Mark and Sara
Mark hasn’t paid his rent for five months. When Sara questions he promise to pay later. She is helpless. She can’t afford a lawyer. Courts take eight months to almost a year to enforce action. The only option is to persuade Mark.
Joe’s business
Joe is a businessman. He does business with different corporates on a frequent basis. A few months ago he signed a contract with a retailer. Though the conditions of the contract were met. The retailer refused to pay. These people take advantage of the legal system and persuade Joe to settle for less pay. Joe had such experiences before. In some cases, he went to court. The time and money he spent there cost him his profits.
How do we help Sara and Joe?
Have we solved this problem elsewhere? In Sara’s case, we need to make Mark pay the rent every month. A time-based trigger. Your calendar app uses such trigger to give you notifications of predefined events.
In Joe’s case, once terms of the agreement is met the party needs to pay. It’s a condition based trigger. Consider the last time you purchased an ebook from Amazon. Amazon will only deliver it once the payment is confirmed.
The point is computer programs execute such instructions consistently. It did when you clicked on this article, scrolled down, etc . In order to help Sara, we need to convert the agreements of the contract into code.
Pseudo code of the smart contract between Sara and Mark
If today’s date is 30th and rent is not paid then
Transfer $500 from Mark’s account to Sara’s account
But where do we deploy this code? It should be deployed on computers of all parties involved. This can be achieved with Blockchain. In Blockchain the involved parties are interconnected to form a peer to peer network.
Sara’s and Mark’s bank will be part of a private Blockchain network. Joe and Sara will sign a coded contract(a.k.a smart contract). Then it’s deployed on the network. Both Mark’s and Sara’s bank will have a copy. On 30th of every month when the clock ticks 12.00. The agreed amount gets transferred from Mark’s account to Sara’s account. Joe started using smart contracts to enforce his clients to pay the agreed amount.
Sara is happy because she doesn’t have to trust Mark’s consent to transfer rent. Joe’s glad because he doesn’t have to go to a court for justice. Instead, he can spend those efforts to grow his business.
Follow HackerNoon and me (Febin John James) for more stories. I am writing a book about Blockchain. If you wish to get the pre-release version sign up here. I also recommend one book with every story I write. Because reading is invaluable. (Find the benefits of reading here). For this story, it’s Thinking in Systems: A Primer by Donella H. Meadows_._
I can respond to your bitcoin/blockchain queries via email. Let us talk.