“I’ll give you the property deed once you’ve given me the money!”
Trust, transparency, and security. These are the glues keeping society together for the last thousand years. Businesses and institutions such as banks, software giants, and brokers have made their profits providing intermediary services between multiple parties, ensuring transactions can be trusted and are accurate.
Through the advent of blockchain protocols and distributed ledger technologies, enterprises are now able to utilize applications that enable purpose-built decentralized consensus systems and create programmatic business/rules logic that can be reviewed by all applicable stakeholders.
What does this mean?
Enterprises can now interact with stakeholders such as customers, partners, and internal teams (to name a few) and conduct business in a way where they can transact directly with one another WITHOUT having to rely on third-parties (read: banks, software companies, broker-dealers) to validate or facilitate transactions.
By reducing the number of intermediaries involved and transacting through blockchain-powered infrastructure, businesses can experience immediate benefits in the form of reduced operating costs, improved operating speed, and access to higher quality data.
One of the most exciting functionalities made relevant and popular to businesses today by Ethereum is the idea of Smart Contracts.
We are now able to securely and transparently attach programmatic logic to transactions.
Some practical examples of this include:
- Supply Chains: Rendering of service / ‘proof of completion’ is automatically provided to the participant when the operator receives goods or services. Rates and services can be negotiated and agreed upon digitally and enforced through smart contracts. Supply chain activities and smart contracts are auditable, can be monitored, and promote operational efficiency.
- Fundraising: Companies are able to raise funds from investors and in exchange transfer security tokens (digital representation of shares) to verified parties instantaneously. The automatic swap of funds for digital shares are executed by smart contracts and recorded on the blockchain ledger.
Regulatory compliance such as trading, transfer, vesting, and dividends distribution are also handled and programmable through smart contract modules.
Using smart contracts to tokenize and trade assets enables real-time global exchange participation, helps negate illiquid asset discounts and promotes broader transparency in financial markets.
- Voting: Global stakeholders can vote on decisions remotely and instantly (i.e. dividend distributions) and programmatically execute the outcome(s). The voting smart contract formalizes governance rules — bylaws, governing statutes, rules of procedure, or articles of association of an organization — replacing day-to-day operational management with self-enforcing code.
- Data Management: The provenance of company and customer data never has to be questioned again. Enterprises are able to implement processes where KYC/AML (identity) requirements can be attested, verified and granted without human involvement, for example. This concept can be expanded to a magnitude of additional use-cases such as decentralized data access, data rights, data security, and much more.
Through smart contracts, every process, task, payment, and agreement can have a digital record and signature that can be identified, validated, stored, and shared.
These are only a few highly transferable use-cases for smart contracts and how they can transform business processes. By running smart contracts on blockchain protocols like Hyperledger, Ethereum, or R3, enterprises and their customers no longer need to rely on and trust another entity for the execution of terms or contracts.
Through smart contracts, every process, task, payment, and agreement can have a digital record and signature that can be identified, validated, stored, and shared. The value of this collected data will power decision making as we have never seen before.
Smart Contracts can be designed to be immutable and auditable, made viewable by all* stakeholders, automate the mapping of contractual obligations, and executed at high-throughput rates.
However, there are challenges associated with this as is usually the case with any new technology. But with industry education, and the understanding that the balance of power is shifting from enterprises to their end-users, the benefits to business and technology are enormous.
So the next time you want to sell that property to a buyer on the other side of the world, you can take the digitized deed to the property and attach it to a smart contract which is both visible and verifiable to the buyer.
Once they send the required amount of funds to the contract, ownership to the property will be transferred to their possession, secured and validated by the blockchain.
*Depending on the blockchain protocol used (i.e. permissioned versus permissionless), participants who can view and audit certain transactions on the network can be restricted.
Author — Pritom Paul, DLT Labs™
About the Author: Pritom is an experienced Business Analyst and Product Management professional. He has worked on delivering global enterprise products, FinTech transformations, and innovative blockchain solutions. He enjoys staying abreast of current technological advancements and helping clients solve challenging problems. He is a Toronto Raptors fan and classic car enthusiast.