A contract, an obligation where Part A does what Part B wants at a fairly agreed price, is in many ways the basis of a functioning human society. As proof of this, even King Hammurabi, who is considered the author of one of the world’s oldest laws, found it useful to codify the rules concerning the contractual relationship and the obligations between merchants and their agents.
If merchants in the time of the great ruler relied on their contracts for clay tablets, their colleagues increasingly relied on their contracts on the blockchain. They want to use smart contracts and decentralized applications (DApps) stored in the chain as an executable token that can be issued by any network user. Once an innovation brought by Ethereum, smart contracts now run hundreds of decentralized financial services (DeFi) where users rely on code instead of a central unit. While centralized entities can perform many of the same functions, DeFi is built on the idea that centralization increases supervision and inefficiency while decentralized services are more open, transparent and secure.
All of this works well in the corporate world. Every business process often involves a certain number of actions that the company performs over and over again. Sounds like a computer algorithm, right? The same goes for a contract, especially with its terms, which are easy to think of as a set of constants with “if-else” terms. An automated and self-executing contract greatly reduces operational uncertainty. By making it decentralized, companies maintain a balance of power by avoiding the need to rely on a central intermediary. This is perhaps the most important gift that blockchain gives to the business community.
Thus, it is not surprising that more and more companies are introducing smart contracts in the business world. The Watr Foundation, an institutional blockchain project, works to move merchandise along the chain, with smart contracts that handle most related transactions. ClearX uses smart contracts to help companies resolve complex agreements such as roaming disputes between operators. SEIF uses a similar logic for legal technology, and provides customers with a large number of templates to use. The momentum is there, and we will probably see more large companies using smart contracts.
About the topic: Blockchain technology can change the world not only with the help of cryptography
At first glance, cryptocurrency enthusiasts may see this as a promising trend. More companies using blockchain means more money and liquidity for the crypto ecosystem, and that means more fuel to travel to the moon, right? do not suck.
Build walls, not bridges
Imagine a future where organizations go through the chain and manage a whole set of smart contracts that now govern their daily interactions. This massive digital infrastructure relies on millions of data streams from automated production lines with sensors to smart deliveries that send updates on their location and status while everything is controlled, authenticated and paid for with little or no human intervention. Payments in foreign currency, of course, and the word “blockchain” are written all over the picture.
But here’s the first problem: no one said that any of the blockchains on which this works should be public. In any case, it makes sense for companies to choose only private and licensed blockchains that will be closed to ordinary investors and merchants. This kind of congestion would only destroy the party by introducing a speculative element into a system in which all the major players are actually interested in having a fixed value unit. Otherwise, it will be more difficult to work in this ecosystem. A public blockchain does not place any burden on the financing and maintenance of the participants, but companies at the company level will not be overwhelmed by it.
Stablecoin issuers should also not get excited about this picture. It is true that they are now in a much better position to secure all business-to-business relationships because they offer temporary stability, which is what businesses need. Those who managed to get into B2B blockchain projects at the moment can also make a good profit. In addition, they can be destroyed by Central Bank Digital Currency (CBDCs).
From a business point of view, CBDCs – perhaps a “wrapped” coin, ie an encapsulated bitcoin (wBTC) on the chain on the Ethereum network – are well suited for cross-chain payments, as they remove a large amount of associated uncertainties. With encryption. Besides being as stable as possible, fiat is rarely affected by any regulations.