How does Photochain’s smart contract work?

To answer the title question, we must first understand what a smart contract is. To make this easier to understand — let’s imagine a transaction that may already be familiar to you.

You are going away on holiday and will rent an apartment by the sea for your weeks’ stay. To enforce the safety and integrity of a transaction — a third party such as Airbnb require you to make a payment to them. The third party then tells the apartment owner that it has received money from you but doesn’t hand it over to the owner. The owner also now knows to let you in the apartment on the agreed booking date.

Then, on the check in date, if you have checked in and had no reason to contact the third party, payment is sent to the apartment owner after 24 hours. However, if the apartment was a fraud, you contact the third party and they don’t make any payment to the owner and refund you your amount instead.

In this example the third party is the middleman that processes all the legal / financial / administrative and other aspects of the transaction.

Middlemen however are costly. In the case of stock photography platforms — middleman costs consist of, but not limited to: storage space; legal fees; licensing fees; payment management; copyright protection; watermarking; account management etc etc… Fees are taken from the sellers — at a premium of 77% of the revenue generated from a seller’s own sales.

So how does a smart contract help?

To simplify the above holiday apartment situation, a smart contract here would replace the third party middleman, ensuring the transaction is directly between you and the apartment owner.

When you request your booking dates, the smart contract automatically (using its pre-programmed code) knows to forms an agreement between you and the owner. You then pay for booking as normal. This will be either in cryptocurrency or a fiat-to-crypto mechanism. This money is received by the smart contract and the apartment owner is notified of this, but withheld the funds for now.

Then on the day you arrive at the apartment, again either you check in as per usual or find the owner was a scam. Should you check in, then you don’t need to do anything and the smart contract will pay out the locked funds to the apartment owner. But no funds are transferred to the apartment owner if you indicate to the smart contract that the terms of your agreement have been breached.

Whilst the difference may not seem like much, the smart contract has in fact replaced the entire need for a business — with office space, employees, costs etc — with some computer code. This saves massively on time and costs.

This “code” — the smart contract — not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforces those obligations. This makes it more reliable that human labour which is prone to error.

In the case of Photochain — our smart contract cuts out the stock photography middleman i.e. Getty Images or Shutterstock — and replaces their functions with a smart contract. This smart contract upholds to integrity of a photography sellers’ proof of ownership, their copyright protection, their identity, payment details, etc and for the buyer the integrity that they will be delivered a photograph just as they paid for. For a full description of what Photochain will achieve for photographers, please read here.

What else can smart contracts do?

In the example of Photochain, we are also using our smart contract in the collection of funds and distribution of PHT tokens for our ICO.

To ensure this goes securely and specifically, prior the to the ICO, the smart contract is programmed with three key functions:

1. To mint tokens for specific ERC20 ethereum addresses
2. To finish minting and prevent future inflation of PHT token supply
3. To only mint up to 230 million PHT tokens, thus not breaching the hard cap

These functions are then audited by an independent code auditor to ensure the validity and viability of the code.

During the ICO, token buyers are asked to send cryptocurrency to a wallet pre-created by us. These wallets are secure, as they are held in cold storage, and additionally each wallet address is unique for the user.

They also are asked for a separate, ERC20 compatible address to receive the funds to.

At the end of the ICO, PHT tokens are minted, i.e. generated in accordance to the time and discount of the buyer, and sent to the specified ERC20 address. Once the total amount of tokens to be minted — either 1) the total of all sold tokens if hard cap not reach or 2) the hard cap amount of 230 million PHT — are indeed minted, then the function finishMinting() is automatically run and no more PHT tokens, ever, can be created.

In the case that the buyer opted for the voluntary vesting period, then the tokens are minted at the time of general minting, however tokens are not distributed until the vesting period has completed. The smart contract is aware to know when the tokens have vested and will still send to the buyer’s given address.

Impressed..?

So all in all, smart contracts are capable of making our lives much easier and cheaper. By cutting out often expensive middlemen, transaction processing becomes much smoother as any interaction becomes peer to peer rather than via third parties. This also has additional benefits such as management of your own data (as you don’t need to verify yourself with a third party institution) and gives you much more power as an individual.

In the case of Photochain, we are using blockchain and smart contracts to bring the power in photography trading to the users — photography owners and buyers. Our smart contracts work to make your stock photography experience vastly superior.

Photochain’s token sale is now open — currently available at a 25% discount. To secure your tokens today go to photochain.io and click “Buy Tokens”.