Blockchain Smart Contracts: Addressing Implementation Challenges

This report explores the increasing adoption of blockchain smart contracts by businesses and governments, highlighting the management problems faced during implementation. It identifies gaps in current research, specifically the lack of studies on scalability, performance issues, and deployment on platforms other than Ethereum. The report emphasizes the potential of smart contracts to enhance efficiency and transparency in transactions while acknowledging the new set of management challenges that arise. It discusses blockchain technology, smart contracts, and their benefits, including speed, accuracy, trust, security, and cost savings. The report also acknowledges technological challenges related to performance and scalability, setting the stage for future research and development in this rapidly evolving field. Desklib provides this and other student contributed assignments to aid in learning.

THE RISE OF BLOCKCHAIN SMART
CONTRACTS
Authors
Dennie James. Nicholas Nwaokocha
Abstract
In the last few years, there has been a significant increase in businesses using
Blockchain technology. This has paved the way for a whole new industry and
has led to the creation of technologies like Blockchain Smart Contracts.
Governments and Companies have now started to adapt to Blockchain based
Smart Contracts and are planning on using this technology to exchange
money, property, shares, or anything of value in a transparent, conflict
freeway, while avoiding the services of a middleman. While this technology
provides a whole new level of efficiency and effectiveness, it also gives rise to a
new set of management problems which have not been studied enough.
This article examines the management problems faced by entrepreneurs while
implementing and using Blockchain Smart Contracts. The article will further
discuss the identified gaps which are the lack of studies on scalability and
performance issues, the lack of studies on deploying smart contracts on
different Blockchain platforms other than Ethereum. Researchers and students
will be able to get a basic foundation on management problems faced while
implementing Blockchain smart contracts, it will allow the researchers and
students to build upon the identified gaps and problems.
1. Introduction
The last decade can be characterized by the increased importance of
technologies in the modern business world as the method to enhance efficiency
and attain better results. Under these conditions, the topic of Blockchain smart
contracts acquired an outstanding significance as one of the ways to achieve
better performance.
The reason preconditioning the high relevance of the selected issue is its
disputable character and potential benefits that can be generated due to the
utilization of this technology. A smart contract is a special protocol that is
introduced with the primary aim to facilitate and enforce the process of
negotiation between parties and achieve a particular agreement that would
satisfy all agents (Alharby, & van Moorsel, 2017). There is the idea that this
innovation can help to reconsider the modern business world and introduce a
new environment. At the same time, there are multiple issues regarding the
security of transactions, the reliability of Blockchain smart contracts, and the
management challenges faced by entrepreneurs during the implementation of

this approach. The problem of utilization should be solved to ensure the further
development of the practice and its wide use.
The topicality of the issue preconditioned the emergence of multiple research
works devoted to its investigation. The main idea is that the Blockchain
technology can be a potent tool in facilitating the development of the business
world and improvement of the negotiation process by introducing new methods
and excluding third parties from the agreement (Alharby, & van Moorsel,
2017). However, there are also some risks related to the given problem such as
the loss of objectivity, technological fails, and problematic implementation
because of the lack of experience.
At the same time, there are also gaps in the research devoted to the issue. For
instance, the sphere lacks studies on scalability and performance issues which
promotes the emergence of particular problems. Moreover, there is no clear
understanding of how to deploy mart contracts on different Blockchain
platforms other than Ethernum (Alharby, & van Moorsel, 2017). In such a way,
there are multiple options for further investigation of the problem. It is critical
to answer the questions how the technologies can be implemented and what
solutions can be used.
Regarding the facts mentioned above, the paper suggests several main points.
First of all, the elimination of existing gaps in knowledge will help improve the
implementation process and attain better results. Second, the Blockchain
technology can be considered an appropriate tool to facilitate negotiation and
exchange process in the future. Third, a whole new level of efficiency and
effectiveness can be achieved but only if management problems are solved
(Hill, 2018).
The suggested article contributes to the improved understanding of the chosen
topic. It reveals the existing gaps in knowledge and tries to eliminate them by
discussing critical elements peculiar to Blockchain technology and its utilization
in the various spheres of business. Moreover, the work improves the
understanding of the ways how to implement innovations in the existing
environment.
The paper is organized to preserve a logic of narration. It starts with the
introduction that sets the ground for the discussion and emphasizes the main
ideas of the work. There is also the body that includes all basic assumptions
and cogitations. The theoretical framework for this discussion is created by
reviewing the credible and relevant literature. The central criteria for sources
selection were their ability to improve the understanding of the problem,
eliminate gaps in knowledge, and create the basis for the discussion. Finally,
the body part is followed by the conclusion summarizing the key points and
outlining the ways how the technology can be used.
2. Blockchain as the Foundation
Blockchain is a revolutionary technology that has opened a whole new world of
possibilities. Blockchain, which is based on the concept of decentralization has
allowed us develop many functions like data storage that is distributed,

