Smart-contract. TokenLab brings the standards for the ICO project
A few months ago, such neologism as smart-contract has a firm place in our vocabulary. Why is it so important for the ICO campaigns?
A bit of theory
The smart contract is a computer algorithm designed to enter into maintaining of contract protocol within blockchain technology. It can be partially or fully self-fulfill and self-sufficient. Unlike of traditional contracts, the terms of smart contracts cannot be changed, and its wording is difficult to interpret differently. So, it cannot be used as an argument in the unjust decisions of the courts.
The basic principle of the smart-contract is full automation and reliability in performance of the contractual relations between people. It means that the smart contracts based on cryptography, can provide better security than traditional documents based on the law. It leads to lower costs connected with the conclusion of contracts and resolution of disputes between the parties.
Smart contract signing is very similar to the process of sending funds of crypto currency. Automatic execution of the obligations of the contract requires a special environment, which provides unobstructed access to the executable code for objects of the agreement. Smart contract tracks of contract terms of achievement or violation of contract provisions, and independently make decisions based on it. All contract terms must have a mathematical description and clear logic execution.
The main condition of the ICO
According to the British magazine The Economist, in August 2017 the volume of investment in ICO get $550mn. This method of raising funds for startups and other projects is gaining popularity.
The scammers are also on the alert. While the idea of the blockchain is complete transparency and trust between users and entrepreneurs, many of the projects, launched by the ICO, have the only well-made website and bright white paper, but not the finished prototype or solution for business and users. Anyway, they allow themselves to report on the fantastic amounts collected during pre-ICO.
The creation of a transparent infrastructure is very tricky and expensive. Fully accountable companies must pass the long list of very complicated procedures. At the same time, the projects intend to launch the ICO, often have no the resources to do everything in “right” way. There is a big temptation just to lead the bright campaign and “dissolve” with investors’ money.
If the technology doesn’t imply any smart contract, investor’s participation in the ICO reduces to buying tokens, with the transaction to private blockchain wallet of projects founder.
In fact, it’s not the ICO, but crowdfunding: you collect money for something to create it then
said the chairman of the Russian Blockchain.community Artem Tolkachev.
In essence, the smart contract is not a separate type of contract, but the technology of information exchange and automatic execution of certain conditions. In addition, it gives users and investors a legally meaningful right. In our opinion, the investor must be able to request confirmation of the collected money at any time, especially if they were collected during the private presale, it about large sums, and the names of the investors are either classified or even it says nothing to you.
TokenLab recommend to understand raising funds for the ICO carefully. The importance of smart contract is difficult to overestimate. If we talk about the trends and standards in the ICO area, the presence of the smart contract is a standard we are looking for.
And it is just great if a startup you are going to invest in offers the escrow as investment guarantee. Taking about trading business its a special account, which keeps records of property, documents or money until the occurrence of the circumstances or performance of certain obligations. Escrow agent sends values in favor of one of the parties only if it fulfilled its obligations under to the other one.
In the world of crypto currency escrow is a third party, celebrity or known and respected person, who is the custodian of funds and guarantor of transparent conducting of ICO. For example, if a project launched ICO and attracted funds of thousands of people, all means come into the custody of the escrow agent, but not the project founders. This is a super safe option that guarantees the safety of investments.
The project descrow.org implements the idea of a decentralized escrow, which eliminates the risks associated with dishonesty or a lack of security of escrow agents. In this approach, the redistribution of tokens and its further working is controlled by the token owners by voting.
According to the British magazine The Economist in the future, smart contracts will be the most important area of application of blockchain technology. At the same time, skeptics point that the technology of automatic support contracts will lead to a weakening of existing social institutions created by many generations. It can also lead to the disappearance of a significant number of jobs in the administrative field, as previously robotization has led to the disappearance of many ones in the industry.
Indisputable remains the fact of the fast growth of investment projects using the ICO. For users and investors, and for us in TokenLab of course, the most important is the issue of security. Often the ICO founders urge to take their word for it, but can’t confirm claimed amounts. Such projects deserve only skepticism.