Blockchain smart contract use cases
Smart contracts come with a plethora of benefits. They are tamper-resistant, self-executing, and self-verifying. They are also changing the face of the banking industry in the form of error-free processing of insurance claims, smooth peer-to-peer transactions, streamlined KYC processes, transparent auditing, and so on. In this article, we will discuss the positive changes that smart contracts have brought into this industry. Simply put, smart contracts are self-executing programmable contracts that encode an agreement between two or more parties.
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Blockchain smart contract use cases
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- Understanding the Basics of Ethereum and Smart Contracts
- Smart Contracts: 10 Use Cases for Business
- Smart Contracts: What are they & Why they matter?
- Smart Contracts
- Blockchain Technology and Smart Contracts
- Intelligent Smart Contracts for Innovative Supply Chain Management
- Why Many Smart Contract Use Cases Are Simply Impossible
Understanding the Basics of Ethereum and Smart Contracts
We propose blockchains and smart contracts as enabling technologies for an innovative type of supply chain management, with the goal of achieving higher levels of collaboration between the companies participating in the chain, which in turn pays in the form of higher levels of profitability and economic health for the participating enterprises.
Our proposal goes far beyond simply using blockchains as decentralized systems to track the origin and delivery of goods, which is what most of the current blockchain projects on supply chains are focused on. In fact, we introduce a type of smart contract aimed to solve two of the main problems that hinder the efficiency and effectiveness of supply chains, namely trust and coordination.
Solving the problem of trust amounts to the capability of establishing quickly and cheaply contractual relationships based on convergent business needs among parties that may not know each other, and therefore need to protect themselves from opportunistic or incorrect behavior. Solving the problem of coordination consists in creating, at convenient management costs, a control system capable of directing the objectives of the supply chain as a whole, so as to achieve a greater common good in the medium term, as an alternative to the state of affairs in which each participant pursues, on its own behalf, lower but immediate returns.
Our smart contracts for innovative supply chain management replace human coordinators in tackling the problems above, thus eliminating one major obstacle to their effective solution, namely the need to trust the coordinator itself. Furthermore, in this way, by automating the process of coordination, they unburden the supply chain of a considerable management cost.
Contracts of this kind not only automate contract execution as in standard smart contracts, but also adjust costs and compensations of the members of a supply chain, effectively taking up the role that was of human coordinators.
Blockchain technology initially established itself through cryptocurrencies, but is currently seen as carrying huge potential for many further applications, due to its effectiveness at managing trust among stakeholders and at enforcing high standards for data protection, transparency, and authentication, without resorting to third parties or central authorities.
Blockchains are deployed on wide-area networks such as the Internet and, in a broad perspective, it is conceivable that they will extend the scope of the Internet from Information and People to Value, by making value transfer viable on a global scale. In this way, through the trust algorithmically ensured by the blockchain and the consequent data protection, values of products and services can be exchanged among parties, who do not need to be acquainted with each other, to their best advantage without having to go through the encumbrance of costly intermediaries and laborious bureaucracy.
This implies, however, re-thinking and redesigning business processes in a variety of sectors, from food to manufacturing, from health to government, from copyright to large-scale retail. Supply chain management is one such process that, within this outlook, has recently gained the limelight. Extant use cases for the blockchain in the context of supply chains have been implemented by distribution giants such as Walmart 1 , which has focused on blockchain-based monitoring of the safety of its food supplies.
It is expected, however, that smaller players can reap even larger benefits from applying blockchain technology to their supply chain management. Indeed, a promising arena for the application of blockchain-based supply chains is given by business ecosystems made up of multiple corporate actors, more or less equivalent in size, which, through the blockchain, attain the possibility of intertwining supply relationships on equal footings without undergoing the hegemony of larger chain leaders, apt to impose economic terms and conditions to their advantage.
It is well-known that one of the main challenges in the effective construction of these balanced supply chains is to establish trust relationships quickly and effectively among the various participants.
