November 11th, 2018 | by Michael Barnard
Electrical utilities which own the generation and distribution network will love smart contracts. They get all of the advantages while purchasers get most of the disadvantages. They have guaranteed payment, no accounts receivable problems, and the contracts will be between only two entities, so they’ll be simple
November 10th, 2018 | by Michael Barnard
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
November 3rd, 2018 | by Michael Barnard
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
October 28th, 2018 | by Michael Barnard
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.
October 27th, 2018 | by Michael Barnard
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.
October 21st, 2018 | by Michael Barnard
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.
October 20th, 2018 | by Michael Barnard
Herstatt risk or settlement risk is the risk that a foreign exchange rate will change after a contract is locked in at a specified amount of a specified currency. Obviously this is a two-way risk, as if the exchange rate goes up, the buyer will pay more; and if the exchange rate goes down, the seller will receive less. The more volatile the currency and the longer the time until settlement, the greater the risk
October 13th, 2018 | by Michael Barnard
A smart contract that involves contracting a payment for services to be rendered or a product to be delivered involves three separate accounts: a purchaser, a seller, and an escrow account. Escrow is a means of creating trust in a contract where there is none. In an escrow situation, a third party holds something of value from the purchaser until a certain condition is met by the seller, at which time they deliver the thing of value to the purchaser
October 7th, 2018 | by Michael Barnard
A smart contract is a computer program that runs on blockchain. That means it runs on the distributed computers which choose to support blockchains. Smart contracts are arguably a subset of the more generalized term distributed applications, or dapps