anonymous transactions, smart contracts etc. Blockchain has not only enabled
new functions that were not possible before, but it has also allowed new
solutions to be implemented in existing problems (Michael & Butcher, 2016).
This section gives an overview of the Blockchain technology and discusses the
concept of decentralization as the core of the technology.
2.1 Blockchain and Smart Contracts
Blockchain has been talked about in literature since 1991 but the concept was
finally brought to life by Satoshi Nakamoto. Blockchain came to the spotlight
when Nakamoto introduced Bitcoin, a cryptocurrency based on the Blockchain
technology which embraced the idea of a decentralized economy. Bitcoin as a
cryptocurrency is a Blockchain based currency that uses a database that is
distributed across a network of computers so the transactions are secured from
any sort of fraud or error. Since the introduction of Bitcoin, there have been
several new cryptocurrencies that have popped up and now are worth
hundreds of billions of dollars. The most popular concepts in the decentralized
space are the proof of stake and proof of work.
Proof of work is a way in which the users are rewarded by completing complex
crypto calculations (Schrepel, 2018). These complex crypto calculations are the
reason that Blockchain based bitcoin is considered to be secure from Denial of
service attacks. When a transaction takes place, all the computers on the
network are expected to be in agreement so that the transaction can be
classified as a legit one. The other popular concept is proof of stake which
establishes who will be the creator of the next block in the process. The
algorithms that form the foundation are not perfect, however, they are
improving at an increasing rate, which means that practitioners are actively
finding ways to improve the technology by making the existing design better
and also increasing the decentralization in some cases (Wolfskehl, 2018).
Sometimes these changes lead to forking, which is one of the disadvantages
that practitioners are trying to fix.
Understanding Smart Contracts
Smart contracts are digital contracts which are based on complex algorithms
that allow them to be fulfilled once the preset conditions are met thus allowing
automatic execution. This smart contract technology has further evolved as
Blockchain technology has grown. It’s now at a stage where Blockchain based
smart contracts are paving the way of how contractual agreements will look
like in the near future. The technology is being welcomed with open arms by
governments and companies from all over the world. One of the major
advantages of smart contracts is that they eliminate the need for any middle
man which means that there is likely to be minimum human intervention in the
process, thus making the process more effective and efficient at the same
time. They also make the whole process automatic which allows the contract to
be executed in a conflict freeway and makes the process of exchanging any
property much smoother (Karamitsos et al, 2018).
The proponents of smart contracts believe that it will help in lowering the
transaction cost against what is being incurred in the traditional methods

