Smart contracts are still relatively immature. Given time, they will reach that maturity. But do we really have time to wait?
In order for blockchain to begin to fulfill its potential, it must become ubiquitous. And in order to achieve ubiquity, we need broad adoption from the enterprise market.
Notoriously slow to embrace new and emerging technologies, the enterprise market demands fitness-for-purpose before it adopts something new. Even a smaller-scale implementation in this market is a significant undertaking, with the kind of scale that can significantly advance the adoption of a new technology – provided it is successful.
We can’t wait for smart contracts to mature to the point where the enterprise is willing to adopt them – we need to proactively bring them to maturity now.
Here are the 4 key things we need to do:
The future of individual blockchains is yet to be decided. History tells us that early tech leaders do not always fulfill their promise over the long-term (for example, the Netscape browser, which lost market share first to Internet Explorer, which was later unseated by Chrome).
Conservative enterprise decision-makers don’t want to risk selecting a single chain just yet. With a sharp focus on the commercial value and use cases of smart contracts, the technology is largely a means to an end for them; why choose one chain that might limit future options?
Instead, the enterprise market wants the flexibility to create smart contracts that will enable them to transact with their industry and supplier networks wherever they are – and wherever they will be in several years’ time.
While past experience indicates that certain industries and use cases may eventually gravitate towards particular blockchains, providing a cross-chain environment from the start may fundamentally disrupt this behavior. Either way, it significantly de-risks smart contract projects for the enterprise.
To further de-risk smart contracts, the enterprise is likely to demand backward-compatibility for all transactions. As chains evolve and release new versions, most companies would find it valuable if transactions using the old software can continue to execute.
Without backwards compatibility, smart contracts that previously worked may simply stop working. But in the enterprise, the scale and value of the transactions mean that the impact could cost tens of billions of dollars, and bring industries to their knees. Think not tens, but tens of thousands of smart contracts; worth not hundreds, but hundreds of millions of dollars.
While proof-of-work has been the dominant consensus method for some time, business leaders have real concerns about its fitness for purpose.
Mining is perceived to be risky: it relies on the stability of a network of miners, whose actions and availability cannot be controlled or insured by anyone. It’s inefficient, using large volumes of processing power and energy; and it’s slow, taking up to an hour for a standard Bitcoin transaction to reach consensus. Smart contracts on Ethereum have their own problems, the most obvious of which is security – news of hacks and low standards for formal identity verification tools make it seem like a risky choice.
What does the enterprise market want? Firstly, a stable network to process transactions. It doesn’t necessarily want the responsibility of controlling this network, but it does want reassurances around the stability and performance of the network. Secondly, efficiency: with millions of transactions being processed, time and processing power consumed will add up quickly, so a means of reaching consensus that is fast and efficient is critical to keep business moving. Thirdly, it demands water-tight security to ensure that smart contracts are executed in the most secure manner possible, and only by appropriately verified parties.
One promising means of meeting the enterprise market’s needs is proof-of-stake, a consensus algorithm that relies on coin ownership to achieve distributed consensus. Others may well emerge as we continue to drive the acceleration of adoption.
without backwards compatibility, smart contracts that previously worked may simply stop working
Right now, each smart contract is created individually. While a few developers – and a very few companies – do openly share what they’ve learned, smart contract development is still largely a Wild West. Mistakes happen.
And in this Wild West, developers are working in parallel on smart contracts for similar or identical use cases. It’s wildly inefficient – even more so when you consider the chronic global shortage of blockchain developers.
From the enterprise market’s perspective, there is a serious need for standardization. What they’re really looking for is access to a suite of standard smart contracts that meet various common use cases on an industry basis. These can either be used as-is, or as a starting point for more complex use cases – a little like the pro forma old-school legal contracts.
In some use cases and industries, we anticipate demand for Master Contracts – off-chain agreements that use oracles and data feeds to interact with on-chain smart contracts.
Industry-standard templates would not only provide a solid starting point – it also gives the demanding enterprise market with peace of mind around the quality of the smart contracts they are using. Mistakes and bugs aren’t good for anyone’s smart contracts – but at enterprise scales, they can be disastrous.
Not only would this approach drive a standardized way of operating, but it would also drive serious efficiency. Even resource-rich enterprise companies balk the time and money involved in creating multiple new smart contracts from scratch; when the scale of the problem is enterprise-sized, we’re not talking about tens, but tens of thousands of smart contacts.
The enterprise market’s broad adoption of smart contracts is critical to fulfilling the true promise of blockchain. Rather than wait for smart contracts to naturally evolve to meet the significantly more demanding business needs of the enterprise, we have the opportunity to proactively develop them to meet these needs.
To do so requires significant collaboration – not only within the blockchain industry, but also with forward-thinking enterprises that are hungry for innovation. We need to take a wider view – what benefits the users of blockchain, benefits both industry and the technology as well.
It is only through close collaboration on joint infrastructures, processes and initiatives regarding smart contracts that we will be able to meet the needs of the vital enterprise market, and ensure their accelerated, broad adoption.