What Smart Contracts Mean for the Future of Business
We Still Have a Ways to Go, But the Future Looks Bright for Smart Contracts
This is a guest post by Andrew Stepanov, of GanttPRO. The views and opinions expressed in this blog do not necessarily reflect those of the PolySwarm organization nor is this considered professional advice.
If you want to run a successful business, you have to be open to innovation. Can integrating smart contracts into your business be considered innovative? Definitely. You may even have already thought about it. Especially considering that Gartner estimates certain smart contracts will be used by 25 percent of global companies by 2022.
Before you bring smart contracts into your business and business analysis techniques, remember one simple thing: The use of smart contracts for the sake of using them will not bring value to your business.
That’s why our newest guest author is talking about where smart contracts can be valuable in business. Learning from the companies that already use them and educating yourself on how smart contracts can benefit your business will allow you to determine what this new technology means for your organization. Not to mention the future of business as a whole.
Financial Transactions Without Intermediaries
This is a popular point in the smart contract discussion. Satoshi Nakamoto, the creator of Blockchain technology, wanted to reduce any third-party services that are commonly included in money transfers. Also, smart contracts remove obstacles with international money transfers and speed up processes needed to make a transaction. There’s greater accuracy and transparency as automated systems perform all the processes.
In this way, businesses that use smart contracts will ideally rely only on themselves. There will be no need to pay fees to any other outside organizations. Bottom line: this means that more profit will stay within your business.
Should you use it? If you handle a large volume of transactions and pay a third-party in the process, smart contracts may be a valuable technology for you.
Efficient Supply Chain Management
In some way, this is a continuation of the first point. Imagine, you run an ecommerce business. A client comes to you and wants to buy a certain product, but your supply is low or near-empty. In this case, you need to contact upstream supply chains or manufacturers to order more of your product. They, in their turn, will have to coordinate with other relevant services to deliver what you and your customer need. This is both costly and can clog up the chain of communication.
Smart contracts enable you to improve communication and coordination between your business and these suppliers (and take out the intermediary fees, like we mentioned above).
“By allowing supply chain partners to create trusted relationships without the need for banks or, perhaps, even traditional purchasing processes, manufacturers, suppliers, customers and machines can find each other and do business much more quickly and inexpensively,” explain experts from Cognizant.
There is one well-known case that reinforces the value of blockchain in this scenario. Frank Yiannas, the Walmart’s vice president of food safety, once bought a package of mangoes in one of their stores and brought it to the office. He demanded his team to figure out where exactly these mangoes had come from. It took from them more than six days to discover it. Not bad, as the vice president remarked, but still quite long.
This was a part of a larger experiment. For years, Yiannas wanted to develop a technology that would be able to track and catalogue all the products that come to Walmart and for a long period of time, he had couldn’t.
Walmart, together with IBM, implemented Blockchain technology and it filled the gap. After that Yiannas was able to, in one click, track all the shipments and operations with any products. And you could too.
Should you use it? If you manage an extensive supply chain, smart contracts may make your life easier and the process more efficient.
Automated Payments and Requests
This blockchain-based technology creates greater security to all parties involved in a transaction, thanks to an automated contract that works based on predetermined qualifications. To put it simpler, smart contracts are triggered when a specific event occurs. If the agreed actions take place, a smart contract releases funds, for example.
Here’s a simple situation in which a smart contract could automate payments:
“I could agree to a smart contract with a local library stating that if I do not return a book by a certain date (and the library scans a book as it is returned), the cost of the book will automatically be sent from my Bitcoin wallet to the library. In contrast, under a traditional contract, the library would send me a bill, which I could choose to not pay — in violation of the contract,” explains Max Gulker, PhD.
This makes smart contracts valuable to nearly every business that handles transactions. Not to mention, 82 percent of businesses fail because of cash flow problems. By automating this process with smart contracts, you’re less likely to deal with missed or late payments because the payment is made as soon as requirements of the contract have been filled.
Should you use it? If you deal with a lot of missed or late payments, smart contracts may be a way to recoup that money and eliminate this issue in the future.
Time to Get Smart?
It’s difficult to know all the potential benefits smart contracts will bring businesses, and these are just a few of the initial ideas that have been discussed in the industry. As with any new technology, smart contracts too will mature, and we’ll begin to see shifts in how business is done.
Bio: Andrew Stepanov is a content writer and communication specialist at GanttPRO, growing company engaged in developing intuitive Gantt chart software. In his spare time, he listens to rock music, watches football and hockey games or enjoys time with his family.