Contents

Introduction................................................................................................................................1

Blockchain Technology.............................................................................................................1

Blockchains alters Contracting..................................................................................................1

Conclusion..................................................................................................................................2

References..................................................................................................................................2
Introduction

This report paper gives a gist of the potential of the blockchain technology to alter

contracting in both organization and market. The potential implication of technology

advancement, distributed ledger which is enabled by blockchain and lastly summing it with

the blockchain technology is examined through this paper. Blockchains are algorithms which

are preprogramed, and the protocols will automatically monitor the connected inputs, enforce

the rules, respond to the changes, and the responses are triggered. When the preprogramed

algorithms have a high complexity then it is defined as Smart Contracts.

Blockchain Technology

Blockchain was founded in 2008 which was emerged to explain the term Bitcoin which is a

electronic cash system used peer to peer. The Blockchain technology gained the limelight in

2017 when the rapid increase in price of Bitcoin was highlighted in the newspaper which

published “Bitcoin millionaires and billionaires”. Bitcoin is the most commonly used

cryptocurrency; it is known as the Internet-enables money system which is in the digital

form, and it is not defined or restricted by a political entry or by geographical location.

Blockchain will take inputs of complex arrays and the output can be connected to the

computer device or any other physical system around the world. Under this blockchain,

Ethereum blockchain followed a fully programmable setup which gained popularism and it

was defined as Smart contract which describes block chain transactions which are automated

and more complex. (Buterin, 2013). The Smart contracts are the small-scale program which

are automatically executed when certain predefined conditions are satisfied. These contracts

are independent on any human agency or 3rd party intermediaries for the execution. They are

instead dependent on the oracles or trusted data feeds which can transfer the external data

which corresponds to preprogramed, and protocols which are store in blockchain.

Blockchains alters Contracting

There are various reasons due to which we can say that “Blockchains alters Contracting” and

they are stated as below:

 Adoption of Blockchain Technology: After the inception of Ethereum there are many

start-ups who are developing the decentralized application and are using the smart

contract capabilities of Ethereum. Slock.it is one start-up which uses the smart locks

which are enabled with blockchain to completely allow renting in sharing economy.

 Blockchain Technology adoption give rise to new costs: The three costs will be

generated when the Blockchain technology is adopted that is Costs arising from

Flexibility, New costs which are raised from Oracle problem and the cost will arise

when there is a secure execution.

 The implication of Blockchain for Contracting in the Organization & Markets: There

are various reasons due to which we can say that “Blockchains alters Contracting”.

Often between the firms when contracting is done then it is relied on various factors.

Hence the transaction becomes more complicated. Blockchain is helpful to address

these concerns and makes it easy to identify potential counterparties, it reduces the

degree of monitoring and the amount of trust which is necessary between the parties

will be reduced. Agency costs can be reduced by the implementation of Blockchain

and there will be unrealized profits. Through which it will impact the agent’s

motivation, impact on firms operations, Blockchain will impact on the excess

expenses, On the compensation of interest alignment and on unrealized profits.

Conclusion

Hence, we have seen that there are various ways through which Smart contracts which are

enabled by blockchain can impact the firm contracting. In a recent survey, A freelancing
platform Upwork reported that since 2018 Skilled freelancers in the field of Blockchains

were highly in demand. The use cases of the blockchain have suggested that how the new

blockchain technology helps to make an easy effort for the human agency in any

organizational decision making. Using the Smart contracts also eliminates the agency costs

and the solutions which are based on blockchain holds as a potential of efficient and effective

way to eliminate certain agency costs and lastly contracting.

References

1. Murray A., Kuban S., Josey M. (2018) CONTRACTING IN THE SMART ERA:

THE IMPLICATIONS OF BLOCKCHAIN AND DECENTRALIZED

AUTONOMOUS ORGANIZATIONS FOR CONTRACTING AND CORPORATE

GOVERNANCE. Retrieved March 21, 2022 From CONTRACTING IN THE

SMART ERA BLOCKCHAIN AND AUTONOMOUS

ORGANIZATIONS_b5354eccdb0f36865c5cef4327f67740.pdf

2. Buterin, V. (2013). Ethereum white paper. Retrieved March 21, 2022 from

https://github.com/ethereum/wiki/wiki/White-Paper