A smart contract (SC) is a program (script) aimed at automating a business process. The code itself is replicated to several blockchain nodes, executed autonomously and synchronously on all nodes of the blockchain network. The members of the Boosty Labs team, a company that specializes in smart contracts development, discuss the role that smart contracts can play in the transformation of the logistics market.
How are smart contracts used in logistics companies
In essence, the blockchain environment provides security, safety and immutability in which the CS code is executed, and the CS itself is a trusted protocol for the execution of a business process. In logistics, smart contracts are used to:
- holding auctions among suppliers of goods and services in order to ensure the independent determination of the winner and record the results of the auction;
- control of information exchange with objects of the Internet of things (IoT) and response by sending a signal at the moment of violation of the parameters of the IoT object set in the SC;
- organization of electronic document management of transportation documents (an alternative to using digital signature technology to record each stage of the transportation process in the blockchain);
- carrying out settlements between the customer and the executor of the transportation upon the fact of its execution in strict accordance with the terms of payment under the contract;
- automation of information exchange and subsequent movement of stocks in supply chains.
What tasks are solved with the help of smart contracts
The value of a smart contract using blockchain technology lies in ensuring strict adherence to a given business process scheme, autonomy in the execution of the SC algorithm, transparency of operations and, as a result, the possibility of confirming the reliability of events.
Based on the features of the application, smart contracts allow you to solve the following tasks:
- building business processes without intermediaries, whose participants may have multidirectional tasks;
- ensuring the security and sustainability of the supply chains;
- ensuring transparency of transactions in the supply chain without the possibility of making unauthorized adjustments to the data;
- informing participants in logistics processes about the movement of goods and documents in supply chains.
Unresolved problems and limitations of using smart contracts in logistics
The use of SC is constrained by the development of the blockchain technology itself. It faces problems with scalability, rising transaction costs, and lack of speed on public blockchains like Bitcoin or Ethereum. To solve such problems, cross chain platforms are being developed (for example, Polkadot, Cosmos, Thepower), where you can create separate blockchains (they are also called parachains) that interact both with each other and with external networks.
Cross chain platforms solve the “sores” of public blockchain networks and make it possible to build business applications, such as, for example, Tradelens, ZIM, Provenance, Nyshex or Dilex Global.Business applications interact with the client both through the SC within the application and outside with other SCs from the network environment. This, in turn, creates the possibility of building a new Web 3.0, where routine logistics processes can be safely transferred to the control of the SC, which will work out the logic embedded in them around the clock offline.
How can the use of blockchain technologies in logistics develop in the future
Blockchain technologies are already partially used in logistics as part of private solutions for traceability in supply chains and international maritime transport.
In the short term, the transport industry may move towards blockchain applications in the following areas:
- auctions of resource suppliers (commodity auctions, auctions of freight rates for transportation, etc.);
- transmission of data of stages of delivery,
- automation of settlements between participants in supply chains;
- control and management of IoT objects (sensors, electronic seals, tracking systems);
- control and management of electronic document flow of transportation documents.
In the longer term, the use of blockchain technology is possible for:
- control of trucks with autopilots, data management for such transportation;
- control and management of multimodal transportation;
- electronic document management of transportation documents in one transportation by any means of transport.