This is a non-issue in unbalanced chains, but just because chain dominators impose themselves and act as managers of trust. They do this in the strictly technical meaning of providing directly or indirectly the legal contractual documentation, legal advice etc. But they also guarantee the overall reliability and solvency of the chain, and ensure and, if necessary, impose effective levels of internal collaboration.
Algorithmic trust, as made possible by the blockchain, is well-suited to cope fairly with this aspect, doing away with the need of power asymmetries to get things to work. Yet, for this to become reality, another obstacle needs to be overcome. Indeed, for balanced supply chains to compete on the market on a par with those dominated by corporate giants, their participants must strive for a greater good that lets them create innovative products at competitive prices.
This is at odds with the traditional way of operating, whereby participants charge steeped-up prices of the components supplied to other participants, all to the detriment of the correct pricing of the final product. It is therefore a question of finding an attractive and sustainable alternative to the approach that favors small but immediate gains.
As a matter of fact, there does exist a methodology that applies exactly to our case and has been widely explored within the supply chain community during the past two decades [in research at least since the seminal paper Cachon and Lariviere, , while the practice of the approach dates back to the 's]. It is called Revenue Sharing RS and involves sharing the proceeds of the sale of the finished product among all the participants, starting from the retailer and moving backwards up until reaching every member of the chain.
In this way, suppliers participate in the final gain of the retailer, in exchange for initially supplying at a discount, while protecting downstream the retailer, who can therefore afford to order as many items of the product as warranted by market forecast, without risk of paying penalty for excess of unsold items in case demand drops.
Why then, despite the evidence of its benefits and the existence of some relevant success stories, has Revenue Sharing not yet found the large-scale adoption it seems to deserve?
The answer is summed up in two words: trust and coordination. Participants must indeed be bound by a pre-existing strong mutual trust if they have to take for granted the timely and precise communication of sales made and the consequent fair distribution of proceeds.
In reality, in the vast majority of cases, nobody goes that way and expensive forms of legal protection as well as of administrative control are hence made necessary to prevent misconducts from unreliable participants. Furthermore, the proceeds must be redistributed along an arbitrary length chain i. Blockchain technology can act as a crucial factor of change also in this respect, by making large-scale Revenue Sharing affordable so as to pave the way for balanced supply chains and, in general, for balanced business ecosystems.
This is because it can automate the management of trust and coordination between the participants in the chain through the application of smart contracts, i. Thus, smart contracts can enact transactions corresponding to the sale-purchase of components within the supply chain according to internal prices optimally defined with respect to the pricing of the final product and accepted and verified by all participants.
Redistribution of proceeds can be similarly handled. Here automation is key, in that it radically lightens the burden of coordination which, if implemented through human managers, hinders the adoption of Revenue Sharing with computational and economic barriers bound to ramp up as the chain lengthens.
However, Revenue Sharing is not limited to calculating and distributing sale proceeds, but also optimizes various parameters and indicators in order to plan the best price for the final product. By incorporating this logic too, smart contracts enter the wider arena where computers are propelled beyond ordinary deterministic computations, and enabled to make intelligent choices along the lines and vision of trends like artificial intelligence.
We provide a description of the algorithm of Revenue Sharing and general architecture for its deployment as an intelligent smart contract that has Ethereum as a reference point but can also be adapted to other blockchains;. We show how RS-based intelligent smart contracts totally automate the aspects of trust and coordination in supply chain management, thus effectively pushing forward the state of the art in this sector;. We highlight the substantial boost that this solution could channel for the purposes of a more balanced market, freed from oligopolistic yokes, where small and medium-sized companies with high value-add can live and thrive, with benefits that spread to the socio-economic fabric at large.
The remainder of the article is structured as follows. Section Blockchains, Intelligent Smart Contracts and Digital Trust recalls the main aspects and concepts underlying blockchains and smart contracts.
