One clear area where smart contracts have potential is in cross-border purchases of finished goods or raw materials where no business relationship exists. Herstatt risk already applies due to the exchange rates with the foreign seller, although at a lower level of risk. Projecting accounts receivable into a distant country is problematic at best.
It’s worth elaborating on the post-Westphalian nature of cryptocurrencies for the purposes of this discussion. The Peace of Westphalia was a series of treaties signed in 1648 which formally ended both the 30 Years War and the 80 Years War, which were both Catholic vs Protestant wars and a war between the Roman Empire and a bunch of mostly Protestant nations.
Smart contracts are applications that will be impenetrable to most buyers and most actual sellers. Instead of putting your trust in Visa and Amazon, you are placing your trust in someone else entirely, the developer of the contract.
In a world where ordinary people can trade solar energy credits without batting an eye, you must be talking about bitcoin and cryptocurrency.
One of the purported advantages of smart contracts, including a third party such as a delivery organization in a contract, is actually an added complexity. Anything which involves multiplying parties to a contract increases its complexity, as is true with any solution to a problem. One of the original English formulations of Occam’s Razor was do not multiply entities without necessity.
The slow speed of transactions means that smart contracts aren’t particularly suitable for e-commerce applications right now. When you pay for something on iTunes, you receive access immediately.
Fresh off its victory in Sir Richard Branson’s 2018 Extreme Tech Challenge, the solar sharing startup Power Ledger launches new blockchain-crypto product.
Imagine a world where every purchase has an associated carbon price, which is offset by REDD+ projects. Each tonne of carbon saved through REDD+ projects could be registered on the blockchain, and tracked by people offsetting their purchases. The technology could in theory, remove the complexities associated with polycentric governance, and allow forest owners to claim a larger share of the benefit for protecting their forests, by interacting peer-to-peer with the consumers making purchases.
Time value of money is another issue with smart contracts. Escrow is fine and dandy, but it’s not used on all that many contracts compared to net 30 terms. Some of this is due to the fees being high, which smart contracts reduce substantially. But time value of money is another big reason.
EWF appears to be positioning itself wisely and carefully in the emerging blockchain-for-energy space. It’s not trying to boil the ocean, it’s aligning itself with the regulated marketplace for electricity and it’s partnering with serious organizations.
