Smart contracts are a type of computer protocol that facilitates, verifies, or enforces the negotiation or performance of a contract. Nick Szabo first presented the idea of smart contracts in 1996.
- The code and the agreements contained therein exist across a decentralized, peer-to-peer network and are enforced by the network of computers that run the code.
- They render transactions traceable, transparent, and irreversible.
- The best way to think of a smart contract is as a digital vending machine which is a piece of code that dispenses value when certain conditions are met.
What is IoT?
IoT or the Internet of Things is the network of physical devices, vehicles, home appliances, and other items embedded with electronics, software, sensors, actuators, and connectivity which enables these objects to connect and exchange data.
- Blockchain is a distributed ledger technology that can be used to store data about IoT devices.
- By combining these technologies, it is possible to create a system in which IoT devices can interact with each other and with smart contracts on the blockchain.
- For example, a smart contract could be set up to automatically buy or sell a product when a certain temperature is reached.
Role of Smart Contracts in IoT
The use of smart contracts in IoT can help to streamline the way in which data is collected and processed. By using smart contracts, devices can be automatically configured to collect data and then process and store it in a secure, decentralized manner. This can help to reduce the need for manual data entry and processing, and can also help to ensure that data is more accurate and up-to-date. In addition, smart contracts can be used to automatically trigger actions based on the data that is collected, which can help to automate the management of IoT devices and networks. So, smart contracts play a vital role in IoT by providing a means of communication and interaction between devices, without the need for human intervention.
- No intermediary: By using smart contracts, devices can share data and information with each other, and carry out transactions without the need for a central authority.
- Efficient system: As there is no requirement for central authority it allows for a more decentralized and efficient system, as well as reducing the costs associated with traditional methods of data sharing and communication.
Examples:
- Supply chain management: A smart contract can be used to track the movement of goods through the supply chain, from the point of manufacture to the point of sale. The contract can automatically trigger payments when goods are delivered, and can also be used to track the location of the goods at each stage of the journey.
- Energy management: A smart contract can be used to automatically meter and bill for the consumption of energy, based on data collected from smart meters. The contract can also be used to manage the distribution of energy resources, by automatically releasing energy from storage when demand is high, and by automatically curtailing energy use when demand is low.
GPS-based IoT and Smart Contract
GPS-based IoT is a technology that uses GPS to track and manage devices.
- It can be used to track and manage anything from cars to livestock.
- Smart contracts are contracts that are written in code and stored on a blockchain. They can be used to automate transactions and enforce terms and conditions.
- GPS-based IoT can also be used to create smart contracts that automatically execute when certain conditions are met.
- Such as a contract could be set up to automatically release funds when a GPS-enabled device reaches a certain location.
- This could be used to pay for transportation, parking, or other services.
- For example, a smart contract could be created that would automatically release payment to a contractor when GPS data indicates that the contractor has arrived at the job site.
Use cases in Food Industry
In the food industry, smart contracts in IoT can be used to automatically track and manage food safety and quality control.
- For example, each time a batch of food is produced, a smart contract can be used to track the food’s progress through the supply chain, from farm to table. The contract can automatically record data such as the temperature and humidity of the food, as well as whether it has been exposed to any potentially harmful chemicals or bacteria. This data can then be used to ensure that the food is safe to eat and of the highest quality.
- Smart contracts in IoT can also be used to manage inventory and stock levels in the food industry. For example, smart contracts can be used to automatically reorder food items when stock levels are low or to track the expiration dates of food items. This data can help food businesses to keep their shelves stocked with fresh, safe, and high-quality food.
Use cases in Medical Industry
1. Secure and efficient data sharing between medical devices and electronic health records (EHRs): Smart contracts can be used to create a secure and efficient data-sharing infrastructure between medical devices and EHRs. By using smart contracts, each medical device would be able to securely share data with the EHRs of hospitals and clinics. This would allow for a more efficient and secure data-sharing infrastructure, as well as reduce the chances of data breaches.
2. Automated clinical trial management: Smart contracts can be used to automate the management of clinical trials. By using smart contracts, clinical trials can be automatically registered, patients can be recruited, and data can be collected and stored. This would allow for a more efficient and effective clinical trial management system, as well as reduce the cost and time needed to manage clinical trials.
3. Automated insurance claims processing: Smart contracts can be used to automate the processing of insurance claims. By using smart contracts, insurance claims can be automatically processed and payments can be made. This would allow for a more efficient and effective insurance claims processing system, as well as reduce the cost and time needed to process insurance claims.
4. Secure and efficient prescription management: Smart contracts can be used to create a secure and efficient prescription management system. By using smart contracts, prescriptions can be securely shared between doctors and pharmacies. This would allow for a more efficient and secure prescription management system, as well as reduce the chances of prescription errors.
Pros of Smart contracts in IoT
- Security: Smart contracts in IoT can help to enhance security by providing a means of verifying and enforcing the terms of contracts.
- Transparency: It can help to make the terms of contracts transparent and easy to understand.
- Efficiency: It can help to automate the execution of contracts, saving time and effort.
- Cost-effectiveness: It can help to reduce the costs associated with traditional contract negotiation and execution.
- Accuracy: It can help to ensure that the terms of contracts are accurately enforced.
- Flexibility: It can be designed to be flexible, allowing for modifications to be made as needed.
- Time-saving: It can help to save time by eliminating the need for traditional contract negotiation and execution.
- Reduced risk: It can help to reduce the risks associated with traditional contract negotiation and execution.
- Improved security: It can help to improve security by providing a means of verifying and enforcing the terms of contracts.
- Increased trust: It can help to increase trust between parties by providing a transparent and easy-to-understand means of enforcing the terms of contracts.
Cons of smart contracts in IoT
- Lack of standardization: There is no standardization of smart contracts in IoT, which means that each company or organization can create its own versions of smart contracts. This can lead to confusion and complexity when different devices from different manufacturers try to interact with each other.
- Limited computational power: The computational power of IoT devices is often limited, which can make it difficult to execute complex smart contracts. This can lead to errors and unexpected results.
- High costs: The costs of developing and deploying smart contracts can be high, which can make them impractical for many IoT applications.
- Scalability Issues: The scalability of smart contracts is often an issue, due to the limited computational power of IoT devices. This can make it difficult to execute large or complex smart contracts.
- Interoperability issues: Different IoT devices often use different protocols and standards, which can make it difficult for them to interact with each other. This can limit the usefulness of smart contracts.
- Regulatory uncertainty: The regulatory status of smart contracts is often uncertain, which can make it difficult to know how they will be treated by governments and other authorities.
- Legal risks: Smart contracts may not be legally binding in some jurisdictions, which could lead to problems if there is a dispute.