/biz/ - Business & Finance

>>7465691
Companies have all sorts of contracts for all sorts of things (obviously) but the legal system never works like it's supposed to. Let’s say you agree a contract to sell a table, say, for $20 next week. You give the guy the table but next week he doesn’t pay. Are you really going to take the buyer to court even though he legally owes you the money?
This kind of thing happens on a huge scale between companies. If they do decide to go to court it's expensive and wastes time. Usually, the side who’s owed money settles out of court for much less than they’re owed.
This is where smart contracts come in. Smart contracts are basically code that executes a contract when conditions are met. An example might be “I'll buy $100 of bonds if the base interest rate hits 1%”.
Once agreed, a smart contract will execute as written, no matter what. No one can fuck each other over once the contract is agreed (unless they BOTH agree).
What’s more, the contract is stored on a blockchain and so can’t be interfered with without hacking 51% of the nodes (this is practically impossible).
But there is another attack vector for smart contracts. Returning to the $100 for bonds example above, I could hack the input to the contract to (falsely) tell the contract that the interest rate is now 1%. The smart contract sees this and executes when it's not supposed to. The security of the contract is only as strong as the weakest E-link, which in this case is the input (also called an oracle).
E-coin (ECN) solves this problem by decentralizing the oracle – i.e. the information that goes into the contract. It means smart contracts can't be triggered by false inputs (i.e. the attack vector I described above) without hacking 51% of the nodes (again, impossible).
And the bond example is just one of millions of use cases.
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