Smart contracts are ideal for tracking sustainability because they can use the immutability of blockchain for security and trustworthiness, while also allowing inputs from required sources to automate the process. Sensors existing on the Internet of Things allow a smart contract to function in the real-time world and trigger the execution of agreement provisions that allow the value of sustainability to be realized.
While a smart contract functions just like any legal contract, there are some subtle differences that make it an important tool in tracking sustainability through blockchain. The first important aspect to understand is that a smart contract is a computer program or a transaction protocol, which automatically executes or documents events and actions respectively legally relevant events and actions according to the terms of a contract, of an agreement or of a negotiation. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions. In a word, it functions just like any contract: one party meets a condition, which triggers an action by another party.
Blockchain and Smart Contracts
Recording the sustainability of a product, such as an advanced, bio-based renewable fuel, is one such way that blockchain can lock in the sustainability value of that product by the unit of sale. With that sustainability value managed through blockchain, it is therefore beyond reproach and immutable. Blockchains maintain a record of transactions across a linked peer-to-peer network of computers. Because all computers retain control of the blockchain collectively, rather than any single user, the shared nature of the record makes it immutable and decentralized. Because of its decentralized nature, blockchain technology has proven a useful tool for tracking anything of value, and this means establishing the protocols of a contract, and upholding them.