What is the role of smart contracts in industry?
In the era of the Smart Factory and Industry 4.0, digital security is a primary challenge. Today’s industrial control systems often encounter a variety of issues that put production data and instructions at risk.
Therefore, we have a need for up-to-date solutions which implement enterprise security and make systems tamper-proof. One of the latest are smart contracts. Let’s see why.
What are smart contracts and how do they work?
A smart contract is “an automated, executable agreement that references intelligent software.” It is an informatic protocol used to formalize and translate the elements of a contractual relationship into a cryptographic code. Its objective is in fact to facilitate, verify or impose the respect and execution of the terms of the contract.
Typically, we talk about smart contracts in the context of the blockchain. Their use serves to automate the execution of an agreement so that all parties involved can be sure of the outcome in real time, without involving intermediaries and without wasting time resources. In addition, they can automate a workflow as well, triggering the next action when conditions are met.
How do smart contracts work? First, the terms of the contract are defined. Once finalized, they are translated into programming code, which is then stored in the blockchain network and replicated among the participants. At this point the code is executed by all the computers in the network and, when the terms are met and verified, the related transaction is executed.
Smart contract execution can involve providing services, exchanging money, unlocking content protected by digital rights management, or other types of data manipulation, and much more.
Smart contracts: the advantages in the blockchain
They function as a certification of data or products authenticity
Production data is vulnerable to attack and tampering. For example, tampering with product performance data during quality inspection. Or the counterfeiting of products (such as NTF). Since all participants have the same information at the same time, the risk of forgery or tampering is minimized. This level of transparency guarantees security to the parties, making the contracts impregnable and immune from alterations.
They reduce costs
Smart contracts eliminate the use of intermediaries. You no longer need to rely on third parties to verify the terms of the contract and provide the necessary trust. Thus, associated transaction costs such as brokerage, arbitration and enforcement fees are reduced – or disappear altogether.
Smart contracts can be used to strengthen privacy protection. For example, facilitating the selective release of privacy-protected data to satisfy a specific request.
Greater range and speed
Removing the need for trusted third parties and human intervention in the process is not just a solution to cut transaction costs. Autorun also gives more autonomy to the parties and speeds up the process.