Why Smart Contracts Standards Are Essential For Large-Scale Adoption

There are still so many unknowns about the future of blockchain technology, but increasingly, questions regarding standards are forcing themselves to the forefront of the conversation.

More specifically, people want to know how to set and maintain standards for smart contracts — the self-executing agreements written into lines of code on the blockchain.

Right now, the technology is advancing so quickly and companies are creating custom smart contracts left and right. Governing bodies can’t keep up with the ad hoc development happening, so it’s unclear exactly how standards — established rules that serve an entire industry — are going to form.

Without standards in place, there’s little chance of large-scale adoption in the near future.

Ideally, the all the players in an industry contribute to creating the smart contract standards. But that’s not how it’s playing out in every case right now.

If industries continue this siloed development of smart contracts, without some type of standard by which to operate, companies aren’t going to experience the full benefits of working with blockchain solutions.

Here’s why we have to standardize smart contracts:

Tech development is moving so quickly, and numerous standards can’t keep up.

Today, smart contracts protocols vary widely. Everyone is using their own.

For instance, in the supply chain, companies are leveraging GS1 standards, the global standard for barcodes.

But there are also plenty of other proprietary standards out there. Take Ethereum, for instance. They have standards for their ERC-20, and ERC-721, but there are also criteria in place for smart contracts between all the various ERC tokens.

When everyone plays by their own rules, the inherent value in having standards is lost.

Standards are a way of organizing people or companies around a common understanding. They provide the basis for growth and cooperation which can help an entire industry, not just an individual enterprise.

So, let’s say a retail company is delivering a package and using smart contracts to execute business operations. That involves multiple parties — the retailer, the logistics provider and the recipient. The retail company maps the transfer of the package from one party to the next, and then writes the necessary smart contracts.

If there is no industry standard for the entire supply chain, the smart contract is going to be different for every business process they map. This would generate hundreds of smart contracts that may or may not be related.

While that may work for one company in the short-term, it’s not really a scalable solution.

A single set of standards is needed for large-scale adoption.

The blockchain industry is reaching a point where the massive number of custom smart contracts being used is an impediment to growth.

The truth is, a lack of standards creates challenges in interoperability. This is true even when it comes to concepts that seem simple — like how data is shared or stored.

Without standards, blockchain technology may end up with the same problem as the current internet with numerous cloud databases.

In siloed cloud databases, the overall architecture requires point-to-point integrations. Data is stored differently by each company, and therefore, “data normalization” is a huge problem just to ensure everyone is speaking the same language.

A blockchain will not only act as a common backbone for peer-to-peer messaging and data sharing, but it will also allow for data normalization (each party speaking the same language) as defined by the protocol.

One way to create these industry-wide rules is by leveraging existing standards.

Many industries and companies already have guidelines in place that they use to operate as efficiently as possible. Working with these existing parameters, rather than attempting to create something entirely new, is the best way to get companies to implement blockchain solutions.

The goal here is to have one smart contract standard that’s been created by the industry, for the industry — in order to facilitate collaboration while maintaining competition.

Yes, it will take longer than having everyone create their own whenever they want to, but a smart contract is not a toy.

Constantly generating new contracts that self-execute — without proper vetting — is not a system that will stand the test of time.

Technologists are attempting to implement solutions in billion dollar industries, and a haphazard system simply won’t be adopted. Real growth and large-scale adoption are going to require an airtight and standardized system for executing contracts between companies.

A mess of smart contracts on a multitude of platforms is difficult to manage.

The bitcoin blockchain alone is already roughly 173 gigabytes in size.

As more transactions and data are processed on blockchains, it’s imperative to have a way to make processes as efficient as possible.

If companies don’t start thinking about standards of output early on, they are going to wind up with a situation where everyone continuously creates their own smart contracts as needed — and operability will suffer.

For instance, let’s say two companies in the same market decide to collaborate in order to stay competitive. If they’re both using different standards, their systems may not be able to transact with each other. And that creates more of a data monopoly situation, rather than true decentralization.

In order to have true decentralization, there needs to be consolidation and agreement — at least in the beginning.

This may simply be a phase when everyone is putting out different, proprietary smart contracts, iterating on them and seeing what works best. But these initial rules will eventually result in operability issues.

For large scale adoption, we simply have to have standards in place. And instead of waiting and seeing which standards win out over time, it’s better for technologists to help create standards that work for each industry.

This article originally appeared on Forbes.com.

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