Smart contract as a replacement for the intermediary business model

MINISTRY OF EDUCATION AND SCIENCE OF RUSSIA

Saint-Petersburg STATE

Electrotechnical University (ETU)

Innovation Management department

REPORT

Discipline «Basics of Cyber-Physical systems management»

Topic: Smart contract as a replacement for the intermediary business model

Saint-Petersburg

2023

TASK

FOR THE REFERAT

SUMMARY

        This abstract delves into the paradigm shift brought by smart contracts, replacing traditional intermediaries with decentralized, automated systems. Exploring blockchain-based smart contracts, the study unveils substantial investments and widespread adoption. Objectives focus on efficiency gains, cost reduction, and streamlined processes. Smart contracts are dissected, detailing functionalities, roles, and benefits, including speed, accuracy, and cost efficiency. Use cases, such as trade settlement and supply chain documentation, exemplify their transformative impact. Adoption considerations cover critical factors, operational assessments, and integration challenges. Technological and business developments address scalability, privacy, emerging models, and legislative adaptations.

CONTENTS

1. Introduction        5

1.1 Background        5

2. Smart Contracts Overview        5

2.1 Definition and Functionality        5

2.2 Role in Blockchain Technology        6

2.3 Automation of Agreements        7

3. Challenges with Traditional Intermediaries        7

3.1 Limitations of Traditional Models        7

3.2 Issues: Delays, Costs, and Trust        8

4. Benefits of Smart Contracts        9

4.1 Speed and Real-Time Updates        9

4.2 Accuracy        9

4.3 Lower Execution Risk        10

4.4 Reduction of Intermediaries        10

4.5 Cost Efficiency        10

4.6 New Business Models        10

5. Use Cases        11

5.1 Trade Clearing and Settlement        11

5.2 Supply Chain and Trade Finance Documentation        11

5.3 Other High-Impact Areas        11

6. Considerations for Adoption        12

6.1 Factors for Business Leaders        12

6.2 Operations Evaluation        12

6.3 Integration Challenges        13

Conclusion        13

BIBLIOGRAPHICAL SOURCES        16

1. Introduction

1.1 Background

The proliferation of blockchain technology has introduced transformative possibilities for various industries. Among its advancements, blockchain-based smart contracts have emerged as self-executing code capable of automating the terms of agreements. Traditional business models often rely on intermediaries to facilitate transactions, leading to inefficiencies, delays, and increased costs. As blockchain technology matures, smart contracts present a compelling alternative to these intermediaries, offering a decentralized and automated approach to agreement execution.

The adoption of smart contracts has seen significant interest, as evidenced by the surge in venture capital deals and substantial investments in blockchain-related initiatives. This enthusiasm is driven by the potential to streamline processes currently scattered across databases and ERP systems. In this context, exploring the background of smart contracts unveils their evolution from a financial transaction protocol to a versatile utility, poised to revolutionize the business landscape.

As we delve into the subsequent sections, this abstract will examine the role of smart contracts in replacing traditional intermediary models, focusing on use cases such as trade clearing and settlement, supply chain, and trade finance documentation. Additionally, it will address the considerations and challenges businesses face in adopting this innovative technology, offering insights into the future landscape shaped by smart contracts.