Section Algorithmic Supply Chain Coordination illustrates the Revenue Sharing methodology of cost optimization and distribution of returns within supply chains. Section Intelligent Smart Contracts for Supply Chain Coordination describes the deployment of this methodology as an intelligent smart contract.
Section Discussion and Future Work discusses the contribution of this article in the context of the perspectives opened by the blockchain in the direction of innovative economic systems. Finally, section Conclusions concludes the article. Distributed ledgers are databases where transactions are validated through a decentralized mechanism involving a network of peer nodes, and are therefore managed in the absence of a centralized validator.
The most popular implementation of distributed ledgers is given by the blockchain. The validation mechanism in blockchains amounts to a form of consensus among peer nodes and a number of consensus algorithms have been devised for this purpose, the most relevant and popular being Proof-of-Work [pioneered by the mother of all blockchains, the Bitcoin Nakamoto, ], Proof-of-Stake, and Byzantine Agreement. Since we are primarily interested in how blockchains provide a new version of trust, suitable for the flourishing of innovative economic models, let us see through a simple example how it basically works.
Suppose that company A records an invoice issued to customer B and containing data of both A and B , such as address, VAT number, invoiced amount, invoice number, bank details. This operation is then in turn duly recorded. All three, A, B , and C , want to be certain that nobody tampers with these records, so as to prevent, for example, fraudster D from replicating A 's invoice data and then redirecting the paid or anticipated amounts to D 's bank account.
Since digital files can be easily copied and modified, how to make sure that this does not happen? In general, how can binding agreements be protected from tampering, in order to demonstrate that each of them represents a specific, non-replicable state, inserted at a specific time?
A traditional solution consists in using trusted third parties TTPs as guarantors, but this has considerable drawbacks, in particular the high prices imposed by TTPs for their services, often accompanied by laborious bureaucratic procedures. But it is here that blockchain technology can turn things over, with its ability to create tamper-proof ledgers and overcome the need of costly TTPs. Since the nodes involved in validating transactions all keep a copy of the blockchain, each participating node has the complete and transparent history of what happened, thus making transactions secure.
In addition, the blocks are encrypted and difficult to break in with the purpose of modifying the information they contain. A blockchain can therefore be seen as an incorruptible digital ledger of records, replicated on different computers in a peer-to-peer network, which guarantees the genuineness of the recording of data. Records can be anything, from money transfers to information of all kinds.
Network members are anonymous individuals called nodes. All communications within the network exploit cryptography to securely identify senders and recipients for each transaction, by using the hash unique identifier contained within each individual block in addition to the information and hash of the previous block.
The hash of the last previous block binds with the new block and ensures that neither one can be altered, hence preventing the insertion of new blocks between the two.
In this way, each new block that gets into the chain strengthens the verification of the previous block and, consequently, of the entire blockchain. When a node wants to add information to the ledger, a consensus is formed in the network to determine where it will appear in the chain. Summing up, a blockchain is a ledger of transactions. It is shared by multiple actors and, thanks to its underlying technology and processes, cannot be changed. Similarly, but with much higher execution times and costs, notaries a typical example of TTPs record the actual and irreversible transfers of properties between parties.
Therefore, blockchains provide the digital basis for the implementation of five key concepts, namely decentralization, transparency, security, immutability and consensus , which together lead to an even wider result: a digital algorithmic implementation of trust.
Those same authentications of fiduciary relationships that had hitherto been entrusted to human intermediaries with high costs and sub-optimal timing, as well as with the burden of a cumbersome and intrusive bureaucracy, can now be dealt with by an algorithm: fast, simple and cheap.
One of the consequences is that trust between businesses is made much more affordable, hence leveling out the barriers that have shackled so far cooperation among enterprises on a global scale.
Smart contracts have nowadays found a practical and effective implementation on blockchain technology. They have, however, an independent history that is worth reconstructing to understand both the way they work and their relationship with the contracts of the legal tradition.
