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How Are Smart Contracts Going to Change Every Business?

How Are Smart Contracts Going to Change Every Business?

The dream of cryptocurrencies replacing the national currencies and ending the power of national banks, along with breaking down financial barriers and ease international trade that once promised, hasn’t panned out yet. Primarily because of the high volatility of Bitcoin and other cryptocurrencies. But, for sure, the existing adoption and the potential use cases of Blockchain technology sure have had a significant impact on how we do business.  And most of this has turned out for the better.

Thoe yo-yo price of Bitcoin is old news, but in the shadow of Bitcoin, a different albeit quieter blockchain revolution is already underway.

The second generation that we call Blockchain 2.0 brought us programmable financial instruments called smart contracts, built on a blockchain — most often, on the infrastructure created by Ethereum. That’s correct; there are no smart contracts in bitcoin.

Although Blockchain was conceived as a network that would transfer value from one address to another, a smart contract is a computer program that takes that confirmation and executes a series of actions. Anything from issuing to a receipt, release a password, or just about anything you can code into them.

Understand that its predecessor Ethereum is an immutable and trustless network with security and reliability to ensure that programmed instructions coded in by a smart contract developer in a transaction are executed sans a third party’s intervention and can’t be changed. The beauty of Blockchain is that a single code can trigger and automate an infinite number of steps in that transaction.

Especially for small businesses, automation has been a godsend, providing a plethora of services with tech innovations. Take the example of a parcel tracking service. Without a third party’s intervention, their customers can check in real-time where their order is. Yet, many services have not been automated.  Take escrow services, for example. It costs billions of dollars. A Manage your real estate agency escrow service, for example, charges an obscene 1-2% of the value of a property. To hold onto the purchase price funds until a real estate deal’s conditions have been met.

An escrow company’s services can easily be encoded in a smart contract. This automated process will require the property buyer to purchase tokens and deploy them to a wallet address using its public key on the Blockchain. The property purchase funds will stay at that address until another smart contract confirms that all the required steps in the purchase process are completed. Once all the requirements have been met, the tokens (purchase funds) will automatically be released to the seller. The seller then can convert the crypto back into fiat currency. This way, no intermediaries are needed, and the entire real estate purchase process becomes automated.

This transformation is not occurring in a vacuum. Many businesses have already adapted their services to a blockchain model. One such example is a bike rental company called Slock. It has created a blockchain-connected lock that you can put on a bike, a car, or an apartment. Once a payment transaction has been approved on the Blockchain, a user can unlock the rental and use it. Businesses like Airbnb, or community bike-sharing schemes, can easily use this innovative way to manage rentals. The company, which recently got acquired, is already working on a smart contract-based system to simplify rental management of their fleet or properties.

Of course, it is a challenge for businesses to adopt a completely new paradigm or adapt to a new way of doing business. Be it Ethereum smart contracts or Hyperledger smart contracts, but the cost savings are there, and the lack of need for hardware and centralized servers may be a good bargain.  There are many hiccups to how Blockchain operates because the processing of transactions is entirely reliant on miners in blockchain networks where Proof of Work (PoW) consensus algorithm, but with the migration away to other consensus algorithms are happening fast and maybe what saves blockchain networks in the immediate future.

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Also Read: The Argument for a Corporate Password Vault

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