Blockchain 101: What Are Smart Contracts and How Do They Benefit eCommerce?

The term "smart contract" might be confusing at first. Smart contracts are neither "smart" nor "contracts." They are automated computer programs that execute certain tasks once specific requirements are met. 

Smart contracts are similar to vending machines. If you want to buy a soda from a vending machine, you must insert a coin and select your product. Once the machine has received the order and the coin, it understands that it has to dispense a specific product. It does that automatically. If both requirements – the coin and the product selection – have not been met, the machine will not dispense any product. 

That is precisely how smart contracts work. They are simple "if-then" functions. That means they are not smart, as they simply execute a pre-determined code. If the code entails a mistake, the smart contract won't work properly. They are also not a contract, as they are not legally binding, at least not according to current legislation – things might change in the future. 

Smart contracts in eCommerce: Automating operational processes

What does all of that have to do with blockchain and eCommerce? Smart contracts are a way to automate processes. But they need data to function, for example, data that is being stored on a blockchain. 

On a blockchain-based eCommerce platform, a smart contract could work like this:

A customer orders a product on an eCommerce website. Once the product is selected, a smart contract automatically deducts the purchase price from the customer's digital currency wallet and places the money in an escrow wallet. All of that happens digitally, and all data, including the digital money, is stored on a blockchain. 

The smart contract then orders the seller to ship the product. Once completed, proof of shipment is uploaded onto the blockchain. The smart contract then automatically triggers and releases the payment from the escrow wallet to the seller's wallet. 

The result is a much faster, automated, and secure eCommerce transaction. It is also cheaper because it does not involve any manual processes and no credit card fees. 

Smart Contracts on Export Portal

Export Portal not only uses the above example to secure and automate the processes on our platform, but we use the “if-then” functions of smart contracts to automatically generate actual contracts, purchase orders, and invoices for our users. This way, communication gaps, time delays, and expensive lawyers are one less thing to think about. 

At Export Portal, we’re always looking for new ways to innovate and make the international trade process that much smoother for our users. Register for free today!