What are smart contracts, and how can you work with them?

How we do business is continually evolving. Things like automation are becoming an ever-bigger part of how we work.

Yet, we still tend to overcomplicate things when there are easier ways to do something. Many of us remain wedded to ghastly email threads and do not realise how much time we are wasting sifting through trying to find the one line of relevance. We continue to use tools that create unstructured data and leave us facing a mountain of manual work and analysis.

When you challenge this, you hear “because that is the way we have always done things.” Is there a more disheartening phrase in the English language?!

Things do not have to be this way. Pivoting towards using things like smart contracts can revolutionise both your internal processes and the customer experience. Let us look closer at what using smart contracts means for your business.

What is a smart contract?

Smart contracts are a prime example of contract automation. Both the concept and term “smart contract” was introduced by cryptographer Nick Szabo in the 1990s. Szabo described smart contracts as "a set of promises, specified in digital form, including protocols within which the parties perform on these promises."

Vending machines are often given as an example of a smart contract. Let us think about how a vending machine works for a second. You choose your product, make the payment, and you get your Faxe Kondi. That is assuming everything works, and you do not need to shake the machine to get your drink!

Smart contracts work on an "If-Then" basis. Again, we'll use the vending machine to highlight this. We have outlined the process of a vending machine below:

• If – User selects the product they want.
• Then – Machine displays the price and asks for payment.
• If – User subsequently makes payment.
• Then – Product is provided.
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Easy, right? The complete process is automated, and the "contract" executes itself automatically. Millions of people around the world perform such a transaction every day without realising (and maybe caring!) they have used a type of smart contract.

If a vending machine is a smart contract, are other forms of self-service products the same?

Yes - but  the potential of smart contracts goes far beyond ensuring your customers can do everything themselves. Even boomers would not call a vending machine a piece of modern tech, so we need to look closer at how smart contracts are used in the 21st century.

Smart contracts and blockchain

Smart contracts are commonly associated with blockchain and cryptocurrency transactions. For example, in a Bitcoin transaction, the smart contract is essentially the computer program that you use to pay someone in Bitcoin and receive your goods.

In this context, smart contracts are OK if you want to buy things or trade Bitcoin or other cryptocurrencies. However, as cryptocurrencies are decentralised and unregulated, blue-chip companies are wary of involving themselves in such transactions and using smart contracts in this way.

While crypto continues to be in the news, the average guy on the street still does not have a clue about how they work or why smart contracts are relevant.

Smart contracts in a crypto/head-scratching sense can, thankfully, be differentiated from smart legal contracts. These allow you and your business to leverage the power of smart contracts and the same "If-Then" protocols without all the overcomplicated crypto nonsense.

Contractbook and smart contracts

This is where using Contractbook comes in, helping you leverage smart contracts without needing to rely on blockchain technology to make it happen in your business.

You still get all the benefits of a “traditional” smart contract, but you can understand what is happening and make decisions around how you wish to use them.

The key to making smart contracts work for your business is the use of structured data. You cannot just write up a contract in Google Docs and use it as a smart contract. At least, not without investing in AI-tools to analyse the data and conditions included in your contracts. Not only will these be expensive, but they might also recommend you restructure your contracts anyway! Instead of spending money to go back to square one, use the right platforms from the start to help you maximise your use of smart contracts.

Best of all, you do not need to do anything technical to create smart contracts and integrate them into your business processes.

Questionnaire-based contract creation means data is sorted, structured, and presented in such a way to facilitate use as a smart contract. You can then harness other apps and platforms to use dynamic "If-Then" protocols to get the outcomes you need from your smart contract usage.

There are no limits to how you can use smart contracts in this way, and you do not need to be a huge company to take advantage of such functionality, either. At Contractbook, one of our favourite customer stories is that of Dreivers, who were able to automate a significant portion of their workload. As a two-person, low-margin business, that is both a vital expense saving and valuable time the team can then spend elsewhere!

Check out our other customer stories and get inspired as to how smart contracts can help your business.

Using smart contracts to streamline your processes

If contracts play any role in your business, the chances are that you also have a process that can be automated. Smart contracts are your pathway to making this happen!

It is easy to get caught up in the technicalities of smart contracts, especially when considering their traditional use in a blockchain context. Do not let this scare you off! Smart contracts can be simple, no-nonsense, and revolutionary for your business processes.

Why spend time on repeat processes that are easy to do and can be automated through contract automation?

Harness smart contracts to do the job for you, and start feeling the benefits from day one!