Integrating smart contracts into blockchain technology is one of this decade’s greatest innovations, but the best thing about this is that this technology is not only restricted to blockchain and cryptocurrencies. From decentralisation to revolutionising payment processes in several businesses, smart contracts’ perks are limitless. However, the focus has been on its crypto usability for too long, and many are forgetting how helpful it could be in other real-world scenarios. How do smart contracts come into play with businesses and retail transactions? Read on for all you need to know.
Smart Contracts and How They Work
To fully understand how smart contracts operate, we’ll start with a reference to traditional contracts. Contracts are documents, legally binding transactions, and are approved with predetermined conditions being met. However, in most cases, these contracts require an intermediary — someone to sign off on the agreement in a way that both parties approve of. To put it simply, parties A and B often need C, an intermediary, to witness the transaction. For smart contracts, the concept is the same, but the model of execution is different.
Smart contracts are self-executing programs that automatically carry out the actions programmed into a transaction. With this technology, nobody needs an intermediary. The transactions and agreements are approved as long as the predetermined conditions are met. Its relevance spans several sectors, including real estate, healthcare, mortgages, supply chain management and retail. Because this innovation is all about executing agreements, its value has exceeded blockchain usability. It is becoming a widely accepted concept in businesses and retail transactions. It’s quite understandable because there are a lot of positives to using this model in purchasing and delivering goods and services, especially since the transaction is automatic, irreversible, and doesn’t need third parties.
Smart Contracts in Retail Transactions
Faster and Direct Transactions
Traditional payment systems rely on banks or payment processors that can delay transactions and disrupt trade processes. In comparison to cryptosystems, the gap in terms of speed is wide. Ethereum, which is one of the biggest blockchains, can execute around 15 transactions per second (TPS). This is still considered relatively slow compared to some other blockchain networks. Solana, Near Protocol, and Stellar can all execute transactions at 1,077, 85.3, and 76.21 TPS. This goes to show just how fast smart contract transactions and crypto trading networks can be. Automation also contributes to this speed because real-time settlements can be made without intermediaries.
Enhanced Security and Fraud Prevention
Smart contract retail transactions can be safer for several reasons. For one, the transactions are immutable, which greater certainty. Also, the contracts only get approved when certain conditions are met, so all parties can rest assured that they will get what they want. The system also offers other perks that are great for security, like tamper-proof and permanent records, cryptographic encryption to secure customer data and lack of central control.
Transparency
At any point in time, all partners involved can view the terms and conditions and also follow up on the progress of the smart contract. The benefits can also extend to other aspects of retail, like inventory management, where smart contracts can be used to automate inventory updates and update processes using real-time data. The possible integration with IoT also makes this more plausible. Smart contracts can be integrated with Internet of Things devices to allow real-time data to trigger their execution. This approach is an excellent method to boost transparency and efficiency in other sales processes, such as logistics, manufacturing, and deliveries.
Cost Efficiency
Cryptocurrency transactions are a cheaper alternative when you factor in the cost of processing traditional payments and the various fees they impose. Often, traditional banks impose several charges, such as exchange rates in international transactions, service charges, and other hidden costs, that add up to high charges for use. For retail traders who ship goods across countries, this is an easy way to boycott conversion fees associated with cross-border transactions. Smart contract transactions can be cheaper as they allow for a lot of flexibility.
Some Major Setbacks
Although smart contracts for businesses have many positives, we also need to reiterate that cryptocurrencies are still a fairly new technology with a lot of room for improvement. Major challenges to look out for include price volatility when dealing with digital assets, regulatory concerns, restrictions in certain regions, and blockchain scalability.
The Future of Retail In Blockchain Tech
The blockchain industry offers a lot of innovative approaches to business transactions, and this is only the beginning. More functionalities are being discovered daily, and many of them could translate to improved efficiency for businesses. Smart contracts and crypto payments are only a start. With broader adoption, businesses will be able to explore better cross-border trade, automated processes and several other perks that can significantly impact their productivity.
