Firms bear the responsibility of creating benefit to the shareholders in form of profit. Firms that have supply chains have a need to guarantee supply chain excellence and ensure that all actions within the supply chain are completed and obligations are met. A traditional contract is a tool used to coordinate the supply chain by creating incentives between two or more parties to take action and honor obligations (G. Cachon, 2001, pp. 2.)
Smart contracts are computer programs within the blockchain. Programs can execute a variety of transactions from simple to relatively complex transactions. For example, these transactions could involve negotiations, specific rights and obligations (Szabo, 1997; Kolvart et al., 2016; Khan et al., 2021.)
According to Kshetri (2021, pp. 19-20), traditional contracts have three major deficiencies that smart contracts do not possess: lack of transparency, part or all of the application is controlled by a single entity, and lack of trust between the contracting parties. All above mentioned shortcomings can be addressed through blockchain-based smart contracts. Kshetri (2021, pp. 17-19) gives an example about how these flaws were met through smart contracts in rice farming. In this example he concludes that price premium was reached when using blockchain-based smart contract application. This was achieved through more transparent negotiations with clients (Kshetri, 2021, pp. 17-20.)
To fully distinguish the difference between smart and traditional contracts I will add Silas Nzuva’s (2019, pp. 71-73) list of smart contract advantages. He names five advantages that will benefit firms greatly: (i) accuracy, (ii) clear communication and transparency, (iii) speed and efficiency, (iv) security and, most of all, (v) cost reduction. (Nzuva, 2019, pp. 71-73.) While many of these benefits are mentioned elsewhere, cost reduction is obvious but not directly stated in every article and book.
Another example about accessing information is given by Waller et al. (2019, pp. 137). This example relates directly to the transparency challenge cited by Kshetri (2021, pp. 19-20). They write about a situation where one company must have multiple teams working in different locations around the world to ensure contracts with suppliers. Such a company could benefit greatly from smart contracts when employees are able to access to access information in real time and programs that quickly create contracts for them.
Rouhani and Deters (2019, pp. 50771-50775) write about practical applications for smart contracts utilization in six fields: healthcare, business process management, internet of things (IoT), digital identity, record keeping and voting, alongside with supply chain management.
In the healthcare sector, one example for how smart contracts can be used is remote patient monitoring (Griggs et al., 2018, pp. 130). Pintado et al. (2017, pp. 5) demonstrate on their study at University of Tartu how business processes such as loan assessment processes could be implemented within Caterpillar firm. Fernandez-Carames and Fraga-
Lamas (2018, pp. 32983) studied how smart contracts and blockchain in general could be implemented for IoT devices. IoT devices are a one way to gather data for blockchains and programs like smart contracts (Subramanian et al., 2020, pp. 2). Buccafurri et al. (2019, pp. 4-6) propose to associate digital identities with smart contracts on Ethereum- based blockchain and they have implemented this on practical level in their paper. When it comes to record keeping blockchain and smart contracts are built for it. One practical implementation suggestion is found from construction industry. There Building information modeling (BIM) gives smart contracts the data it needs to prove when e.g. payments are due or which work phases have been done. This helps especially with subcontractor coordination (Shojaei, 2019, pp. 523-524.) Voting is mentioned one of the last implementations by Rouhani and Deters (2019, pp. 50774). Their example bases on study executed by McCorry et al. (2017, pp. 357-375) where they presented privacy-pre- serving board-room voting system using smart contracts.