where the third parties are engaged for the enforcement and the execution of
agreements (Luu et al, 2016). The traditional legal contracts’ enforcements
require that the presence of trust is there, legal entities are there, and others.
These are comparatively time consuming. On the other hand, smart contracts
does not require these challenges. In the smart contract, there are two aspects,
namely, smart contract code and smart legal contract (Stark, 2018). The
former is “stored, verified, and executed” on the Blockchain. The recording of
the program takes place on the Blockchain, it stores and transfers the amount,
and the execution of the codes take place by the Blockchain which means that
the execution can take place only in the written form and interference with its
operation is not possible. The smart contracts, in the financial or legal terms,
has entirely different definition. The smart legal contract is one use case of the
code. It can be used to complementing and replacing the legal contracts.
Smart contracts are not limited to particular business or industry. Though there
are several types of legal contracts in the world, however, only few of them can
be considered as idle candidates to fit the smart contracts. A particular legal
contracts can be from any discipline such as sale of houses and land, exchange
of intellectual properties, financial instruments, and small services at small
scale. The usage of smart contracts is gradually entering into the financial
sphere. Though it will be difficult to find the smart contract implementation for
the financial instruments, however, there are entities who are investing
resources to build in this aspect. The proponents of the Blockchain technology
are viewing huge possibilities in the future for the smart contracts. The smart
contracts are likely to complement or bring in new facilities in the contract
making (Omohundro, 2014).
Benefits of Smart Contracts
It is being considered that smart contracts bring in several benefits which is
stronger than the other methods of contract development. The speed and
accuracy can be considered as one of the major benefits. Unlike traditional
method, the automated and digital contract development can be done very
fast. This will save substantial amount of time of the entities engaged in the
contracting activities. Moreover, the correction and reconciliation of mistakes in
the contract can be easily rectified which is difficult in manually filled
documents (Savelyev, 2017). Another benefit of the smart contracts is the trust
factor. Smart contracts work based on the rules that are predefined and the
transactions take place on its own without human interventions such as signing
or filing which happens in the paper based contracts. Moreover, as the records
of the transactions are shown to the entities or individuals participating in the
process, there is less likely to be any opportunity where the questions can be
asked on the information present in the contract.
Moving further, smart contracts also provides enough security that is
impossible to breach with the existing technology in the market (Delmolino et
al, 2016). The encrypted recording of the transactions are very difficult to be
attacked by the hackers for their personal benefits. Considering the nature of
the Blockchain, where the records are attached with one another, and
alteration in one record will require that the entire record be updated. As
previously discussed, in addition to the security, speed, accuracy, and trust,
cost is the key benefit that can be gained by the entities.

Performance, Scalability, and Smart Contracts
Though there are good amount of positive hype around the usage of smart
contracts, however, at present the implementation of smart contract is likely to
hit the technological challenge. The use of public Blockchains are difficult
considering that the number of transactions processed per second are
relatively low and therefore the implementation at the global scale seems a far
story. However, there also exists permissioned blockchains (Scherer, 2017).
These kinds of blockchains are restricted in its form and cannot be used at
public scale. In this form of blockchains, only certain number of users define
the things that can be recorded in the blockchain. Though this is of the closed
form, but it has several benefits in comparison to the public blockchains. One
of the key benefit is that it allows the ability of splitting the network into
several segments. In this method, only certain number of nodes can be used
for the purpose of validating the transactions for the requested applications. In
addition, the validation of the nodes can be considered faithful.
The study conducted by Mattias Scherer (2017) compared the public and the
permissioned blockchain. The study led to the understanding that the
permissioned blockchains are comparatively better in the performance and can
be scaled at the desired scale in comparison to the public blockchain. The
author argues that if the financial sector wants to bring in improvement in the
performance and the scalability in the blockchain technology, then the usage of
permissioned blockchains can be facilitated. This blockchain method wards off
three key concerns in the blockchian sphere. They are security,
decentralization, and the scalability. The study further led to the finding that
with the reduction in the decentralization, the blockchain network can be made
more scalable and the performance can be improved significantly (Buterin,
2014).
Uncertainty, Complexity, and Smart Contracts
The usage of smart contract is likely to help the industries in reducing the
uncertainty and complexity. As previously stated, smart contracts will remove
the unnecessary intermediaries, and as a result reduction in the complexity
can be expected. The smart contract will act as the contractor and may
eliminate the layers of intermediate entities facilitating the contract. The smart
contract system can be handled successfully by the two parties for governing
and enforcing the contract. In addition, if the contracts are of multilateral
nature, then an entity can engage in handling of the recording of the
transactions (Catchlove, 2017). The third party can act transparently to facilitate
this transaction. As the information will stay public, therefore, there may not be
the opportunity of playing power games. Moreover, it brings in appreciable
level of efficiency in the process. Another benefit in terms of reduction of
complexity is that it may engage in the declaration of activities that are to be
completed by the contracting entities. As per the resolution of uncertainty is
concerned, the smart contracts system brings in more stability. The closed
billings and contracts in the traditional method assume a risk in cases of
business and customer relationship where there exists fear of ambiguity in the
contracts. The smart contract helps in the reduction of uncertainty among the
parties by keeping the information clearer to the parties.
A Decentralised Revolution

