Smart Contracts: 12 Use Cases That Change The Rules Of The Game
By IMBA-Exchange on Altcoin Academy
The Chamber of Digital Commerce, the main association representing the interests of those who trade through the blockchain, organized a symposium on this topic and also founded the Alliance of Smart Contracts. The Chamber and the Alliance (in collaboration with Deloitte) presented a new document during the symposium entitled: “Smart Contracts: 12 Examples of Use in Business & More”. The paper looks at a dozen different areas that smart contracts can automate and change.
We have listed 12 key ideas from this report below, including the benefits and challenges identified there. Since we see the development of smart contracts on the blockchain starting in 2017, you can find the first companies and studies in any of these 12 areas.
1. Digital Identity
At an individual level, smart contracts can enable users to own and manage their own digital identities through factors such as reputation, data and the digital assets associated with them. Smart contracts can also be used for those personal data that are not related to the business. This is called a “user-oriented Internet for people” document.
Benefits: control of personal data; companies do not need to store data.
Problems: a single point of failure as a target for hackers; third parties may be sources of data leakage.
Automating record management, such as “destroying them when a certain date is due,” is a simple task for smart contracts. According to the above document, smart contracts will help to digitalize the registration form in the Uniform Commercial Code (UCC), while automating the updating and making of entries, “calculating the percentage of the lender at the time of creating the loan with the accuracy of a cent” on property collateral. A smart contract will allow you to store data in a distributed registry without slowing performance or compromising data privacy.
Benefits: reduced costs for lawyers; automated loan tracking; automatic record management.
Problems: the transition from paper registration; The UCC and the government enter and archive everything manually, which causes errors.
Diving deeper into fintech, we see that smart contracts for companies that issue shares can simplify things like automatic dividend payment, separation of shares and responsibilities in private enterprises. The document states that private equity issues are more likely to start using this technology. Although there is a company in Delaware, Symbiont, which deals with cryptographic signatures on the blockchain for securities and enjoys the support of the government of Delaware.
Benefits: The ability to digitize operations with securities from beginning to end; automatic payment of dividends; division of shares.
Problems: the need to replace the manual process with paper documents; intermediaries add value and risk.
4. Trade Finance
The document says that smart contracts can simplify international transactions with various goods. Automating the distribution of letters of credit and the initiation of trade transactions can create a more efficient, less risky procedure for buyers, suppliers and financial institutions.
Benefits: faster approval of payments; more efficient deals.
Problems: managing physically existing documents; document fraud; double financing.
There are reasons why fintech is one of the most interested parties in the implementation of the blockchain. Smart contracts can set a standard set of rules for derivatives transactions in order to optimize Over-The-Counter (OTC) financial agreements. Symbiont’s director and co-chair of the Smart Contracts Alliance, Mark Smith, call OTC financial agreements one of the most obvious examples of smart contracts.
Benefits: automated settlement and processing of transactions in international trade; real-time position assessment.
Problems: redundancy of the OTC market service process; fully paper-based document management.
6. Recording Financial Data
Smart contracts can be used to conduct business accounting through a distributed registry, accurately and transparently considering financial data. Once based on the blockchain, standards that are compatible with legacy systems and optimized for current use cases can simplify both financial reporting and auditing.
Benefits: transactional data integrity and transparency; Accounting costs for data management are reduced.
Problems: errors and fraud in accounting systems; expensive process.
The Future Of Smart Contracts
Getting a mortgage is a complicated process, most of which is done manually. Smart contracts can automate every aspect of the transaction, including processing payments and securing the property, to make signing a mortgage agreement a faster and more efficient process. However, for this to work out, a person’s digital identity must also be on the blockchain.
Benefits: automation of lien; cost reduction and error reduction; improving the visibility of property data; verification.
Problems: disagreements between different parties (beneficiary of the contract, borrower, database with real estate data); data confidentiality.
8. Record Of Title To Land
The transfer of property ownership of land is an area where fraud and disagreement are often encountered. Smart contracts can make asset transfer easier by improving transaction integrity, efficiency, and transparency. In various countries of the world, including Georgia, Ghana, and Honduras, they are already using blockchain to record the ownership of land.
Benefits: Eliminate mortgage fraud.
Problems: different participants applying for the same property; delays with manual entry into the database; identity verification.
9. Supply Chain
Smart contracts can provide excellent visibility at any stage of the supply chain, using the Internet of Things (IoT) to track goods and products from factories to points of sale. Companies like Everledqer and IBM are already using blockchain for supply chains, making the delivery of anything from diamonds to Chinese pork visible.
Benefits: simplification of complex systems with a large number of participants; the ability to track various inventory; reduction of risks associated with fraud and theft.
Challenges: data incompatibility and blind spots in supply chains.
10. Car Insurance
In the automotive industry, smart contracts can automatically provide almost instant processing, verification, and payment of insurance claims. In short, if two drivers had an accident, then they can solve insurance issues in a few hours, a maximum of days, and not in weeks and months. Car insurance is a depressingly slow process, and smart contracts can speed it up.
Benefits: the vehicle gains “self-awareness” and the ability to use its sensors to assess its damage; saving data of the owner of the insurance policy.
Problems: the subjectivity of the diagnosis of damage; duplication of checks by insurers.
11. Clinical Trials
Clinical trials, which are called medical research involving sick people, are always a sensitive matter in terms of the privacy of patient data and the need to control results. Smart contracts can be a mechanism for creating a clear and privacy-focused rule system that will allow the sharing of data between medical institutions, automatically and with the consent of the patient. The paper describes the potential for “revolutionary positive changes” in this area.
Benefits: Better visibility of results; data sharing; automatic data transfer; respect for patient privacy.
Problems: message processing; inconsistent consent management; the inertia of decision-makers.
12. Cancer Research
Finally, the paper states that smart contracts can “help data processing” for collaborative cancer research. Like clinical trials, smart contracts can automatically send patient data for processing, while maintaining its privacy.
Benefits: data sharing; patient privacy.
Problems: the difficulty of sharing research between different institutions.