The topic of smart contracts is a very important one for future business processes of IOTA. Some readers might already have heard of so called Smart Contracts, for others this term is completely new and again others are experts in this topic. This article is intended to help readers understand why smart contracts are so important to businesses and individuals, and what they have to do with IOTA.
A basic requirement for smart contracts was blockchain technology. Only through the use of blockchain technology it was possible to program smart contracts. In this case, data records (contract provisions) are combined into individual blocks and stored in encrypted form as a chain with a precisely calculated and associated check digit per block, whereby each block must form a consensus with the entire chain.
Smart Contracts facilitate transactions
At first glance, this may sound very complicated for the layman. The functionality of a smart contract becomes understandable if one compares it with the way we are used to or set up and concluded contracts. Where enforcement of paper-based contracts may require the involvement of lawyers and arbitration boards, ie third parties, Blockchain technology enables compliance with and implementation of contract terms without the need for a third party. And that’s the groundbreaking thing! Not only fine print can be dispensed with. It will also no longer be necessary to challenge a smart contract (the contract will only be valid if the previously defined conditions are met) and no contracts can be subsequently modified and manipulated (as in a valid blockchain only blocks out) Records with verified consensus can exist.
Application examples for Smart Contract
Accordingly, this new way of signing contracts has many advantages. The costs can be significantly reduced and the efficiency significantly increased. In cargo shipping alone, the cost of accounting and manual logging of orders and logging of the loading and unloading process is often 50% higher than the value of the load itself. Or, consider the fair distribution of revenues, e.g. in the music industry, where a musician decides who gets which parts, when he makes his works available for download on the net. So the potential is huge.
Ideally, then, this block chain, which is used to record a smart contract, also implements its own or existing cryptocurrency, as described, for example Ethereum. So it is even possible to use your own currency to fulfill this contract. This can create an own, large community within a business area.
Qubic IOTA and Smart Contracts
For IOTA, there have not been any official Smart Contracts so far and that was a big challenge. Ralf Rottmann, member board of directors (IOTA Foundation) wrote an interesting article on the Smart Contracts in March 2018. It says there:
“IOTA does not natively support smart contracts. The IOTA Foundation has stated that the IOTA Foundation is a top-of-the-line solution. And it’s public knowledge that IOTA Foundation is actively working on this additional smart contracts layer. “
After details about Qubic (quorum-based computation) were published in June 2018, the subject of Smart Contracts was taken up again. On the Qubic page, many interesting things of this groundbreaking technology are made, and the subject of Smart Contracts has been dealt with extensively there. It says:
„Generally speaking, smart contracts eliminate the need for third party enforcement by encapsulating contractual obligations in software, to be autonomously verified and enforced. Anyone with access to the contract can verify that a specific event will always result in a specific outcome. While it is expected that smart contracts may be used in the future to replace many kinds of real-world paper contracts, to date the most common use case for smart contracts is to create virtual tokens which inherit many of the properties of the distributed system in which they are created.
While Qubic is of course capable of supporting these kinds of traditional smart contracts, the combination of fee-free transactions together with general-purpose quorum-based computation opens the door to entirely new possibilities….
These types of smart contracts are also just iterations on the more general capacity for quorum-based computations. Qubic therefore also provides a standardized way to define, validate, and enforce the results of a smart contract to a high degree of certainty.“
We believe that when IOTA is equipped with Smart Contracts by Qubic, the future opportunities will grow very quickly and IOTA will further consolidate its outstanding position.
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Sources:
[1] https://morethandigital.info/die-wichtige-rolle-smart-contract-und-kryptowahrungen-zukunft/ (Parts of the article translated into English)
[2] https://medium.com/@ralf/about-smart-contracts-in-iota-626d2bd3619e
[3] https://qubic.iota.org/intro
