The uses of Smart Contracts for Micro Businesses

Small and micro businesses are the backbone of economies. Most businesses in economies start as SMEs. In Africa, it is estimated that SMEs employ 47% of the workforce, and their output is 20% of the country's gross domestic product. Although SMEs are an essential part of the economy, they still face many challenges. SMEs struggle with bank loans: almost 30% of these businesses shut down due to lack of funding. Blockchain opens new opportunities to SMEs to solve existing problems and enable them to optimize their businesses to operate more efficiently. One method of optimizing business using blockchain is the use of smart contracts.

What are smart contracts?

Smart contracts are automated programs that can carry out the terms of any contract. Parties involved make a deal, put the details of the agreement into code and create a blockchain. When the deadline is reached, the blockchain will notify the supplier to send the product from the agreement. The blockchain will also release the payment for the supplier. This is all done automatically without the use of a third party. They can be used to lower costs of most financial transactions because the third party that would charge fees is removed from the transaction. 

How do smart contracts work?

Smart contracts are automated programs that run specific code that is programmed according to the specific terms of a contract. They use IF/THEN conditions to execute their tasks. The best way to explain how smart contracts work is with an example. An example of an IF/THEN condition is: IF a client sends a referral customer, THEN a code can be released for them to receive a discount on their next purchase. Another example is: IF a supplier delivers goods by a specified date, THEN release the supplier's payment. 

How are smart contracts used?

Blockchain has many uses. Its most common use is to transfer money and make payments. Transferring money through blockchain is the easiest and most cost effective solution, even more so when it comes to international payments. Blockchain and smart contracts, however, are not limited to money transactions.  They can be used to automate tasks to make business easier. Let’s take a look at Airbnb as an example of this. Smart contracts are an easy way to handle rentals. A blockchain connected lock can be used: once renters reach their destination and have met their contractual terms, the lock can unlock and allow the renters into the property. Another example of the use of smart contracts can be in manufacturing. Managers at manufacturing plants can make a code to automate how much material they order, when it is ordered, and when it will arrive. 

Are there any limitations? Are there any bad sides to using smart contracts?

Blockchain and smart contracts also have some disadvantages. One disadvantage is that there is no way to adjust a smart contract after it's been programmed into the blockchain. Although this is a safety feature to avoid fraudulent activity, it is also a disadvantage as there could have been an error with the contract terms that needs to be fixed. Another disadvantage is the high dependence on programmers and exposure to bugs. There are also weak legal regulations of smart contracts. 

How will it benefit my business?

There are many advantages to using smart contracts. They include being safe and secure, as blockchain uses enhanced security when it comes to the storage of personal information and data. Information is encrypted, anonymous, and resistant to hacking. They are cost effective, as cutting out middlemen in contracts saves small businesses time and money. Smart contracts can cut out expensive transactional fees and legal payments, which can hinder small businesses. Smart contracts are also time saving. By nature, automation of tasks results in time and energy being saved. Businesses also won't need to wait for weeks for the creation and exchange of documents, goods, and services. 


Smart Contracts and Crowded Cap  

Crowded Cap will implement smart contracts for crowdfunding micro businesses. For example, we will use smart contracts to collect funds for micro businesses and distribute these to the micro business once the funding target is reached. Smart contracts will also send money back to investors if the terms are not reached. We will also be implementing smart contracts with micro business consulting. check out the spark token smart contract here.


Comments

Post a Comment

Popular posts from this blog

What is crypto winter and why does it matter?

Image
Looking at the most recent crypto news, veterans within the space would say that we are in a crypto winter. The term is used fairly often, but what does it actually mean? Crypto winter refers to crypto prices falling and staying low for an extended period of time. Top cryptocurrencies like Bitcoin have dropped 55% over the last year to around $20,000 per coin. Ethereum (ETH) and other leading altcoins, such as Cardano (ADA) and Polygon (MATIC), have lost over 60% of their value since last year. What does this mean for companies? Companies like Coinbase, BlockFi, and Crypto.com have announced hiring freezes and staff cuts in order to cut back costs. Hiring freezes are normally a sign that an organization is trying to deal with an economic downturn. What does this mean for developers and startups? Developers and startups are at a remarkable point with blockchain technology. The technology has not been integrated into all parts of society and continues to be very early in the financ
Read more

Blockchain: what is it and what does it really mean for Micro business?

What is blockchain? Blockchain is a public electric ledger that is built around a peer to peer network that can be openly shared between users to create an unchangeable record of transactions. Each transaction is time stamped and linked to the previous transaction. Each transaction that is added becomes another block in the chain. Once a new block is entered, it can never be erased, which makes all the transitions verifiable and auditable. The security and chronological order of the blockchain are enforced with technology called cryptography.  How does blockchain work? With transactions of bitcoin on the blockchain network, the bitcoin wallet keeps a piece of data unknown, which is called a private key or seed. This key is used to sign off transactions and provide proof that the transaction came from the owner’s wallet. The key also prevents anyone from altering the transaction once it has been issued. The transactions are broadcast to the network and are confirmed through a process ca
Read more

Is peer to peer lending the future of investment banking?

  Over the years, peer to peer lending and fundraising has become more and more popular. Online platforms allow groups of people to pool small amounts of money together to raise funds for a specific cause. There is no limit with the peer to peer market and there are mutual benefits for all those involved.  Peer to peer services take place between two individuals directly without a third party intermediating. They occur on platforms that are decentralized and provide a vast number of services themselves such as: rating, screening, and payment processing. Peer to peer services can be as simple as buying and selling products.  It’s also called the sharing economy. Without a third party moderator, transactions may become unfair and services the provider is offering may be delivered at a lower quality than expected. This is why peer to peer platforms are necessary to facilitate these transactions and reduce the risk for both the seller and the buyer.  Platforms make revenue by making the bu
Read more