In this blog, learn the importance of industry-wise defined smart contract standards for enterprise-scale adoption of blockchain solutions.
This article lets you understand how developers can set and maintain smart contract standards for smart contract development.
Smart contracts are self-executing agreements coded into lines of code on the blockchain. In the last few years, blockchain technology has undergone significant advancements. As a result, the technology has improved with enhanced efficiency and usability across diverse industry domains.
It is one of the reasons companies are developing custom blockchain smart contracts. Owing to this, governing bodies are failing to keep up with the ad hoc development happening. It has made the process of forming and using smart contract standards unclear, complex, and ambiguous.
Notably, without having smart contract standards in place, there is less chance of the technology’s large-scale enterprise-level adoption shortly.
Preferably, all stakeholders in an industry should contribute to the creation of smart contract standards. However, that’s not the situation in every case currently.
Key industry players siloed the development of smart contracts with no specific standard by which to operate. Thereby, companies might not experience the complete benefits of implementing blockchain solutions.
Check It Out: Blockchain Smart Contracts for Driving Business Innovation
Today, there’s a wide variety of smart contract protocols available as everyone is hell-bent to create their own. For example, companies leverage GS1 standards, the global standard for barcodes for supply chain operations. Users scan GS1 barcodes more than six billion times every day.
On the other hand, when we talk about blockchain solutions development, there are also plenty of proprietary standards in operation. For instance, Ethereum has smart contract standards for its ERC-20 and ERC-721.
However, it also has criteria in place for smart contracts applied between all its various ERC tokens. So, when everyone abides by their own rules, standards lose their inherent value.
Fundamentally, standards organize people or companies around a common understanding in a wider network. They lay the foundation for growth and cooperation.
For instance, a retail company delivers packages while using smart contracts to execute business operations. The delivery depends on the involvement of multiple parties, including retailers, logistics providers, and recipients.
When the retail company maps the package transfer, it has to write and execute necessary smart contracts. Here, the lack of industry standards for the supply chain will require creating separate smart contracts for every business process.
Eventually, it might lead to creating and executing hundreds of smart contracts, either relevant or irrelevant. Although it may work for one company in the short term, it’s not a scalable solution that enterprises need.
Explore | The Ins and Outs of Ethereum Smart Contract Development for Businesses
Currently, in the blockchain industry, businesses use numerous custom smart contracts, which have become an impediment to growth now.
The issue is that having no standards creates interoperability challenges. It is true in cases that seem simple, such as how companies share or store data. Otherwise, blockchain technology may deal with a problem similar to the current internet infrastructure with numerous cloud databases.
In traditional siloed cloud databases, the overall architecture depends on point-to-point integrations. Each company maintains data differently from other companies. It gives rise to "data normalization".
In this case, a blockchain solution will serve as the foundation for peer-to-peer messaging and data sharing. Additionally, it will enable data normalization (each party speaking the same language) as defined by the smart contract protocol.
One way to fix this issue is to create industry-wide rules by leveraging existing smart contact standards. Industries have set guidelines that they use for efficient operations.
Working by adhering to these existing parameters is fundamentally an appropriate medium for companies to implement blockchain solutions. The aim is to use an industry-created smart contract standard for the industry, to facilitate collaboration while maintaining competition.
It will take longer, but a smart contract is not everyone’s cup of tea. Constantly creating new smart contracts without proper vetting will eventually fail to stand the test of time. Put simply, growth and large-scale adoption will require a standardized system for contract execution between companies.
Also, Read | Exploring Applications of Smart Contracts in Businesses
If companies don’t start thinking about standards, they may get caught up in a situation where operability will suffer.
For example, two companies decide to collaborate while remaining competitive. So, when they use different standards, their systems won’t be able to exchange with each other. It will create a data monopoly situation, instead of complete decentralization.
To achieve complete decentralization, companies need to have consolidation and agreement, at least, initially.
Suggested Post: Adoption Value of Smart Contracts for Enterprises
It may seem effective where everyone creates different, proprietary smart contracts, iterates on them, and assess what works best. However, these initial rules will eventually create operability issues.
For large, enterprise-scale adoption, we must have industry-wise defined smart contract standards in place. So, rather than waiting to see which standards work overtime, technologists should create standards that work for each industry.
If you are interested in developing a smart contract-based solution, then skilled developers at Oodles can provide assistance. Contact us today to avail yourself of our services.
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