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Web3: The Smart Contracts revolution

If there's one thing we can all agree on in the tech sphere, it's that blockchain technology has grown far beyond its cryptocurrency beginnings.

The decentralised, transparent, and immutable nature of blockchain has given rise to smart contracts, bringing an entirely new dimension to how we conduct business.

Smart contracts – self-executing contracts that automatically perform actions when predefined conditions are met – are a game-changer. They're like an Amason delivery drone, but for business processes. They do their job quietly, without much human intervention, ensuring things get done efficiently and without error.

Think about traditional contracts for a moment. The red tape, the paperwork, the time wasted in cross-verification, legal hoop-jumping – it’s enough to make your head spin faster than a fidget spinner at full throttle. Now, imagine the convenience of replacing all that with automated, self-executing contracts that minimise human intervention, leaving less room for errors, disputes, and fraud. That’s smart contracts for you.

The emergence of these digital contracts marks a significant shift in the way business processes are being automated and streamlined. And trust me, if you're still skeptical about this tech, let's delve a little deeper. You might find yourself surprised, in the way you'd feel when your phone suddenly learns to predict the exact next word you're about to type.

Why Should Businesses Care?
If you're a business – big, small, or micro-compact – smart contracts should be at the top of your "next big thing to try" list. Here's why:

1. Increased Efficiency and Speed

With smart contracts, business processes that typically require a significant amount of manual intervention can be automated. The time saved is considerable, and we all know time is money. This is like upgrading from a bicycle to a bullet train - the speed difference is palpable.

2. Cost-Effective

By reducing the need for intermediaries (we're looking at you, lawyers and notaries), smart contracts make the contract execution process more affordable. It's akin to swapping your 50-dollar-a-month cable subscription for a far cheaper, ad-supported streaming service – the savings are hard to ignore.

3. Enhanced Security

Smart contracts use cryptography for transactions, providing a higher level of security compared to traditional contracts. So, in essence, it’s like shifting from a lock-and-key scenario to a full-blown, retina-scanning system. Your data stays protected and untampered, without an iota of doubt.

Real-World Applications
You might wonder, "Sure, this sounds great, but how is this playing out in the real world? Are businesses actually leveraging this?"

The answer is a resounding yes.

Supply Chain Management

Walmart and IBM have joined hands to use blockchain and smart contracts for tracking food products through their supply chain. In the event of a product recall, this system can track the source of contamination in seconds, instead of days. Imagine going from searching for a needle in a haystack to having a homing beacon that guides you straight to it – the ease of operation is astounding.

Let's take the example of a coffee supply chain that relies on smart contracts. The journey of coffee from the farm to the consumer's cup involves many stages like farming, harvesting, processing, packaging, shipping, and retailing.

Here's how a smart contract would work:

The harvested coffee beans are packaged and tagged with a unique identifier that is registered on a blockchain. This identifier represents the coffee's digital twin and contains crucial data like the harvest date, location, and quality parameters.

When the coffee package is picked up by the shipping company, the unique identifier is scanned, triggering a smart contract. This contract validates that the shipping company has picked up the right package and automatically updates the blockchain with the shipping details.

The smart contract also initiates a payment to the farmer from the distributor once the package is picked up, removing the need for manual payment processing and speeding up the transaction.

This process continues at every step of the supply chain, providing transparency, reducing delays and errors, and ensuring that each party is promptly paid once their part of the process is completed.

Real Estate

Propy, a real estate marketplace, leverages smart contracts to execute international real estate transactions. These contracts reduce the risk of fraud and eliminate the need for physical presence at closings, saving buyers, and sellers a lot of hassle. It's like having a teleportation device handy for all your travel woes.

Traditionally, selling a property involves multiple steps, including property inspection, price negotiation, contract signing, payment, and deed transfer. Each of these steps takes time and often requires intermediaries such as realtors, lawyers, and bankers.

A smart contract can streamline this process:

Both parties (buyer and seller) agree on the property price and the conditions for sale, which are encoded in a smart contract. This contract is placed on a blockchain, ensuring transparency and immutability.

When the buyer is ready to purchase, they transfer the agreed amount to the smart contract. The contract verifies the payment and automatically transfers the digital title of the property to the buyer.

The smart contract then disburses the payment to the seller, minus any pre-agreed fees (like property taxes, for example). This entire process can take minutes instead of weeks or months, significantly speeding up property sales.

Insurance

Insurance giant AXA has used smart contracts to automate compensation for flight delays. Customers receive automatic payouts if their flight is delayed for more than two hours. It's the digital equivalent of a care package arriving at your doorstep the moment you're feeling blue – pleasantly surprising and oh-so-convenient.

Consider a simple example of flight insurance. Traditionally, if your flight is delayed or cancelled, you have to file a claim with your insurance company and wait for it to be processed, which can take days or even weeks.

With smart contracts, this process becomes automatic:

A smart contract is established between the insurer and the insured. The contract stipulates that if a flight is delayed by more than a certain time, a certain amount will be paid out.

The smart contract is connected to trustworthy flight databases, constantly monitoring the flight's status. If the flight is delayed beyond the stipulated time, the smart contract automatically triggers the insurance payout to the insured's bank account.

There's no need for the insured to file a claim or for the insurer to process it, saving time and enhancing customer satisfaction.

Are There Roadblocks?
Of course it’s not all rainbows and unicorns. As with any emerging technology, smart contracts have their share of challenges. Interoperability between different blockchain platforms, scalability issues, and the need for a legal framework to govern smart contracts are all real concerns. But these challenges are hardly anything new given the rapid technological advances made since the dawn of the Internet.

The Future Beckons
Even with these roadblocks, the potential for smart contracts to revolutionise business processes is immense. As they become more mainstream, their impact will only grow, and businesses that fail to adapt might find themselves the way of the dodo or, you know, the floppy disk.

In the end, the world of technology is a thrilling rollercoaster ride. It's up to us to buckle up and enjoy the twists and turns, and smart contracts represent one of the most exhilarating loops on the track. So, embrace the momentum, and watch as your business process hurdles are smoothly ironed out by these digital wonders.

Don't get left behind in the dust; get onboard the smart contracts train and automate your way to a streamlined future. Trust me, it's a ride you don't want to miss.

 

About the author

Rowan Schaaf

Rowan heads up client engagement and strategy at Pattern. With over three decades of experience in the technology sector, he has worked with a range of organisations from startups to some of the world's biggest brands.

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