Smart contract technology underpins the operation of ChainOn and allows agreements to be made that are legally valid and that are disintermediated, unchangeable and fast.
Article taken from ‘Smart Contract – What it is and how it works’, written by Elena La Stella for Blogchain (https://www.chainon.it/smart-contract-what-and-how-it-works-traditional-contract/)
The Smart Contract today is at the centre of the debate concerning the digital transition, and represents a viable alternative to the traditional contract. The first Smart Contract prototypes date back to the 1970s, but the resonance achieved in recent times is mainly due to the widespread use of blockchain technology.
But what are Smart Contracts and why are they reliable? The main feature of this innovative type of contract lies in the automatic execution of clauses, which ensure that every operation and every development automatically binds all parties involved through effects predefined by algorithms. In essence, the system is managed in its entirety by technology and each aspect is linked to the previous one, thus guaranteeing security and guarantees.
Let us summarise, by points, the advantages of Smart Contracts:
– independence from intermediaries
– immutability of the code
– economic savings
– simplification of operations
– high precision and reduction of the margin of error.
How the Smart Contract works. The operation of the Smart Contract consists in the translation of a ‘traditional’ contract into a computer code capable of verifying the existence of certain conditions preparatory to the implementation of the consequent conditions. In other words, only upon the occurrence of condition A can one proceed towards the implementation and development of condition B.
Smart Contracts, therefore, have the purpose of checking and subsequently transcribing, according to the “if/then” logic (if (if) this occurs, then (then) one can proceed), the conditions agreed upon by the contracting parties and defined by the articles of the contract.
A particularly important aspect related to Smart Contracts is that, although IT is the basis for the functioning of this technology, the only time when true support of this kind is needed is during ‘Phase 1’, i.e. when the contract is drawn up. After that, apart from appropriate monitoring, all subsequent steps will be automated. The translation of the contract into code requires the assistance of an expert with the necessary technological and legal background. The individual clauses of the contract are signed at the signing stage.
The importance of blockchain. It is the ideal technical support for smart contracts, as it facilitates the creation of consensus between the parties. In the conclusion of traditional contracts, the intervention of an intermediary is always necessary to guarantee and protect the contracting parties. In the case of smart contracts, on the other hand, the blockchain can be automatically terminable, since the immutability and control of the data that are entered from time to time, by all the components of the network, are indispensable features of its operation.
Evaluation and validation: the PoW mechanism
The evaluation and thus validation of the contract will be done by the users of the platform through the PoW (i.e. Proof of Work) mechanism. Within the contract, the specifics and details can be infinite and all those necessary to meet the needs of all parties can be included. Underlying the contract are rules determined by both parties, which govern all exchanges, armouring transactions against any possibility of modification or intervention by external agents. The resolution of any disputes must always be foreseen and predefined at the time of conclusion, also regulating the procedure for the eventual termination of the contract.
The marriage of Smart Contract and blockchain, therefore, can facilitate the initial phase of contracting: the protection of the parties is extremely simplified and guaranteed, allowing an intermediary figure to be consulted only at the stage of translating the agreement into a code string. Thereafter, an app will oversee the proper conduct of the code’s operations. The app promptly notifies the contracting parties that one or more crucial clauses are fulfilled. Consent is then given by both parties to proceed with the subsequent steps.
All operations take place in an automated manner; for this reason, they do not require checking for correct execution by an external super partes controller.
Smart Contracts and ChainOn
The technology, as we have amply illustrated in this text, is safe, effective, legally valid and extremely efficient. And it lies at the heart of ChainOn, guaranteeing the possibility of concluding, possibly even in a few hours, agreements that under the traditional system would take weeks or, sometimes, even months: sponsors (companies, SMEs, freelancers) can get in touch with sellers (associations, sports clubs, leagues, etc.) and find an agreement quickly, without the classic and sometimes necessary intermediation, and putting ‘black and white’ on the basis of the agreement to conclude a sponsorship. This makes it possible to conclude last-minute agreements as well, and gives sellers registered on the platform the opportunity to propose dedicated offers for individual events or shows.