As blockchain technology continues to evolve, we are hearing more and more about so-called “smart contracts”.
Smart contracts utilise blockchain technology in order to self-execute. A smart contract is an agreement between two people in the form of computer code. They run on the blockchain, so they are stored on a public database and cannot be changed. The transactions that happen in a smart contract are processed by the blockchain, which means they can be sent automatically without a third party. This means there is no other party to rely on in order to execute the contract. The transactions only happen when the conditions in the agreement are met, so there are no issues with trust, people being available outside of office hours, etc.
Smart contracts can be used where transparent and immutable records are useful. This is why the technology has already found wide adoption in financial services. There is value in ensuring that records of financial transactions are kept verifiable and safe from tampering and fraud.
Companies that have started using blockchain technology include IBM, which has partnered up with companies such as Nestle and Unilever, along with stores such as WalMart in order to manage inventory of certain products.
At such a very early stage in the development of smart contracts, is difficult to know all the potential benefits smart contracts will bring to businesses. As with any new technology, smart contracts will mature, and we should begin to see shifts in how business is done as the technology becomes more main-stream.