Revenue sharing is the process of distributing profit and losses among stakeholders, partners, investors and even employees of a business organization. This is a common business concept in almost any industry that derives profits, from manufacturing, retail and hospitality to media, sports, investments and even the government.
One of the best examples of revenue sharing applied is in government, where different government units share in income generated from taxation to fund services. For example, states share tax revenue with local or federal governments.
Challenges Faced by Revenue Sharing
While each industry faces different challenges when it comes to implementing the revenue sharing model, there are common limitations that can be found in various industries. These include transparency, speed, and assurance of payment. With the rise of the sharing economy, revenue sharing is becoming even more and more common, which has given rise to the need for a more secure method of entering into contracts. Blockchain technology has come up with a solution to eliminate these limitations in the form of smart contracts.
Smart Contracts: What are they?
Smart contracts are digital agreements powered by blockchain technology thatare executed once all pre-determined terms of the contract have been complied with and satisfied. Like conventional contracts, they are used to exchange money, property, revenue shares or anything with value. However, unlike traditional contracts, no middleman is involved. With smart contracts, agreements are often more secure, with reduced dependence on middlemen, and executed in real time which means the contract is executed simultaneously for all parties.
This type of contact is undeniably more transparent, providing more security and assurance of payment because the logic and all information in the contract are visible to all the participants in the blockchain network. And because these are digital contracts, they are also less prone to the errors that often occur when you need to manually file out piles and piles of forms. Smart contracts also provide participants with faster access to yields on a weekly or a monthly basis as long as the contract contains this clause.
Enhanced security is one of the main benefits that can be derived from smart contracts. Since these contracts are based on blockchain technology, they cannot be altered by any single party, since any alterations are only possible if all parties to the contract agree.
Also, the risk of losing your documents with smart contracts is very low, since your documents are duplicated in the blockchain many times over. This level of security does not require an intermediary which means you get to save money that would have otherwise gone to an intermediary, like a notary.
Smart contracts offer a revolutionary way of entering into agreements by being more secure, transparent and speedy. Because they guarantee a specific set of outcomes, they are the ideal contracts for revenue sharing to avoid confusion and even litigation. This could spell major improvements in how international business and trade are done by speeding up transactions, reducing the need for paperwork and enhancing cost-efficiency, especially in industries like music, art, finance, retail and manufacturing, telecoms and the like.