Crypto, blockchain, smart contracts- we hear a lot about these words, but what are their uses in the real world? At first, many were cynical about crypto and blockchain but in the last few years, this has changed. Governments, banks, and countries are using blockchain for a variety of reasons. But what about smart contracts, and how can companies use them to succeed?
What is a smart contract? How can I use it?
A smart contract is a digital contract that self-executes depending on pre-defined instructions and criteria. The developer writes contract terms into lines of code. As the user meets each term, the next step of the process occurs. The contract records each activity and stores it on a blockchain. This makes them both immutable and transparent.
Buying a house is a good example of smart contract usage. It would involve the buyer, seller, bank/mortgage provider, as well as other stakeholders. After the deposit has been paid, it can execute other steps of this process, such as presenting the contract, notifying the financier, releasing funds, and completing.
How is the market growing?
The industry of businesses using smart contracts on a blockchain is growing at a steady rate. The blockchain sector is worth $7 billion and is expected to grow to $39 billion by 2025. But within this, smart contracts account for over $200 million. Forecasts predict it will reach $300 million by the end of 2023 with a 32% growth rate between 2017 and 2023.
Europe is the most popular location and user of this technology, fuelled by ongoing digitalization and a demand for new and innovative technology. More and more companies are looking to integrate them to boost their competitiveness and streamline operations. North America’s smart contract industry has grown, closely followed by Asia and South America.
More than half of global businesses said they consider blockchain as a strategic priority, and 84% said they use it to a certain degree. A further 32% said they are in the process of developing blockchain solutions for their company. Deloitte found that 60% of North American company owners said they think smart contracts are valuable and highly important.
The rise of blockchain and a greater appreciation for smart contracts means that this industry will continue to grow. There is no room for cynicism anymore as business owners have finally understood the potential the technology has.
Their use in business
Smart contracts apply to any business process that requires actions on a step-by-step basis. For example:
- Real estate purchasing
- Identity services
- Media and communications
- Financial sector.
Smart contracts disrupted the financial industry due to widespread adoption in payments, accounting, and both internal and external processes. A great example is their use in facilitating cross-border payments and in matters of international trade, requiring the cooperation of multiple banks. Situations that require escrow and deposits are also suited to smart contracts. Payment providers are also using them for reducing counterfeits, streamlining KYC, and identifying customers.
Smart contracts are used in insurance to automate the claim process and resolve disputes with evidence. They are also automating trading on the stock, forex, and commodities market, and improving financial data management.
Last but not least, they have been integrated successfully into eCommerce companies. The contract manages the entire process from purchase to delivery.
The online gambling industry also uses them. Cryptocurrency is at home in the sector, but smart contracts can verify users, take bets, and manage payouts. A benefit in this sector is the security and transparency that they provide to users and operators.
Can smart contracts on blockchain be used in small businesses?
Yes, businesses of every size use them, especially small to medium-sized businesses. This is because they save the owner time, money, and resources and streamline many aspects of the business. The time-saving aspects of smart contracts are vast, but for small businesses, this can save having to employ another person during the startup period or until the business is more profitable. Furthermore, it increases transparency meaning the business is less likely to lose out from disputes, fraud, or other potentially costly issues.
Another benefit of these for small businesses is the way they speed up many processes. Automation leaves staff free to work in other areas such as marketing, business development, and building client relationships. Increased efficiency also translates into a benefit for customers, many of whom are also keen to work with companies that embrace emerging tech.
Get started with a smart contract-based business
Fast Offshore cannot write smart contracts for your startup, but we can help you set up your business and connect with the right people. For over 23 years, we’ve been working with entrepreneurs to incorporate companies, optimize tax structures, and payments. We have also helped our clients acquire applicable licenses and provide ongoing support. Through our experience in helping blockchain startups, we make the perfect sounding board for your plans and ideas.
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