Smart contracts have potential to speed up business
Smart contracts have the potential to revolutionise business in the same way as the cloud or AI.
Whereas traditional contracts require a forest full of paper and depend on teams of lawyers, notaries, bankers and accountants, smart contracts are made up of a string of computer code.
This means the agreement between buyer and seller can be programmed in advance and self-execute without a middleman holding up the process.
The result is an automated paperless method for handling transactions, transfer of goods and services, managing supply chains and record keeping, for individuals, companies and governments.
Smart contracts have been made possible by the development of blockchain technology, a type of distributed ledger hosted on a network of computers, so no single organisation controls it or can corrupt it.
Best known as the technology that underpins Bitcoin and other cryptocurrencies, blockchain has wide-reaching uses in business and commerce. Thanks to blockchain, smart contracts are secure and cannot be altered or deleted.
They provide an unbiased system of trust, in which documents and data are securely stored and controlled. This removes the need for third parties to agree and enforce transactions, though they may still be required to settle disputes.
By switching trust to the blockchain, the fees for intermediaries are removed and the speed of the process accelerated.
Just about all sectors of the economy could employ smart contracts including finance, insurance, manufacturing, retail, logistics, travel, leisure and copyright. The Internet of Things, where devices automatically connect to each other, is another logical use.
It is not a distant pipedream either. Businesses are increasingly realising that smart contracts could be deployed to improve their processes today.
Whereas blockchain was initially the domain of specialist developers, it can now be built using popular programming languages such as C#. C# is a general-purpose language developed by Microsoft for its .NET software that can be used on Windows, the default computer operating system for hundreds of millions of people and businesses around the world.
Sectors such as pharmaceuticals and healthcare are embracing bespoke blockchain solutions to track medicines all the way through the supply chain, from manufacturers, through distributors, pharmacists and doctors to patients. Smart contracts will reliably execute transactions, both throughout the supply chain and when patients are prescribed their medication.
Ultimately, this will bring multiple benefits for companies, individuals and regulators across healthcare. Building in a high degree of traceability also creates an audit trail to combat counterfeiting and the threat to health caused by fake drugs.
It will give regulators a valuable new tool for monitoring the industry.
Another benefit is that patients will find it very difficult to order multiple prescriptions from a variety of pharmacists, both online and high street. The opioid addiction scandal in the US has shown how important it is to close this loophole.
Removing the paperwork involved in traditional contracts will speed up the processing of prescriptions and cut the costs of healthcare. The focus is currently on private, online prescription services, but in the longer-term the benefits to the NHS could be enormous in terms of cost, efficiency and patient care.
Parts of the blockchain can be on the publicly accessible network, still retaining high levels of security, with others on a closed network where access is limited. It’s akin to having a company intranet system running alongside the internet.
One of the attractions of smart contracts is that they can be used in conjunction with cryptocurrencies, acting as virtual wallets where such currencies can be stored and transferred between users. This can provide a seamless system of payments and record keeping for a wide range of transactions.
Given the benefits, it is no wonder interest in blockchain and smart contracts is growing among individuals, small companies and even the world’s largest enterprises. Before too long smart contracts will be a part of daily business life that we take for granted.