Future of business & trade hinges on smart contracts - Shubho Pramanik, Senior Vice President, Applied Cloud Computing
Contracts are the bedrock of any business. As global
trade becomes much more integrated with the supply chain being distributed over
the globe, contracts have seen a lot of changes over the years. Written or oral
contracts have been replaced with digital contracts that not only transcend
distance but also are compliant with both domestic and international laws.
Digital contracts overcome the lacunae seen in written contracts such as
time-consuming processes, prone to loopholes, subject to simple spelling mistakes
apart from being inferred in unintended ways. However, digital contracts also
have their own set of limitations. Parties to the contract with malafide intent
can tamper with the contract. Similarly, there are instances of signature fraud
and other irregularities also seen on several occasions. Against this backdrop,
the smart contract has emerged as the panacea to these problems. Therefore,
customers & enterprises are increasingly leveraging the power of smart
contracts to conduct various financial transactions, supply chain &
logistics management, along with using it in healthcare, real estate, retail,
and international trade among others. Given the rising adoption of smart
contracts, the market size for smart contracts is likely to reach $1.46 billion
in 2028 from $315 million in 2021.
Cloud-based smart contract leads the way:
Cloud technology has revolutionised the way contracts are
written and entered into. This technology has enabled parties to prepare and
sign a smart contract in a matter of minutes. Typically, in a smart contract,
the software programmes are coded in such a way that pre-defined terms and
conditions are pre-set in the smart contract. In simplistic terms- the “if,
then, and when” clause of a contract is programmed and as soon as the
conditions are met, the contract is executed automatically. So, these contracts
are self-executing in nature that become accessible to intended users across a
distributed cloud network. Here the power of automation is harnessed and the
enterprise saves a lot of time and cost by freeing up critical human resources
for other core functions of the company.
Smart Contracts work on the basic principle of getting
multiple tasks done simultaneously. Cloud technology enables such parallel
processing without any disruptions. Moreover, smart contracts have the highest
form of cybersecurity features. Firstly, digital signatures have been
emblazoned in smart contracts. With legally recognised digital signatures, the
parties to the contract are not only authenticated but also provide a robust
security guarantee. Serverless architecture is another feature of smart
contracts. It means there is no outside intervention in managing the system.
Also, the cloud provider manages the allocation of servers as per the usage of
the enterprise. Therefore, companies don’t have to invest large sums upfront.
They only have to pay as per their usage. This makes the investment very
affordable for enterprises without the hassles of making any long-term
financial commitment. With such customer-friendly features, the usage of smart
contracts is on a rise.
Benefits galore:
The COVID pandemic has proved to be a steep learning
curve for the world as people have learnt to adapt and adopt to innovations. As
smart contracts are faster, more efficient, and accurate; a lot of time and
cost are saved through automation. Moreover, smart contracts are immutable. So,
the terms of the contract are directly written into codes and shared across the
distributed, decentralised cloud network. It is very difficult to hack this
network given the high level of security. So, any cybersecurity breach becomes
a daunting task. Importantly, smart contracts are self-executing contracts
devoid of intermediaries leading to both time and cost savings.
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