Since the dawn of time, humanity has relied on a simple definition of trade. Early civilisations might have traded wood for furs, or meat for fur. Later on, as humanity grew in population and as we evolved to become smarter and more aware of the surroundings we possessed, the definition of trade also grew with us. Being a completely abstract concept, it readily adapted to the need of an era. While meat might indeed be traded for fur, a new concept came into vogue: weighing the masses.
So, we see that with every era, the definition of trade changed to suit the needs of the time. After a while, the concept of currency came into being, and this reflected a new era in the history of man. The point to be made here is that the most efficient method of trade of a specific timespan can be used to distinguish between the levels of sophistication of humanity. With the invention of currency, the age of the banks and the financial institutions began.
Within this age the concept of trade underwent so many conformational transformations that it became almost unrecognisable from the crude methods of the past. The idea of using credit, of borrowing or loaning, and of interest came into being, and so we evolved.
This evolution has continued to the date. While much of the infrastructure of commerce is still the same as before, the world of banking and e-commerce have changed so much that today we may even claim to live in a different time than before. But the basic concept remains the same: the principle of trust. If you would like to read more about NEO Smart Economy visit this article.
You see, if you knew someone would try to cheat you at the first chance, you wouldn’t even consider loaning them a large sum of money, right? But if someone was known to be trustworthy, or at least not known for any negative behaviour, then you might not even think twice about letting them borrow some money, right? This is where the principle of trust comes into play. Basically, since the first humans learned how to trade, the principle of trust has been used to minimise chances of loss. However, today, things are different.
How many times have you thought of buying something online but held yourself back because you felt the deal was too shady? This happens to most of us pretty often. We refuse to trust an unverified and unidentified person to handle our resources. This is what the smart contract is a necessary solution to the problems of the crypto world. The NEO smart economy is built off the principles of trust as given by the Blockchain.
Basically, it generates an electronic document before the finalisation of the deal. In this document, the rewards and the goods to be received, if any, are clearly mentioned. This can be of great benefit to people who are transacting from different countries and who may want an authority to protect them if something goes wrong. In traditional roles, the bank would be the judge, jury and executioner for the defaulter. In other words, it was almost completely up to the bank to see that the customer returned their debts in full. If you would like to read more about cryptocurrencies visit this article.
In NEO Smart Banking however, the electronic document generated is the one in charge of making sure the terms of the agreement are withheld. This is really beneficial for us because the smart contract itself can be the force behind its own words.
For example, if persons A and B were from different countries, and both had different laws regarding defaulting on payment, according to the traditional system, technically there could be no immediate legal action against B is they did not pay back their debts, that is to say, they defaulted. This would create a huge problem for A if they were a businessman or businesswoman and would create a legal case that would go on for a decade at the very least with no solutions. But with the introduction of smart contracts, things are different.
For one thing, the contract, once generated, would be an immutable proof that the two parties were in legal agreement to do the stated clauses within whatever timespan would be agreed upon. Secondly, once the contract would be finalised, the contract itself might ‘store’ the payment in itself. This means that the very instant the terms of the contract would be met; the contract would take over the matter of payment and punishment. You might be able to lie to a jury but lying to a machine gets you nowhere.
One cool thing about the whole system of NEO Smart Economy is that the contracts are written in code and are highly malleable before they are finalised. There are almost infinite possibilities within the system to make as many stipulations as you could need. Furthermore, the NEO Smart Economy will also allow their users to effectively reduce all things into coding. For example, if you promised, say a chair on payment for a task, the contract will record a digital chair in its database and will order its transfer immediately on completion of the terms of the agreement. Some refer to it as an online clearing house, and the similarities are so strong it is not difficult to understand why they have made this connection. In contrast to a real clearance house, however, the smart contract has almost negligible surcharges and can work almost instantly. The item that is to be transferred can also be accessed by a large number of people, since the NEO Smart Economy is built on the basis of trust and transparency and cannot be cheated.
Also, the smart contract allows for people to transact without revealing their identities to each other if they should want to do so. However, it also creates electronic identities that can be verified and so even if the person cheats their way out of the smart contract, they may not be able to escape the authorities of the real world.
credit:
https://blog.amon.tech/neo-smart-economy/
