Section A

CargoChain, an international freight forwarding company, has implemented a blockchain system to manage its bills of lading. The system uses 'smart contracts' that automatically release payment to the shipping vessel the moment GPS data confirms the ship has docked at the destination port. What is the primary advantage of using a smart contract in this scenario?

Answer options:

It ensures the physical cargo cannot be damaged during transit.

It removes the need for a trusted third-party intermediary to verify and execute the transaction.

It allows CargoChain to alter the contract terms retroactively without the vessel's permission.

It completely eliminates the risk of cyber-attacks on the GPS system.

How to approach this question

Understand what a smart contract does: it automates execution based on predefined rules. This automation replaces manual verification by banks or clearinghouses.

Full Answer

B.It removes the need for a trusted third-party intermediary to verify and execute the transaction.✓ Correct

A smart contract is a self-executing contract with the terms directly written into code. On a blockchain network, it automatically enforces and executes the agreement when predetermined conditions (like GPS arrival) are met. This primary advantage is disintermediation—removing the need for banks, brokers, or clearinghouses to verify the transaction.

Common mistakes

Assuming blockchain provides physical security or absolute immunity to all cyber threats (like GPS spoofing).

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