At its most general, the concept of smart contract is rooted in various disciplinary areas such as information technology, economics and jurisprudence. To begin with, smart contracts were first introduced by Nick Szabo in the 90's of the last century Szabo, , therefore well before of the coming of age, more than 10 years later, of blockchains, which nowadays provide the background technology for their implementation. Consequently, at the time Szabo characterized smart contracts at an abstract general level, by describing them as methods to formalize and automate contracts from the legal tradition through the combination of computer protocols with user interfaces.
Szabo talked about the potential use of smart contracts in various fields that involve contractual agreements—such as credit systems, payment processing and content rights management. From this point view, smart contracts that run on blockchain are a partial departure from the concept as originated by Szabo, which nevertheless provided the initial inspiration.
In fact, the blockchains that put the concept of Smart Contract into practice introduced a computer object not yet present on early blockchains, such as the Bitcoin, namely a type of code that can be recorded in an immutable way on the blockchain so as to run it automatically on a virtual machine. In other words, it is software that does not get executed on a single machine, but is instead executed on the virtual machine of a decentralized network, which makes it tamper-proof.
Since a blockchain is a register for validating transactions, smart contracts are best viewed as automated transaction managers, and this is indeed what smart contracts retain from legal contracts. In fact, many legal contracts stipulate that transactions must be carried out if certain conditions are met. Thus, we can view a smart contract as the automation of the transactional part of a legal contract, with the guarantee that transactions will be effectively carried out and will not be tampered with, something which fits neatly with the need to cope efficiently with the requirements of trust and coordination so as to effectively deploy Revenue Sharing.
Therefore, under this view, a smart contract is a program that runs on a blockchain and implements a digital agreement controlled by a set of rules. The software coding such rules is replicated and executed by all the nodes of the network.
In essence, smart contracts enable the quick and cheap deployment of computer protocols embodying complex contractual obligations realized through the execution of transactions triggered by specific events e. In this way, they raise the paradigm of digital trust, implemented for simple transactions through blockchains such as the Bitcoin, to a higher level, suitable for relations between companies. Indeed, as commonly understood and implemented, a smart contract behaves like a deterministic program, by performing a certain operation if and when certain conditions are met.
We can summarize the main features of smart contracts as follows:. For example, Solidity, the programming language for coding contracts on the Ethereum blockchain, is Turing-complete, i. Therefore, smart contract versioning is decidedly different compared to that of traditional software, since new versions of a pre-existing smart contract are new smart contracts altogether, to which the inputs of previous versions must be redirected.
As a result, two or more parties who do not know each other can now interact through contractual agreements that do not require expensive management and supervision by human third parties. The next stage in the evolution of smart contracts is in making them effectively intelligent, by going beyond the simple automation of the contractually enforced chaining of transactions.
This evolution appears indeed desirable and justified every time it comes to planning, and therefore a variety of criteria must be used for example, in the case of supply chains, profitability, delivery times, etc. Planning is at the heart of supply chain management and, in the case of Revenue Sharing, is practiced so as to define an optimal price to bring the product to market, taking into account criteria such as the degree of willingness of participants to adapt to optimized internal costs as well as possible variations in product demand.
Smart Contracts: 10 Use Cases for Business
Bitcoin was created to be a new global monetary system, but blockchain, the underlying technology for cryptocurrencies, has expanded across multiple industries. In this article, we highlight five blockchain use cases that are increasingly being popular around the world. To illustrate how blockchain evolved into a technology that applies to multiple industries, we have to trace its history and point out when and where it evolved to unlock the many use cases that have been developed. When Bitcoin was created in , it was proposed as a new monetary system run by thousands of computers distributed around the world, making money less dependent on central authorities. This network of computers handles a special type of database called blockchain , which uses distributed ledger technology to add data in a permanent manner, allowing for a verified record of transactions protected by cryptography and consensus among the computers that operate it, among other technologies. Since the creation of the Bitcoin blockchain, several developers have adopted the technology to add more functions and use cases. When the Ethereum blockchain was created in , it introduced smart contracts, which allowed people to program contractual agreements that go beyond payments.
