In this video, we'll look at the effect of smart contracts on the four phases of the deal cycle. Those are search, negotiation, performance, and post-performance incentives. Most of the world's historic economic revolutions began by improving one or more of these deal cycle phases. They introduce new ways of human interaction. They reduce the risk of broken trust. They increase the quality or the quantity of information flow, whether it be through prices or language. Blockchain-based smart contracts may spar the next economic revolution by transforming these phases yet again. We'll explore each phase in the new high-tech capabilities in more detail. So, let's begin with the search phase, the phase when buyers and sellers find and size up each other. The first era of the Internet was great for search, new web browsers and search engines, allowed people to connect and to find each other all around the world. Text searches on Amazon or eBay help consumers to find products. Buying key advertising words through Google helped companies to find their target market. The global positioning system of maps used by Lyft and Uber help in matching their drivers to potential riders through smartphones. These once radical gains in innovation have now become pretty standard to the search phase. The negotiation phase is the process of agreeing upon and committing to deal terms. Computers and the Internet have made ample innovations in this phase to consider eBay's collectibles auctions, Google's keyword auctions in various price setting or price discovery algorithms. Pricing algorithms are already especially valuable for situations involving variable costs, but requiring take it or leave it prices. Once again, we use Uber as a prime example. Its algorithm factors in distance, driving conditions, and other transportation data to set a price. More precise data equals fair pricing, and fair pricing means less mistrust between parties. The performance phase ends when the terms of the contract have been performed. Ensuring performance involves managing collateral. Collateral can be money, a guarantee, or a product. In the first era of the Internet, few innovations have occurred in this phase. Compared to past decades, automation has increased proof of performance with advancements in computers, sensors, and blockchain technology. But the pace of this progress pales in comparison to the gains made in the search and negotiation phases. In this phase, the smart contract manages the collateral. It can hold it in escrow and either free it or cease it to effect an outcome. That barely scratches the surface of smart contracts capability in this performance phase. Last is the post-performance incentive phase used to ensure the desired outcome. These include chargebackability, ratings, and contract law. Credit card chargeback gives the consumer or the distributor protection in the case of fraud or conflict in performance. If there's an issue with the outcome, the consumer can ask the bank to claw back the money from the merchant's account and refund it to the consumer's account. An investigation may ensue if the bank or other authority validates or requests for investigation. It's a widespread method to assess post-performance. Ratings also serve as incentive in the post-performance phase. Public feedback like a business rating or a consumer credit rating can accrue to our reputations and influence the search and negotiation phases. If we want a good rating, then we perform up to par. When we don't perform well, then parties may select someone else next time. It's a useful system for finding the right match and promoting quality. Legal recourse is also an option, but it's costly and not always effective. The point of smart contracts is to reduce reliance on litigation. In total, trillions of dollars have been moved through the Internet, improving how we form contracts and perform under those contracts with each other. We now have far fewer problems finding what we want if it exists. Yet most of the problems of negotiation, performance, and post-performance remain. So, businesses still face higher costs and bottlenecks in the post-performance phase, for even the simplest and most straightforward types of credit and payment. Smart contracts running on public blockchains could provide tremendous innovation in business. How? Well, by applying this technology to all four phases. Smart contracts have improved in security, integrity, and they enable globally seamless reach. We need to support more kinds of deals between increasingly far-flung and differently laude and cultured people, and deals between devices on the Internet of Things as well. Cryptocurrencies, tokens, blockchain-based smart contracts can create value by permitting continual money storage and transfer in the performance phase. Second layer or peripheral networks like lightning will help us use this currency in settlement systems for payments at a larger scale too. For more details about smart contracts and phases of the deal cycle, checkout Nick Szabo white paper, Winning Strategies For Smart Contracts. He did that as part of our work in the Blockchain Research Institute. If you have any questions about the ideas we discussed, please visit the discussion forum.