Blockchain based smart contract use cases in industry

Insights

Blockchain based smart contract use cases in industry

Applications that companies are piloting right now

Paper contracts can take weeks to travel around the globe, while digital documents are uncomfortably easy to forge. Is there a way to automate transactions to make them smoother, more efficient, and more secure for all parties? Leaders are looking at blockchain and smart contracts as a viable solution.

What are blockchain based smart contracts?

Smart contracts represent a next step in the progression of blockchains from a financial transaction protocol to an all-purpose utility. They are pieces of software, not contracts in the legal sense, that extend blockchains’ utility from simply keeping a record of financial transaction entries to automatically implementing terms of multiparty agreements. Smart contracts are executed by a computer network that uses consensus protocols to agree upon the sequence of actions resulting from the contract’s code. The result is a method by which parties can agree upon terms and trust that they will be executed automatically, with reduced risk of error or manipulation.

Technology leaders envision many applications for blockchain based smart contracts, from validating loan eligibility to executing transfer pricing agreements between subsidiaries. Importantly, before blockchain this type of smart contract was impossible because parties to an agreement of this sort would maintain separate databases. With a shared database running a blockchain protocol, the smart contracts auto-execute, and all parties validate the outcome instantaneously and without need for a third-party intermediary.

But when should companies employ blockchain enabled smart contracts rather than existing technology? They can be a worthwhile option where frequent transactions occur among a network of parties, and manual or duplicative tasks are performed by counterparties for each transaction. The blockchain acts as a shared database to provide a secure, single source of truth, and smart contracts automate approvals, calculations, and other transacting activities that are prone to lag and error.
 

Blockchain based smart contract benefits

For a wide range of potential applications, blockchain based smart contracts could offer a number of benefits:

  1. Speed and real-time updates. Because smart contracts use software code to automate tasks that are typically accomplished through manual means, they can increase the speed of a wide variety of business processes.
  2. Accuracy. Automated transactions are not only faster but less prone to manual error.
  3. Lower execution risk. The decentralized process of execution virtually eliminates the risk of manipulation, nonperformance, or errors, since execution is managed automatically by the network rather than an individual party.
  4. Fewer intermediaries. Smart contracts can reduce or eliminate reliance on third-party intermediaries that provide “trust” services such as escrow between counterparties.
  5. Lower cost. New processes enabled by smart contracts require less human intervention and fewer intermediaries and will therefore reduce costs.
  6. New business or operational models. Because smart contracts provide a low-cost way of ensuring that the transactions are reliably performed as agreed upon, they will enable new kinds of businesses, from peer-to-peer renewable energy trading to automated access to vehicles and storage units.
     

Blockchain based smart contract use cases in industry

To determine high-impact areas of potential, Deloitte’s analysis of smart contract use cases considered a number of factors, including: a sizable market opportunity; the presence of active, relatively well-funded start-ups targeting the opportunity; the participation of prominent investors; technical feasibility and ease of implementation; and evidence of multiple pilots or adoption by corporations. The lowest-hanging fruits today are applications in which contracts are narrow, objective, and mechanical, with straightforward clauses and clearly defined outcomes.

We have identified a range of applications - ranging from smart health records to pay-asyou-go insurance - that companies are piloting right now. Using the criteria above, two use cases stand out for their immediacy to market: trade clearing and settlement and supply chain and trade finance.

Download the report 'Upgrading blockchains: Smart contract use cases in industry' and read more about the use cases.
 

More information on blockchain technology?

Do you want more information on blockchain technology? Please contact Jacob Boersma via +31 (0)88 288 2069 or Jeroen Bulters via +31 (0)88 288 6380.

Blockchain based smart contract use cases in industry
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