seems to be insatiable.
Smart contract smart Locks can be a way to deliver.
Consider Turkey, for example, where borrowers pay 5% per month on theirs car loanswhich works out to more than 100% per year – 70 percent above inflation.
If the loans were guaranteed and managed by a smart contract that automatically stops the car when the borrower defaults, wouldn’t it attract investors everywhere?
Larry Fink of BlackRock he said this week that “tokenization could greatly expand the world of investment products beyond the listed stocks and bonds that dominate the markets today.”
Philip K. Dick predicted technology. Nick Szabo wrote the book.
Now, finance just needs to build the door to this investor’s utopia.
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