Smart Contracts: What are they & Why they matter?
Skip to content. Change Language. Related Articles. Table of Contents. Improve Article. Save Article. Like Article. A Smart Contract or cryptocontract is a computer program that directly and automatically controls the transfer of digital assets between the parties under certain conditions. A smart contract works in the same way as a traditional contract while also automatically enforcing the contract. Smart contracts are programs that execute exactly as they are set up coded, programmed by their creators.
What is the easiest way to get things done? To find someone who succeeded and to repeat their actions step-by-step. What is the smartest way to get things done? To find someone who succeeded, to estimate their mistakes, and to come up with own strategy. This rule applies to everything — work, relationship, house cleaning, dog training, pasta cooking, whatever else.
Blockchain Technology and Smart Contracts
In this post, we are going to answer the basic questions that help to form an idea, what those contracts are about. A smart contract is basically a computer code on top of a blockchain which comes with a set of rules that bind the parties to interact with each other in a certain way. In case those pre-defined rules are met, the agreement is automatically enforced without the need for a middleman. The person selects a product and inserts the coins. The machine then checks whether you inserted a the correct amount and, that being the case, ejects the product and change if necessary.
Intelligent Smart Contracts for Innovative Supply Chain Management
The potential of blockchain is still being explored in sectors such as healthcare through initiatives such as Covid vaccine supply chain management. Listed below are the key use case trends impacting the blockchain theme, as identified by GlobalData. Blockchain is being used to speed up payments, improve transparency, eliminate intermediaries, and reduce costs. Cross-border payments through traditional payment methods are complex, expensive, and slow. The World Bank estimates the average transaction cost for remittances to be around 6. Smart contracts can be used for consumption-based payments, dispute resolution, and facilitating chargebacks apart from enabling faster and cheaper payments.
Why Many Smart Contract Use Cases Are Simply Impossible
Emerging ownership models on the blockchain View all 4 Articles. We propose a new platform for user modeling with blockchains that allows users to share data without losing control and ownership of it and applied it to the domain of travel booking. Our new platform provides solution to three important problems: ensuring privacy and user control, and incentives for sharing.
Gideon Greenspan. In this opinion piece, Greenspan discusses blockchain-enabled smart contracts and why this application of the technology may be suffering from inflated expectations. As the developer of a popular blockchain platform, I sometimes gets asked whether Ethereum-like smart contracts are on the MultiChain roadmap. The answer I always give is always: 'No, or at least not yet'. But in the hype-filled world of blockchains, smart contracts are all the rage, so why ever not? Well, the problem is, while we now know of three strong use cases for permissioned bitcoin-style blockchains provenance, company recordkeeping and lightweight finance , we've yet to find the equivalent for Ethereum smart contracts.
Both technologies Blockchains and Smart Contracts are profoundly changing many areas of private law transactions. For an overview of past and upcoming meetings of this project, please click here. Kindly contact the ELI Secretariat if you have any questions concerning this project. Blockchains are technologies for storing and transmitting data, allowing the constitution of replicated and distributed ledgers, without a central monitoring body, secured by cryptography, and structured by blocks linked to each other, at regular intervals of time. Smart contracts are auto enforceable code, running on top of a blockchain. The applications of blockchain go beyond the strict framework of crypto-currencies and are potentially numerous. DLT is already used to replace some back-office functions of banks and insurance providers, but it could also be used to auto-execute European standard forms, such as the European Certificate of Succession which gives authoritative information to banks and land registries on eg heirs and their inheritance rights.
Sani is the Board chair at VezTek , an L. Cornelius as we'll call him in this feature looked around nervously before continuing as if someone might be watching us. I collect European Art for tens of millions in value but am unable to sell anything due to the Covidrelated economic constraints. It's no secret that blockchain has already started changing the way we do business, but the extent of how blockchain will impact the business world of the future continues to become clearer.