The traditional paper-based sending and sharing of documents and the tiresome process of transferring, reviewing, and signing off on contracts has been a hindrance — allowing otherwise simple operational agreements to stretch out over the course of a few days. Smart contracts, without their reliance on third-parties, offer both a greater level of digitalisation and automation, allowing payouts to be resolved within a matter of seconds.
One area that would especially benefit from smart contracts is in programmatic advertising, where fraud is pervasive. According to cybersecurity firm Cheq, ad fraud will cost up to $30 billion in 2019 alone when accounting for indirect social and economic costs.
With blockchain, automation can go one step further, adding another layer of transparency and accountability to the digital supply chain. With smart contracts, settlements following campaigns can be automated based on contract parameters to ensure that only fraud-free, verified impressions are paid.
Decoding the fine print
When deployed on a decentralised blockchain, smart contracts add further benefits, as its code is immutable once distributed onto a network. In transactions that involve untrusted parties, fears of fraud or tampering can be mitigated, as a contract’s terms cannot be edited retroactively. Moreover, all transactions are transparently recorded on a distributed ledger, visible to all pertinent parties.
But beyond financial transactions and traditional contracts where parameters are fixed, what about situations where data sets are in flux? From financial markets to weather forecasts, these data sets fluctuate over periods of time and smart contracts strangely enough appear to be hamstrung by one of their value propositions––immutability.
What is the role of smart contracts in these scenarios? Middleware solutions, look to bridge the gap, by verifying the correctness and accuracy of the data as it is inputted into smart contracts. Initiatives in this area are on the rise, ranging from Cornell’s Town Crier, a “high-test bridge” that allows the Ethereum blockchain to interact with online data sources, to Chainlink, a decentralised network of oracles that allows smart contracts to query multiple data sources in the real world.
Within a largely data-driven environment, this flexibility is crucial. While many argue that the ultimate pitfall of smart contracts is their structural rigidity when it comes to the encoding of terms and conditions, the growing prominence of middleware optimisations appears to be the defining factor. As they allow for real-time flexibility, such advancements are the key to the inherent long-term utility of contract automation.
As good as it gets
Across businesses, eliminating the middleman is far from controversial.
Long touted as the natural consequence of business model innovation, increased emphasis on forging direct connections with one’s consumers and users has always been prized over seeking out intermediaries, and for the most part, the same can be said across the supply chain.
So long as they are designed well, smart contracts represent the next phase in automation. After all, a contract is only as good as its terms. As advancements in the area of middleware solutions continue, we can hope to see technological infrastructures that can allow for enhanced process streamlining while redefining business relationships.
Underscored by greater security and utility, smart contracts provide us with the necessary assurances we need today in a world powered by global, digital enterprises, big and small.