We have smartphones, we have smart glasses, we even have smart cars (thanks, Google) – now it’s time to introduce smart contracts.
This is a concept that has been bubbling over the past couple of years but is predicted to show some real traction over the coming months.
Before we delve into the many benefits which small businesses are about to reap as a result, let’s first go back to basics and answer the question on many people’s lips.
What is a smart contract?
Smarts contracts (AKA ‘blockchain contracts’ or ‘digital contracts’) exist in the realm of blockchain – a digital ledger which stores encrypted information in a decentralised location.
Smart contracts enable users to exchange anything of value in a secure and transparent way quickly and without the need for intermediaries.
The contract is compiled as code into the blockchain which activates a series of actions once it has been triggered by something such as the receipt of a cryptocurrency payment or document upload.
A seller agrees to send 100 games consoles to a buyer for the price of 1 bitcoin per item by a specific date. This is then written into an encrypted smart contract and put into the blockchain.
Should the buyer not receive the goods by the specified date, the cryptocurrency will not be released and both parties will be notified of the contract breach without any need for human intervention or supervision.
Smart contracts could also potentially find a place in the world of influencer and affiliate marketing.
How? Well, a website would simply need to set up a smart contract which triggers each time a sale is closed via an affiliate link click. Cryptocurrency would then be transferred to the influencer/affiliate for them to convert.
Benefits of smart contracts for small businesses:
Time-saving – By nature, smart contracts use blockchain software to automate processes through a series of triggered actions which can save a serious amount of time and energy.
Eliminating the need for third parties, banks and middlemen also enables smart contracts to dramatically speed up traditional processes.
No longer do business owners need to wait weeks – even months – for the creation and exchange of documents, goods and services. Smart contracting is the epitome of efficiency.
Cost effective – As the saying goes, ‘time is money’ and where precious hours are saved, business owners are also able to keep hold of more cash.
Cutting out the aforementioned middlemen rules out costly factors like legal payments and transaction fees which have the potential to seriously hinder a small business or start up.
Safe & secure – The overriding USP of smart contracts and blockchain as a whole is enhanced security when it comes to the storage of personal information and data.
Although documents are publicly available, the information is encrypted, anonymous and resistant to hacking. Documents are also duplicated many times on the blockchain so are virtually impossible to lose.
Moreover, by extracting third party involvement, smart contracts also eliminate the risk of both human error and external manipulation.
Now you’ve got a better understanding of how smart contracts work and how they could benefit you as a small business owner, we want to hear your thoughts. Join the conversation on Twitter or Facebook!