Blockchain technology is oftentimes set on equal terms with digital currency-related topics like Bitcoin, when in reality this thriving technological platform offers other diverse and business-related improvements and possibilities as well.
One of these business-related improvements are smart contracts. Compared to today’s conventional contracts, smart contracts are at their lowest level: Computer programs. They are coded by a developer and stored and deployed on a computational system.
The big advantage of smart contracts is that these computational code programs are now stored on a blockchain, utilizing the possibility to be activated or triggered by the blockchain itself or activated from an external call, executing the capability to read and write data in the blockchain database or to interact with the blockchain state in general.
Smart contract programs are therefore able to provide novel programming paradigm approaches to conventional contracts while simultaneously utilizing all the core benefits of the blockchain technology.
Exemplary Fields of Interest for Smart Contracts
And yet, all this technological and conceptual improvements need to be applicable to actual use-cases in real world scenarios.
Online Identification and Services
As of today, the internet has changed the customers‘ behavior significantly in terms of shopping experiences and availability of goods. However, one of the most important aspects of customer-related internet transaction is the ‚Know Your Customer‘ (KYC) process. Online parties need to identify the person who’s interacting with them by asking for credentials or identification measurements. This is not only expensive and time consuming, but oftentimes offers hard to implement anti-fraud measurements, since the requesting party only has a limited amount of control over the other parties data and needs to ‚trust‘ the others honesty to a certain degree while simultaneously offering a single point of failure if the gathered user data gets compromised by fraud.
The nature of smart contracts would allow the saving and deployment of personal data in a safe and enclosed blockchain environment. The data is only editable by its creator but permanently stored and accessible by external parties on the blockchain. This way, external parties don’t need to hold any sensitive data anymore since they are able to call a smart contract for authentication or given access to specific data, reducing the overall cost and time consumption in the KYC process.
More importantly, this field of interest could also be applied to government-related topics like citizen identification for digital representation in governmental services like healthcare and more importantly, could create the opportunity to enable digitally signed and authenticated voting procedures independent from time and location.
Banking and Finance Sector
Another major field for potential deployment of smart contracts lies within the register and saving of bank transfer notes and trading in general.
Due to its heavy regulation law-wise, and overall asset-heavy execution, progress in this field is time consuming and generally connected to checks and permission issuances. And even more often, documents are still transmitted in physical shipment, decreasing the overall speed by huge margins while simultaneously being a target for potential fraud and document misusage.
Smart contracts in this field are able to reduce the overall complex overhead by applying the field-fitting If-Then principle to transfers as well as showing an immense transaction speed increase by digitalizing the physical shipment and instant document issuances provided via smart contracts.
The overall more efficient workflow in creating, approving and validating documents and a big potential for law-enforcement approved smart contract templates to value overall safety could prevent potential document fraud at its earliest roots.
This is especially true for stocks and derivatives, which are one the biggest impacts in financial activities. These are traded and serviced by different, decentralized stock exchanges independently all over the world and therefore again have a big overhead of signing and approving documents while being complex to handle and fulfill.
Smart contracts (and subsequent blockchain-executed programs) offer the possibility to unify the storage of trades as well as the option to validate these transaction and transaction terms due to the ledger-based blockchain technology. This automated execution of transaction terms while improving the speed compared to physical paper orders offers a huge advantage over the existing system with a significantly reduced possibility of fraud and errors.
Supply Chain Management
And as a third example, supply chains in times of advanced computational support and ‚Industry 4.0‘ approaches have become increasingly complex to be managed.
Since these supply chains consist of several vendors and additional contributors, all with their own IT infrastructure and databases, which are mission-critical for the overall state of the chain yet mostly isolated sharing only the minimum needed information with other partiers, errors and issues can be uprising very spontaneous and unexpectedly.
Potentially unknown data formats used by the contributors are a major problem as well. The need for similar and factorable data is not guaranteed due to a huge potential of incompatibilities and complexity-wise blind spots.
Smart contracts could immensely reduce the complex multi-contributor supply chain system and delivery of goods. Due to its nature, a smart contract could keep track of goods in a unified system, a unified data set and is able to trigger several events connected to a chain-related event like item movement, item production and even trigger smart contracts for warnings and calculations of delivery assurances, tracking and financing. Furthermore, fraud-reducing validation and verification again could be applied with smart contracts on the go.
The application of smart contracts into real-world scenarios and fields does, per se, not include any boundaries. Due to their generic nature and code-wise definition of purpose, smart contracts could be applied to any field of logic and structure, however some fields do seem to hold a bigger potential in applying and benefiting from smart contract execution.
These business-related fields like banking, like online identification, like supply chain management show the promise of smart contract implementation and potential of new technology to gain not only improvements upon existing structures and ideas, but an actual measurable and instant advantage over those existing paradigms used today. We just need to specify the use-cases more detailed, implement the logic professionally and see the benefits in practice.