And what you need to know about them…
Contracts govern the way we think and act in today’s economy but its inherent reliance on third-party law firms makes it cumbersome and costly to execute. Unfortunately, there is no escaping it as contracts are embedded into the mundane routines of our everyday life. The house we live in is under a contract with a property agent, the job we go to from 9–5 is another contract with our employers, and even the Internet service in our mobile phones is yet another contract signed with a mobile service provider. While most have resigned to the fate of unnecessary expenditure due to the sheer number of third-parties involved in the service industry, blockchain technology has chimed in with a solution of its own: smart contracts.
What Are Smart Contracts?
Smart contracts are computer codes input into a blockchain that follow the terms of agreement as defined and agreed upon between the two parties involved. Unlike traditional contracts that require third-parties for execution, smart contracts are autonomous and will execute itself to produce the necessary output once they have detected and verified that the pre-defined terms are met. That is not all. Unlike certain traditional contracts that are specific to a single asset, smart contracts can be used to exchange any asset of value as long as the necessary codes are entered into the blockchain. That includes the exchange of money, shares, property, precious metals and even collectible cars and artwork!
With no third-parties involved, risk of fraud and embezzlement is greatly reduced. Furthermore, it will be hard for scammers to pull off their usual tricks as the blockchain that hosts these smart contracts is transparent to all and non-tamperable.
How Do Smart Contracts Work?
It is as simple as what is illustrated in the diagram above. Let’s assume that the asset of value in this instance is a precious metal asset. A mining firm can upload their right of asset ownership onto the blockchain. Subsequently, interested investors (or ‘users’ in the diagram) can choose to purchase these assets and enter into a smart contract with the mining firm. In ordinary circumstances, a third party will be warranted to draw up a contract between the two parties. With blockchain, this need is eliminated as anything the third party is hired to do can be coded into the smart contract.
What Types of Smart Contract Are There Available?
As smart contracts are essentially terms of agreement coded into the blockchain between the creator and the user, it encompasses a variety of contracts found in diverse areas and fields. For clarity’s sake, let’s stick to the previous example: precious metal assets.
Take for instance, an upcoming asset tokenization platform, Konrad. As asset tokenization involves the fractionalization of asset ownership, valuation, management, and its transfer, smart contracts play an extremely important role to ensure the smooth operation of the platform.
To facilitate asset tokenization, smart contracts on the Konrad platform are categorised into five groups: contracts related to KYC/AML, asset management, asset transfer, token and smart risk control as facilitated by the oracle machine. As the platform remains in its initial stages of development, various types of contract templates are expected to be created to enhance the user-friendliness of the platform in the future.
At present, a graph has been illustrated below to outline a simplified model of an asset transfer contract on the platform.
As can be seen in the diagram above, smart contracts has taken over the role of asset valuation and authentication that are traditionally reliant on third-parties. In fact, the smart contract API has essentially become a one-stop service centre for asset transference as it provides both valuation and distribution services with automated transfers once stipulated conditions are met. This is just one example out of the many where smart contracts can aid in the streamlining of asset management.
Conclusion?
Smart contracts are “smart” for a reason. They are cost-effective, secure, accurate, trustless, autonomous and can make a world of a difference to the world we live in, changing our future for the better.
To find out more about Konrad, check out its socials at:
Bitcointalk: https://bitcointalk.org/index.php?topic=5148889.0
Facebook: https://www.facebook.com/KonradPlatform/
Medium: https://medium.com/@konradholdings/
Reddit: https://www.reddit.com/r/Konrad_Official/
Telegram: https://t.me/konrad_En
Twitter: https://twitter.com/KonradHolding
Website: https://www.konrad.holdings/
Weibo: https://www.weibo.com/7041318945/profile?topnav=1&wvr=6&is_all=1
