Smart contracts, promise to completely transform the way several markets act now. While smart contracts have been around for a while, they are only now starting to be used in mainstream business. Now, smart contract development services are getting popular, this is because the technology is only now starting to be understood and trusted by organizations and the public.
So, when we talk about these smart contracts, it is important to highlight that they do not only concern legal documents, for example. In practice, they are all those that can be executed without the need for an intermediary.
How do smart contracts work?
As seen, smart contracts work from blockchain technology. This chain has gained greater relevance in the market as a result of the popularization of cryptocurrencies. The blockchain works as a public ledger that records financial transactions in blocks. This information is reliable and this innovation has been considered one of the most secure in the world.
This technology emerged in 2008 and allows digital data to be connected and verified by miners who then record the transactions. Each of these blocks has a chain of information, the cryptography, which consists of the sum of characters of the current block with the previous one.
Therefore, breaking this code is practically impossible, as it consists of several chains, i.e. several block codes. Visually, it would be something similar to the composition of a train, in which there is a connector between each carriage. However, in blockchain, this happens in an infinite way.
Relationship between the technologies
How does this technology relate to smart contracts? It is the blockchain that is behind the functioning of smart contracts. In this way, the code chain consists of the pre-established conditions of each contract.
In a routine process of your company, for example, where there are approval levels, it is possible to apply the concept of smart contracts. All you have to do is define the criteria that must be met for the activity to continue its journey without the need for human interference.
What are the advantages of smart contracts?
Who is entrepreneur or manager knows that the main difficulties in the daily operation consist of the following aspects:
- Data Security;
- Cost management;
These four points consist in what we call operational efficiency. Thus, when smart contracts are used in the appropriate way, they have the potential to act directly in the optimization of these crucial aspects of good corporate governance.
These days, companies are more committed to delivering a better information security experience for their customers.
Thanks to blockchain, smart contracts are one of the most powerful alternatives when it comes to increasing the security of process automation. In other words, using this innovation, it is possible to protect not only your customers but also the sensitive and strategic information of your business.
The opportunities to reduce operation costs are varied and depend directly on two factors:
- The particularities of the business;
- The quality of management decisions.
Therefore, smart contracts can be used in your business to avoid the occurrence of errors and make processes more fluid. In practice, this already contributes directly to optimising the use of resources.
Moreover, considering its high level of security, smart contracts prevent possible costs in case of data failure.
More agility in the day to day
Unproductivity in the business generates financial losses in the short and long term. Including, it is the reason for increasing the Churn rate, or rejection rate, among customers, who want their demands to be met with agility.
Does your company have an unproductivity indicator? A practical example is the case of fleet management in transport and logistics. This is a complex and costly operational routine, in which each stage must be subject to continuous improvement.
Through this indicator, it is possible to know if your operation has a response time within the expected market average. Any variation that jeopardizes the goal should be investigated and corrected.
In the same vein, it is common for the locks to be in manually validated processes that depend on human intervention. Thus, the use of smart contracts enables these bottlenecks to be corrected.
Agility is one of the criteria of any operational process, but not the only one. In fact, there is no point in making a fast delivery without meeting the other standard criteria of the business. In other words, there is a minimum quality that every customer expects in order to be satisfied.
Likewise, for smart contracts to result in optimization, it is essential to define what the quality conditions are. In practice, they are the acceptance criteria we mentioned earlier.
More than in the formalization of documents, the concept of smart contracts can be used in any digitalized routine that demands conditions that must be met. Just as artificial intelligence identifies whether or not these conditions have been met, there is no intermediary.
Where can smart contracts be used?
According to Statista, Ethereum, the network created for smart contracts, by 2021, dominates just over 20% of the entire potential cryptocurrency market. Considering this data, it is possible to imagine that the smart contracts segment is also a great possibility to be explored.
There is still no legal framework on the subject, which can make it difficult when we think of its application in the legal environment. However, this does not prevent the use of this technology in essential business management fronts. It is enough to pay attention to its limitations to ensure the correct use of this resource.
Today, the concept of smart contracts and decentralized finance is already under debate and shows its relevance to the financial segment.
Besides the financial and logistics segment, the use of smart contracts can be applied in scenarios such as
E-commerce (virtual shops), marketplaces, and apps;
- Real estate market;
- Games and entertainment;
- Legal contract management;
- IoT (Internet of Things);
- Information Security.
Thus, there is a range of opportunities to apply this technology in the business. The most important thing is to understand how to use this resource. In this sense, the integration of the process is fundamental for the success of this decision.
How to create a smart contract?
To be considered a smart contract, the code chain must meet three basic rules:
- Observability – verify that the parties to the contract are meeting the acceptance criteria.
- Verifiability – guarantee event data that proves whether or not the pre-established conditions have been met.
- Privacy – restricting access only to key users.
In this way, the way the process will be built in detail depends directly on the particularities of its operation and the purpose-objective of the contract. But regardless of the context, it is a fact that there should at least be clear acceptance criteria.
Although it sounds easy, but you need experts like Kiss.software to create a smart contract for your business. Kiss.software is a smart contracts development services provider that offers a wide range of services to its clients. The company has a team of experienced and qualified developers who are well-versed in the latest technologies and tools used in the development of smart contracts. The company has a strong focus on the security of its client’s data and information. You can visit their website https://kiss.software/ to learn more about their services and consult them about your requirements.
Smart contracts are definitely changing the way we do business, and it’s only going to become more prevalent in the years to come. For those who are unfamiliar with smart contracts, they essentially allow two parties to make an agreement without the need for a third party (such as a bank or lawyer). This not only saves time and money, but it also makes transactions more secure since everything is done electronically. If you’re not already using smart contracts in your business, now might be the time to start exploring this option.