I've been reading on some common use cases how using smart contract get rids of the needs of an intermediaries and how trust issues can be solved having everything decentralized.

But there few things I'm confused. Assuming in the context of house rental payment. Landlord and tenant both enter into a contract and my assumptions are:

  1. Assuming it's a 12 months contract. Tenant would deposit 12 months worth of rental into the contract and the balance gets locked and deducted on a monthly basis. Tenant is not allowed to use the balance.

  2. If the contract ceases, rightfully landlord would destroy the contract and the remaining balance gets returned to the tenant. However, what if the landlord refuses to do so or the landlord has lost the wallet? How would the tenant get back the balance?

  3. If #1 assumption is valid. Wouldn't this discourage the use of smart contracts for rental payment? If I'm the tenant I would have opted for normal bank payment rather than using smart contracts since it locks my money for 12 months.

Please correct me if I'm wrong. Thanks!


I think you are taking the name "smart contract" a little to literally.

Smart contracts are a nickname for computer programs which are immutable and run on platforms like Ethereum. They are not limited to only "written promises" like the contracts you might be familiar with today.

Take a quick read here: What is a smart contract?

Now, it is totally possible for someone to create a smart contract program for rent. It would behave a lot like how you describe, but thanks to the flexible nature of computer programs, you should be able to add additional functions beyond the scope of a normal "written promise" which can handle fringe scenarios.

Additionally, I do not think a smart contract which handles rent payment needs to have all the funds deposited at once (invalidating assumption #1). Imagine a high tech apartment complex which has a smart lock which is tied to the smart contract. The smart contract could define that when entering a lease agreement, that the room will be reserved for the tenant for 12 months, however the user simply needs to pay once a month. As long as the user pays on time, the smart lock allows the user in. If the user doesn't pay, the smart lock will not let them in.

If you want to be really fancy, you could also have something where the lease can only be terminated early if there is evidence that the tenant has submitted multiple late payments. Things don't need to be so black and white.

Also, regarding accidentally losing access to the contract, there have been established patterns where a contract can have multiple owners, and even methods to transfer ownership. However, it will ultimately be up to the landlord to make sure to keep track of their account information, otherwise they risk losing all of their rent fees!

  • thanks for the explanation. everything seems much clearer to me now. – Wilson Aug 10 '18 at 4:00

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