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smart contracts
and the IoT

Author: Shane Schick

Business and legal agreements of various kinds are a critical part of running almost any organization, but they can be complex and time-consuming to execute. Blockchain smart contracts represent one of the most promising ways to simplify and streamline this process while ensuring all the data involved remains secure.

Blockchain is commonly defined as a sort of decentralized digital ledger that makes it possible to record data in a way that can't be altered or tampered with. That makes it an ideal tool for contracts that involve multiple parties — whether that's between Internet-connected devices, a business and its suppliers or even its customers.

While blockchain can be applied in many ways and is best known for its use in managing cryptocurrencies, it can also offer great potential within the enterprise as smart contracts.

Blockchain for smart contracts

Unlike traditional agreements that require human beings to oversee every aspect of having them signed off and seen through, technology to support blockchain smart contracts allows an agreement to execute itself.

In other words, as long as the application involved recognizes that the terms and conditions of a contract have been met, it can verify the agreement has been completed.

That means companies using blockchain for smart contracts can automate the performance of agreements without relying on third parties (who may charge fees) to oversee agreements. Fewer intermediaries would also mean agreements can be executed more quickly. Plus, the automation involved can reduce the risk of errors that manual processes pose.

Best of all, blockchain smart contracts can provide peace of mind to organizations because all the data is encrypted and distributed across the entire blockchain ledger. Anyone who wants to steal or make unauthorized changes to an agreement would have to do so across an entire chain of blockchain nodes, which would be extremely difficult.

Smart contracts and IoT

Blockchain for smart contracts can become even more powerful when used in scenarios that involve the Internet of Things (IoT).

For example, IoT devices process a great deal of data. Smart contracts and IoT allow greater analysis of that data, creating a digital audit trail of the recorded metadata to ensure agreements meet compliance standards.

Blockchain smart contracts could also be used to let IoT devices validate themselves as they connect to a network, or to automatically enforce business rules such as authenticating users and transactions.

Blockchain smart contracts: Technology in action

One of the most immediate applications of blockchain for smart contracts may be in retail enterprises.

Think of all the products that retailers need their suppliers to send them in order to keep their shelves stocked. Unfortunately, it's not uncommon for shipments to go awry.

A supplier might manage to send products to some of the retailer's store locations, for instance, but a few could get missed. This may lead to vendor disputes that can be difficult to resolve.

By deploying IoT sensors on the items being shipped, retailers can use blockchain smart contracts to gain visibility into their supply chain and confirm which products arrived, which locations received them and when.

Meanwhile, in the food sector, keeping items frozen and fresh is vital for public health. Blockchain smart contracts can be used here to help manage the quality of food, which can be assessed based on data collected via IoT sensors that monitor it.

Similarly, the IoT can help to bring transparency into the transpiration of pharmaceuticals—for example, confirming the temperature, if drugs need to remain frozen. The terms of the smart contracts will only be met if the medications have been shipped properly, and the technology can offer greater accuracy than when human beings are tasked with the same work.

As more blockchain smart contract pilot projects get under way, other industries may identify similar opportunities. If you haven't talked to a managed service provider about how to harness the power of the IoT with blockchain and provide greater value across the enterprise, the time is now.

The author of this content is a paid contributor for Verizon.