You can define programmable money as money in its digital form that you can program to follow an intrinsic logic for a predefined purpose based on the attributes of the digital money itself. This concept appeared first in 2009 with the development of Bitcoin, the first clear example of programmable money.
There are currently thousands of cryptocurrencies that can be programmed to carry out transactions using smart contract technology. Also, you can program stablecoins, for instance, to pay out your company employees at the end of the month using smart contracts, which is the technology behind programmable money.
What are smart contracts?
Smart contracts refer to computer protocols that make it easier to verify, control, or carry out a contract digitally. Because smart contracts run on the blockchain, which handles all of the contract’s transactions, there is no need for an intermediary to carry out the transactions.
Unlike traditional contracts, which specify rules and penalties for an agreement, smart contracts define and enforce those rules and penalties without the need for human intervention. Smart contract companies can build these contracts to be implemented in groups and individually.
The basic building blocks of a smart contract are referred to as objects. Signatories, the parties who need to approve or disapprove the contractual terms, the subject of agreement or contract, and specific terms are the three main components of a smart contract.
First, look at the best qualities of smart contracts that may help provide more benefits to your business compared to traditional contracts:
- Improved Security: You need to have a trusted third party to facilitate the transaction for purchases made with credit or debit cards. This is not the case with blockchain transactions. You can therefore reduce incidences of data theft and fraudulent transactions. In addition, because transactions are final and irreversible, there is no risk of chargebacks or canceled transactions, which are two other common ways fraud is accomplished.
- Enhanced Transparency: The transactions made by smart contracts can be verified by anyone who has access to the public blockchain.
- Autonomy: Smart contracts are self-executing, and therefore third parties and intermediaries won’t be able to manipulate them. This can make transactions easier and safer, especially in international deals.
- Lowered costs: You can make automated payments without the need for multiple intermediaries, thanks to smart contracts. This aspect significantly reduces costs by eliminating the need for these third-party fees.
- Speed and Accuracy: Automating transactions can save you a lot of time you would have otherwise used on traditional contracts. Automated calculations also eliminate human error.
How programmable money powers businesses
Built on various platforms such as the bitcoin contract, smart contracts can benefit businesses by enhancing security and increasing efficiency through automation. Programmable money also has the potential to increase consumer confidence. Relationships are based on trust, and trust is the foundation of business. There is a lot of potential for businesses to benefit from trust-building technology. Here are a few ways you can use smart contracts.
Improving payroll services
The work system is shifting to having employees in different geographical locations, so the structure of wages is also shifting. If you have more than a few thousand employees, smart contracts can help you automate payroll. You can program smart contracts so that you can instantly pay your employees on an hourly basis while also receiving a monthly salary, bonus, or commission.
Better provision of escrow services
Currently, escrow is required for large transactions such as real estate purchases or trade deals to hold funds while a sale is taking place. It’s may also be effectively used when hiring freelancers. You can program a hyperledger smart contract to hold the money and automatically release it to the seller or freelancer once every party observes their obligation.
Easier global funds transfer
You can make low-cost and near-instantaneous settlement of global payments between two or more parties based on predetermined criteria across borders and time zones.
Paying dividends to investors
Profits are often distributed to shareholders on an annual or quarterly basis in publicly traded companies. This process can be automated using smart contracts, even if the stock is transferred to another party. This could reduce some of the barriers companies face when paying out investors if they were to implement the use of smart contracts.
Smart contracts are an excellent starting place if your business utilizes payroll, escrow, and global funds transfers. It’s also great if you want to future-proof your business, lower operating costs, and enhance security and transparency. Do your research and talk to a smart contract consulting and development company to know the options you have.