In the last few years, some companies have frequently begun using blockchain technology for their supply chains. This happened because of global trade inefficiencies. At the heart of this blockchain revolution lies the concept of smart contracts.
Shortly, smart contracts are electronic agreements with self-executing functionality. Certain conditions and all information are entered into them in advance, after which the contracts will be fully encoded and sent to the blockchain. This will ensure their transparency, immutability, and security. For supply chains of the industry, they are needed to optimize processes and improve supply logistics.
Unraveling the Smart Contract Phenomenon
Smart contract origins start with blockchain technology. Initially, blockchain was invented as the base technology for such a well-known cryptocurrency as Bitcoin. It was created in 2008 by a man named Satoshi Nakamoto. But after some time, people realized that blockchain technology has wider potential and goes beyond cryptocurrencies. Such conclusions laid the foundation for the creation of smart contracts.
Smart Contracts Characteristics and Principles
Let’s take a closer look at what smart contract characteristics and principles that smart contract has and what advantages it has over conventional methods of conducting transactions:
- Self-Executing Agreements. As you already know, smart contracts are digital agreements that execute themselves. This means that they are not on the paper pages of the contract, they are protected by code and can be considered fulfilled only after specific conditions and actions are fulfilled.
- Transparency. Such contracts are stored in a system that is similar to a ledger that is visible to all parties involved. This guarantee of transparency is that all parties can see the terms of the contracts, which take into account the risk of any misunderstandings or disputes.
- Immutability. Any data stored in the blockchain is permanent and cannot be changed. The impossibility of changing the terms of a smart contract reduces the possibility of fraudulent manipulations.
- Trustless Nature. Smart contracts, in addition to other advantages, act as an intermediary or trustee. They automatically ensure compliance with the agreed conditions, which simply cannot be changed or removed, since they are already recorded and sent to the blockchain.
- Security. Blockchain’s cryptographic protection makes smart contracts very secure. The data that any of them stores is very difficult for unauthorized access.
As you may have noticed, the characteristics and principles from this list come from the original blockchain principles. This is generally logical, since smart contracts are just a convenient shell for the blockchain, made for automating trade.
The Symbiosis of Smart Contracts and Modern Supply Chains
Let’s imagine the ideal integration of smart contracts with Supply Chains. Now we will figure out what it looks like on paper to make it clearer to you.
Currently, supply chain management requires many physical and legal intermediaries, which leads to unreasonably higher costs for global trade and a large window for fraud. In turn, smart contracts create a system in which everything receives the same minimum amount of trust, using the consensus protocol, offering a neutral field for resolving business issues.
Blockchain also allows any number of individuals to define a protocol that allows them to interact with each other in this decentralized system. The result of this process is an improvement in the procurement process, increased security of transaction security protocols, as well as transparent supply chains, cost reduction, efficiency boost, and confirmation of the origin of any product.
Smart Contract Technology Integration for Supply Chains
If you are interested in blockchain technology integration into your supply chain, then you need to find a special service specifically tailored to your needs. Here is a list of several possible blockchain platforms with smart contracts:
- Trakti. Trakti is a platform based on blockchain technology that optimizes the procurement process and contract management. This increases the transparency of your deals by recording them on a blockchain ledger, ensuring that every step of the supply chain can be verified and completed.
- IBM Food Trust. This IBM program is focused on the food industry and makes it possible to track the path of food from farm to table. Smart contracts in this case ensure transparency of the supply chain and their traceability.
- MediLedger. MediLedger is a blockchain-based platform developed for the unique purpose of monitoring the distribution of medication. The healthcare industry might greatly benefit from more transparency and safety that this technology provides.
You should also look for more interesting smart contract options that are suitable specifically for your system and cover your needs.
Smart Contracts Use Cases
The application of smart contracts extends to various industries, promising to simplify and expedite complex processes while reducing paperwork:
- Real Estate. Smart contracts simplify the process of transferring property or, for example, signing lease agreements and securing shared ownership, reducing paperwork and increasing the efficiency of any real estate transaction.
- Finance and Payments. Smart contracts will easily facilitate your automatic payment settlements, and will generally increase the accuracy and speed of financial transactions.
- Supply Chain Management. Smart contracts automate and track goods, reduce delays, and prevent fraud throughout the supply chain.
Smart contracts integration with modern supply chains enhances transparency and efficiency, making them indispensable for critical-thinking business owners. As they embrace these innovations, they can uncover hidden insights and opportunities, steering their operations toward a more automated and transparent future.