If you’ve been following this series on blockchain, you now know blockchain’s disruption beyond bitcoin, how that disruption is affecting different industries, and how to get yourself ready for that cross-industry disruption. In the most recent article, you learned about smart contracts. Sm1art contracts, while interesting in theory, are even more fascinating in the context of their many real-world business applications.
Smart Contracts in Real Estate
Smart contracts can be applied in real estate. Suppose I rent an apartment. I will be required to return the landlord’s the digital entry key by a specified date. If the key doesn’t come on time, the blockchain will automatically release my deposit. If I send the key before the due date, then I automatically get my deposit back. This example illustrates the if-then premise that underlies smart contracts.
This can be leveraged for not only deposits, but also larger loans. In April 2017, coordinators of a blockchain project backed by the financial industry successfully demonstrated that distributed ledger technology can be used to syndicate, trade and make payments on leveraged loans. Although there was no actual transaction, the proof-of-concept showed how a back-office practice can be eliminated while reducing expenses in the loan market. The issue of reducing high attorney cost involved in reviewing loan docs when a loan price falls below par into distressed levels has been specifically addressed by the demo supporters. The demonstration also eased the efforts involved in determining who owns loans, which can be syndicated among hundreds of investors at the time of issuance and change hands regularly.
Smart Contracts in Supply Chains & Logistics
Smart contracts may be also used to track and verify where and how things are made. The supply chain is generally long and includes a lot of links. Each link has to be confirmed from the previous one, hold up its end of the contract and send the information further. It takes a lot of time and is unproductive, while with a smart contract each participant can see the progress and do the work in time. Smart contracts ensure transparency in the contract terms, and fraud protection. It can also provide shipments tracking.
For example, in January 2018, it was reported that a cargo of U.S. soybeans shipped to China has become the first fully fledged agricultural trade conducted using blockchain, participants. With this and other efforts it been shown that blockchain technology can be used successfully to conduct trade. This distributed ledger technology has enormous potential.
Smart Contracts in Management & Operations
Smart contracts may also be used in management and operations. Ordinarily, business operations have to endure a back-and-forth process while waiting for approvals and for internal or external issues to be resolved. A smart contract can streamline this process and prevent and discrepancies. The blockchain provides a single ledger as a source of trust and reduces problems in communication and workflow because it is accurate, transparent, and automated.
For example, in 2015, the Depository Trust & Clearing Corp. used a blockchain ledger to process more than $1.5 quadrillion worth of securities, representing 345 million transactions. In the process it streamlined the process and reduced errors. Spanish banking giant BBVA has successfully piloted a blockchain solution, built on the Wave platform. The pilot was carried out to automate the electronic submission of documents for an actual sale transaction between Mexico and Spain in a move to speed up the time required for sending, checking and authorizing cross-border trades. The trial saw the time taken for document verification reduced from 7-10 days to 2.5 hours without compromising safety.
Smart Contracts in Healthcare
Smart contracts even have potential applications in healthcare. Health records could be encoded and stored on the blockchain with a private key which would grant access only to specific authorized individuals. Other parts of healthcare could be automated as well. For example, receipts of surgeries could be automatically sent to insurance providers as proof-of-delivery. It could also be used for other healthcare purposes such as for supervising drugs, regulation compliance, testing results, and managing healthcare supplies. Of course, this would be game changing for healthcare industry, which handles the transfer of sensitive data in large volumes daily.
To The Future of Smart Contracts!
As you probably can see from these examples, smart contracts may impact changes in certain industries, such as law. In the near future, lawyers may need to transfer, or at least be fluent, in both writing traditional contracts and producing standardized smart contract templates. It is not hard to imagine that the smart contracts may influence and become part of your legal practice eventually. Now that you know how smart contracts will affect your practice, the next article in this series will explore how you can stay on top of it all.
Olga V. Mack is an award-winning general counsel, operations professional, startup advisor, public speaker, adjunct professor at Berkeley Law, and entrepreneur. Olga founded the Women Serve on Boards movement that advocates for women to serve on corporate boards of Fortune 500 companies. Olga also co-founded SunLaw to prepare women in-house attorneys become general counsel and legal leaders and WISE to help women law firm partners become rainmakers. She embraces the current disruption to the legal profession. Olga loves this change and is dedicated to improving and shaping the future of law. She is convinced that the legal profession will emerge even stronger, more resilient, and inclusive than before. You can email Olga at email@example.com or follow her on Twitter @olgavmack.