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Smart Contracts for Smart Businesses

In today’s digitized era where everything is “smart,” you shouldn’t be surprised that contracts are not the exception. In fact, they were among the very first smart objects. At least in theory.

 

In 1994, an American lawyer and computer scientist, Nick Szabo invented the idea of the smart contract. Although the concept was out there, smart contracts reached their full potential with the advance of blockchain technology.

 
 

The Blockchain

 

As the name suggests, the blockchain consists of many virtual “blocks” of untamperable data shared between a given number of people and stored on countless servers all over the world. (If you’re not entirely sure what the blockchain is, read our article Blockchain: What Small Businesses Need to Know.)

 
 

The Smart Contract

 
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Smart contracts are self-executing agreements stored in the blockchain. This means that once the parties make a deal about something (for example: ordering office supplies), they put the details of the agreement into computer code and create a blockchain.

 

When the deadline to fulfill the order is reached, the blockchain triggers a notification to the supplier who sends the supplies. Once the order arrives, the blockchain releases the payment to the supplier. This is all accomplished automatically (save for the actual shipping of the supplies) and without the services of an intermediary party (aka a lawyer).

 
 

The Advantages

 

Saving time and money

Since there is no need to rely on third parties, including brokers, lawyers, or other intermediaries, the whole process of creating a smart contract is quicker and cheaper than signing a traditional one.

 

Since there is no need to rely on third parties, including brokers, lawyers, or other intermediaries, the whole process of creating a smart contract is quicker and cheaper than signing a traditional one.

 

It’s really self-explanatory, but we need to mention that self-executing contracts are executed a lot faster than normal contracts. There’s no need to check calendars, keep track of appointments, remind people, or deal with any paperwork. Things happen automatically exactly when and how they are supposed to happen. This automation saves you a lot of time and headaches. Not to mention the myriad of fees you won’t have to pay to your lawyers.

 

Accessibility and trust

Since smart contracts are stored in shared ledgers on the blockchain, they’re always accessible. Every interaction generates a new block on the chain, which creates a transparent and easily manageable business relationship between the parties. Nobody can change existing blocks or add new ones without alerting everybody else who has access to the chain (say goodbye to sneaky one-sided contract modifications).

 

Nobody can change existing blocks or add new ones without alerting everybody else who has access to the chain

 

Safety and backup

The blockchain is currently the safest way to store digital data online. It’s impossible to tamper with, since it’s stored on multiple unknown servers at once, and is protected by encryptions. In addition, if you’ve shared the blockchain with people you trust, you have the security of “witnesses” backing up your claims.

 
 

The Drawbacks

 

Although smart contracts are definitely helpful for your small business, there are a few issues we need to mention.

 

Automatism

Yes, one of the main advantages of smart contracts is actually a disadvantage as well. What if something happens? What if your business had to pay a large sum unexpectedly and you can’t pay for your office supplies at the very moment they arrive? Compassion is not among the key features of any technology, and human interaction is sometimes valued over automatic processes, even if they take more time.

 

Human Error

This is rare, but it can still happen: the person creating the contract via computer code could make a mistake that affects the whole chain. Although every bug can be fixed eventually, it’s a problem nonetheless.

 

Legal Enforceability

 

The state of Arizona already acknowledged smart contracts as valid legal documents

 

Since smart contracts are pretty new (and lawyers don’t want to find themselves out of a job), they aren’t recognized in many parts of the world as legally binding. This means that some transactions that by law require the presence of a lawyer (for example, real estate closings in several US states) can’t be dealt with through smart contracts. This might change quite soon, though. In fact, the state of Arizona already acknowledged smart contracts as valid legal documents.

 
 

The Best Use of the Blockchain: Payments

 

Whether you decide to go for smart contracts or not, blockchain technology has many other advantages for your small business. Read our 9 Tips for Small Businesses on Using Blockchain to find out how you can make the most of the blockchain.

 

Since the technology was originally invented as a tool for cryptocurrency trading, it’s quite clear that payments and sending money is the most tried-and-true use of the blockchain. Transferring your money through the blockchain is the easiest and most cost-effective solution, especially in case of international transfers.

 

Veem is a next generation business-to-business payments platform, offering easy, no fee, and secure international transfers.

 

Veem uses a unique multi-rail technology that makes sure your payment travels through the most efficient channel. One of these channels is the blockchain.

 
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Since Veem cuts out the middlemen, there are no hidden costs or unforeseen delays. In addition, Veem offers favorable foreign exchange rates and charges no wire fees.

 

Sign up with Veem and enjoy the convenience of hassle-free international transfers.

 

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