Aug 26, 2021

Programmable Money: How Smart Contracts Make Money Better

By: Algorand

What is Programmable Money?

The German Bundesbank defines programmable money as “a digital form of money which the user can program to follow an inherent logic for a predefined purpose, based on the attributes of the digital money itself.”

In simple terms, programmable money is digital money that can be programmed to act in a certain way based on predetermined criteria. 

The first known programmable money was Bitcoin, which emerged in 2009. Today, there are thousands of cryptocurrencies that can be programmed to execute transactions using smart contract technology. 

For example, dollar-backed stablecoins operating on the Algorand blockchain can be programmed using smart contracts to execute payouts at month-end to company employees. 

The essential ingredient to programmable money is smart contracts. They make cryptocurrency programmable. 

The Power of Smart Contracts

Smart contracts have a number of important advantages over traditional methods of handling payments.

  • Security. Unlike purchases using credit or debit card numbers, transactions on the blockchain don’t require giving a trusted party the information necessary to make purchases. This means there is much less risk of hackers stealing data and using it to make fraudulent purchases.
    Transactions are also final and irreversible, so there is no risk of chargebacks or canceled transactions, another common route for fraud. 
  • Transparency. Transactions made by smart contracts can take place on public blockchains, meaning that anyone can verify each transaction.
  • Autonomy. Because smart contracts are autonomous, they eliminate the risk of manipulation by third parties and intermediaries. This can help to make transactions easier, especially when it comes to international deals where someone might be unsure if companies or institutions in another country are trustworthy.
  • Cost Savings. Smart contracts eliminate the need for multiple intermediaries to process complex payments. Each of these third parties takes a fee for their services, so smart contracts can cut down on costs substantially. 
  • Accuracy. Calculations are made automatically, eliminating human error. 
  • Speed. The automation of calculation, verification, and approvals can save hours of work. 

Powering Businesses with Programmable Money

Improved security and increased efficiency through automation are the most obvious areas where companies can benefit from implementing smart contracts. However, on a more fundamental level, programmable money can build trust, which is incredibly valuable. 

Business is based on relationships, and relationships are based on trust. That means that trust-building technology can be a big boon for business. Consider some examples of what is possible with smart contracts. 

Escrow services

Large transactions like real estate purchases or trade deals currently require escrow as a trusted third party to hold money while a sale takes place. A smart contract can be programmed to hold the money and automatically release it to the seller once the legal requirements are filled. 

Global Payments

Smart contracts can be used to execute multi-layered global payments based on predetermined criteria between two or multiple parties across borders at minimal cost and near-instant settlement speeds. 


The structure of work is changing, and the structure of salaries is changing with it. Smart contracts can automate payroll, even for thousands of employees. 

Hourly contracts, monthly salaries, bonuses, and commissions can all be programmed into smart contracts and processed instantly.


Many publicly traded companies pay out a percentage of profits to shareholders on an annual or quarterly basis. Smart contracts can automate this process, even if the stock changes hands. 

This also has the potential to dramatically lower the barriers for companies to issue stock to investors.

Treasury Management

Blockchain-based treasury management can offer a number of benefits, especially for large organizations.

For example, corporate treasury managers can view the disposition of accounts of different entities worldwide in real-time. This can enhance decision-making processes via improved cash flow forecasts and make it possible to better capitalize on short timeframe investment opportunities. 

Programmable money opens up a world of opportunities for businesses that want to future-proof their operations.

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