Blockchain and blockchain-based Smart Contracts can be used successfully in very different areas. A few examples from quite complex industries and sectors will illustrate this practically.
Basically, it can be said that block chain is always useful when it comes to a self-validating documentation of transactions or contracts in a peer-to-peer network. The fields of application range from contract management for the supply chain, the economic sectors from the financial industry to the automotive sector.
Block chain in management
The block chain not only provides a source of trust, but also eliminates confusion in communication and workflows. Simply because its structure makes the system so accurate, transparent and automated. Typically, business processes consist of multiple back and forth, while those involved in the process have to wait for approvals or for internal and external project participants to communicate with each other. A block chain ledger can optimize and accelerate this process. It also eliminates discrepancies that arise when a large number of parties are working independently, which can lead to cost-intensive legal processes and delays.
Block chain for supply chains
In the area of supply chains, smart contracts play a special role. Supply chains are often delayed by the fact that approvals have to pass through different places and channels, which in turn increases the risk of loss or fraud. A block-chain-based application can eliminate this risk by providing all parties involved with secure access to process the information intended for them and automating certain tasks, approvals and payments. Barclays Corporate Bank, for example, uses Smart Contracts to document changes in ownership and to automatically make payments to other financial institutions upon arrival of goods. Similar procedures are used in the commodities sector to map all steps of the value chain within a block chain based application: Starting with the trader, through the producer, supplier, and auditor, to the buyer. A self-contained, automated and transparent system can thus be created in a tamper-proof manner and the processes can be simplified.
Smart Contracts and Blockchain are also used in freight shipping: Normally, intermediaries or brokers are interposed at various points in a cargo ship supply chain to handle the processing. Eliminating these intermediaries by means of the principle described above not only reduces the administrative effort but also the costs. This may only be a few euros per container, but with the hundreds of millions of containers shipped each year, it is a massive saving.
Block Chains in the Health Sector
In the health sector, Blockchain could be used to store personal health data in encrypted form, whereby the respective user receives a personal key with which he can grant doctors and hospitals access to the necessary health data if required. The same principle could also be used in medical research to store data securely and confidentially in accordance with existing laws and data protection regulations. For example, documents about treatments and operations can also be stored securely in the block chain and sent to the appropriate insurance companies. A ledger can also be used for general health management, such as drug monitoring, compliance with regulations, testing of results and management of supplies.
Blockchain in the automotive industry
The automotive industry is often quite open to technological changes. This includes blockchain technology, which can offer car manufacturers a whole range of advantages. This is especially true for the future and the idea of autonomous, self-propelled cars, where smart contracts can help to clarify the question of guilt in accidents, for example: the sensor in automatic mode or the driver who drove himself – all of this is stored in the blockchain. Transparency can also be established in this way about the authenticity of spare parts, or the mileage can be synchronized regularly so that used car buyers or leasing companies and insurers are protected against misuse. They could also use data stored in the block chain to adjust the rates to the driving behaviour of the insured, for example, when, where and how often a vehicle is used.
To make this even more vivid: Imagine the automotive industry of the future, in which many, often autonomous devices will have to communicate with each other. That means they need a common, secure and quickly accessible database. A shared ledger of parts manufacturers, car salespeople, mechanics, insurers, and others can ensure that parts or equipment within a car itself realizes that something needs to be replaced and notifies the driver or even orders spare parts, negotiates repair costs, or authenticates the mechanic. In this way, automatic payment can also be arranged once the relevant work has been completed. Renault now uses a block chain as a shared ledger to record all car repairs and the maintenance history transparently and tamper-proof.
Another possibility is to use the block chain for payment: Teslas has come up with the idea of having them pay automatically when they drive through a toll station: The car and customs station are equipped with nodes that use Smart Contracts to trigger a transaction from machine to machine.
Similar to the financial sector, the block chain can also be used in the automotive sector for financing contracts when buying a car or for proof of identity when purchasing. It would also make it easier to sell and buy cars if the ownership titles were stored in a block chain ledger accessible to all, or even make renting easier.
In the insurance sector, Deloitte, an international service company with services in the areas of auditing, risk advisory, tax advice, financial advisory and consulting, recently developed a proof of concept for a life insurance product, which is recorded in a smart contract based on block chain technology. In fact, the insurance sector is one of the areas for which self-fulfilling Smart Contracts are particularly suitable, as the conditions under which payments are due can often be defined quite clearly in advance in the insurance policy.
Block chaining in the financial sector
Blockchain technology is already of particular interest in the financial sector: Both in the area of smart contracts, which automate many transactions and force contracting parties to meet their obligations, and for stock trading and identity management, for example online. Users can then decide for themselves how they want to identify themselves and who should be informed. Many in the field have already roughly dealt with the concept of cryptocurrency and Bitcoin, which are based on block chain technology. But there are other areas, such as payment across national borders. This has often been a slow and costly process in the past. Blockchain can be used to simplify and speed up this process, while significantly reducing costs. The same applies to stock trading, where blockchain can not only shorten the settlement process, but also increase accuracy, since data is stored unchangeably and securely in the blockchain. And last but not least, the block chain can also be used for rewards programs, as transactions are transparent and traceable.
To go into some aspects in more detail: Identity management based on the block chain allows users to determine themselves how they want to identify themselves and who is informed. They still have to register their identity in the block chain, but afterwards they can use this identification for any number of services and applications.
Online identity management has always been a time-consuming and cost-intensive process. Initially, users have to register online, but according to the law, especially for loans, it is not sufficient to simply fill out an online form. Additional proof of identity must be provided. For example, customers must present their identity card at the bank branch or at least send a copy by post. The same applies in the insurance sector. Once this has been done, users need a way to authenticate themselves securely, for example when logging on to a website. There are many different ways to do this, from simple password encryption to passport keys that are sent to the user’s mobile phone when they log on. Last but not least, there is still the question of data security, because identity management also means that a lot of personal data is stored by the respective providers.
Blockchain has a decisive advantage here: it excludes middlemen and gives every party involved in the process with network access a non-forgeable and verifiable source of truth, a unique proof of identity. Users can determine how they want to identify themselves and with whom they share their identity. They still have to register so that the verified data is stored in the block chain – but only once and not separately for each individual provider. They can simply grant them access to the once verified identity stored in the block chain – without having to go through the time-consuming registration process again to prove their identity. Innovative start-ups in particular are currently working on corresponding block chain applications.
In the financial sector, among others, the block chain is reforming another service area, namely loyalty and rewards programs for employees, for example. These only function as incentives if they are actually implemented. This can be done automatically by the block chain. Just think – as a simplified example – of contracts between banks and customers: If an employee’s contract of employment stipulates that he or she will receive a bonus as soon as a certain number of new contracts are signed, a smart contract in the block chain and a digital workstation enable the system itself to track the number of new contracts and automatically initiate a payment or reward to the employee when the agreed number is reached. This allows direct feedback, around the clock. However, these rewards can also be given for much simpler tasks, such as completing a form on time, exchanging knowledge or attending a training course. Such block-chain-based programs are already in use.
However, the examples mentioned here are only a small selection of possible application areas for block chain and smart contracts. Blockchain technology and the possibilities it offers will expand even more in the future.