Blockchain technology still has a lot of ground to cover. As of now, questions related to standards are the focal point of any conversation related to the effectiveness of the technology. People and companies want to know how they can maintain consistent standards in their smart contracts—self-executing agreements that are written in the lines of code.

The technology is advancing quickly and companies are creating smart contracts at an increasing rate. However, what many people are ignoring is the standardization of the system at the initial stage, which could create several operability issues in the future.

Here is why standardization is so important:

It is Difficult to Keep up with Multiple Standards

There are multiple protocols of smart contracts as almost everyone is using their own.

For example, businesses are using the GS1 standard, which is the global standard for barcodes, in their supply chain. However, there are many proprietary standards, such as Ethereum. Ethereum has standards for ERC-20 and ERC-721, but there are different criteria for smart contracts between all ERC tokens.

When there are multiple standards, everyone is playing by their own set of rules. This means that companies and investors find it difficult to come to a common understanding. When there is a single standard, it provides opportunities for cooperation and growth which helps an entire industry, and not just a single enterprise.

For example, an e-commerce business using smart contracts for its operations would need to deal with multiple parties, such as logistics, retailer and customer. If there is no industry standard for the smart contracts, then the contracts would be different at every step of the way. While this may work in the short-term for a company, it is not a scalable solution in the long term.

Multiple Standards are Harder to Manage

It is important for companies to think about standards early on.

One of the most popular applications of blockchain technology, Bitcoin, has reached 174 gigabytes in size, as more and more transactions continue to be processed with the same technology. There is a need to make the transaction processes faster, otherwise the operability would suffer.

Let’s say, two companies are dealing in two different standards while operating in the same market. It would become really difficult to collaborate with each other and stay competitive at the same time. This also creates data monopoly rather than decentralization, which defeats the primary purpose of using crypto!

Why is a Single Standard Necessary?

While everyone putting out proprietary and different smart contracts may just be a phase to see what works best, it will only create problems in operability in the long term. For large-scale adoption, it is important to have standards in place at the initial stage.

Rather than waiting out to see which standards emerge as the leading standards over time, it is better for technologists to be proactive and create standards that work for the industry.

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