Smart Contracts: Adoption Value for Enterprises and General Use Case
In the first article of our Smart Contracts series, Antonio explored what a smart contract is, how blockchain technology helps execute it and the various types of smart contracts that enterprises can work with to facilitate a business process. Here, he examines the real adoption value of this digital tool for enterprises and shares the general use cases
At first, let’s understand how smart contracts are different from traditional contracts and the benefits that an enterprise can expect by making this shift to the digital format:
Differences between traditional contracts and smart contracts Image Credit: PWC
As you can see in the image, the main advantages of smart contracts over traditional contracts are that they save time and costs. Besides this, for enterprises with global operations, smart contracts can be executed without the physical presence of the parties involved, as a digital signature will suffice.
In today’s digitally connected world, time is a critical factor for most organizations. Reduction of costs too, is an important KPI for all functions leading to a rapid push towards digitalization of most operational activities. Remote teams are also no more an anomaly. Considering these factors, the benefits of smart contracts maybe obvious for all businesses, and in my point of view an ideal solution perfectly fit for our digitally transforming enterprises.
So, the question that arises is why businesses are not in a hurry to adopt smart contracts in their operations.
The complexity primarily depends on the extent to which your business processes will be allocated to run using smart contracts. There are easy ways of adopting smart contracts, though I do agree that using the word “easy” when talking blockchain is not advisable for sure. However, here, by easy I mean an instance where the business is only digitizing a paper contract, the signature and the storage of this contract for future reference. This process simply entails having two persons writing an agreement and putting their signatures at the end. That’s all! Easy, isn’t it! A text document, two digital signatures and a block in the chain!
However, enterprises are bound to have more complex processes than the simple situation we discussed above. So, what happens when an organization attempts to explore the adoption of the Internet of Things, where autonomous connected computing devices things are interacting with other devices or people?
For example, imagine an autonomous vehicle belonging to a company pays on its own for the road toll and the electric recharge it needs to run on using a smart contract. We cannot even contemplate how complex it will be to orchestrate the contracts between connected devices and / or people.
Considering the above, it’s clear that executing smart contracts can be easy or complex depending on the use cases as illustrated below:
From the simplest transaction to the most complex Decentralized Autonomous Organization, which can either be a company or a government or for that matter the entire society, there’s definitely a need to work out this complex process involving people and things (connected devices) in a more sophisticated manner. This will need an outlook that factors in how to deal with many entities, many terms and numerous regulations. But it’s clear that this is the direction we are headed towards.
To better understand how smart contracts can operate with complex processes, we have analyzed an ecommerce example in the illustration below:
In the above, each of the stages from the autonomous vehicle bringing in the goods to the final delivery at the consumer end, can be possibly organized using smart contracts. Ecommerce brands can have software agents be the third parties to decrypt the blocks at various points.
As evident from the “Autonomous e-commerce” illustration, smart contracts can truly bring about a paradigm shift in enterprise operations. It puts the consumer centerstage and technology to serve their every need. In this context, smart contracts and blockchain play a very crucial role in achieving this.
Coming up: In the next article of the ‘Smart Contracts’ series, Antonio will investigate the end-to-end use of smart contracts in a specific industry and analyze the benefits in an elaborate manner.
Feel free to reach out to us with thoughts on this article or with points of inclusion for the next in the series. Stay tuned!