A full decentralization agreement needs to have complete distribution of
information amongst all the members in the network. Bitcoin achieved this
successfully through Blockchain and this allows all the transactions to be in
agreement and all this information is public. However, some consider privacy
to be an issue even though a strong encryption can effectively hide transaction
details (Macrinici et al, 2018).
Blockchain and Finance
Blockchain and smart contracts are a match made in heaven when it comes to
their applications in the fin tech industry. One of their applications with the
most potential can be seen in the Trading industry which currently involves a
lot of manual paperwork to fulfil the contractual process that happens the
behind the scenes. By using Blockchain based smart contracts, organisations
will be able to save huge amounts of money and not to mention the significant
increase in the efficiency there will be due to the lack of human error that is
usually involved in manual paperwork (Curran, 2018).
Blockchain can make contractual process between the companies in different
countries relatively straightforward by reducing the frictions usually present in
trade. Blockchain offers two major streams of solutions- 1. Better tracking of
shipped goods 2. Money exchange solutions (Huang et al, 2018).
Another major applications of Blockchain is providing trust in payments. Bitcoin
was one of the first innovations in this area. Ever since Bitcoin, the technology
has experienced an unprecedented rate of growth and now all the major
players in the financial industry are jumping on the bandwagon (Hsiao, 2017).
There are multiple other applications of Blockchain in finance, notably in the
money lending space. Smart contracts provide increased effectiveness and
efficiency by greatly reducing costs and making the process more accurate and
reliable (Zhao & Coffie, 2018).
Conclusion
The word Smart Contract has not always been linked to Blockchain. People
used to think of smart contracts as just a normal digital contract, but with the
rise of Blockchain technology, that has changed. Blockchain based smart
contracts have evolved to a stage where they now offer several benefits over
the standard digital contracts. The whole process of the finalising contract is
carried out digitally using complex computing methods by the Blockchain
technology. This contract exists in the form of complex code on the peer to
peer network which makes it almost impossible to destroy. Another one of the
advantages is that the contracts can be set up in a way that they will only be
executed as per the commands given to them on their set up. The applications
have been discussed in detail in the article and it is clear that wide scale
adoption of smart contracts is bound to happen in the near future.
The popularity of Smart Contracts using Blockchain technology has been
growing at a rapid pace. Several companies and governments have already
started adopting the technology and this has further given a boost to smart
contracts. The benefits of smart contracts are very clear at this stage and more

research is being done on how Blockchain based smart contracts can be
integrated in an organisation’s operations. There are management problems
that exist but are being researched and there is a lot research also being done
on the uses of Blockchain technology. In conclusion, Blockchain based smart
contracts are not just a thing of the future anymore, they are here and ready to
be enforced. The knowledge gained through this article can be utilized by the
readers in their further quest to understand the various aspects of smart
contracts.
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