At VAIOT, we often get asked: how are your Intelligent Contracts different from blockchain smart contracts? And so, in this article we will share the ins and outs of VAIOT’s Intelligent Contracts, tell you all about smart contracts and compare the two, so you never have to wonder again.
So first, let us have a look at smart contracts. A smart contract is a section of computer software designed as an automated self-enforcing contract. This means the underlying computer code is triggered by certain actions after predetermined conditions are met. Smart contracts can be used, for example, as digital contracts that serve as an intermediary between two parties for the exchange of cryptocurrencies (or any other digital asset). Once the terms of the agreement are established, the smart contract verifies their fulfillment and distributes the assets accordingly.
In other words, smart contracts are lines of code that, when certain conditions are met, execute a specific function. The code is typically followed by “if… then…” statements, which cause predetermined and predictable actions. An e-commerce shop could, for example, implement a smart contract that would make sure that “when payment is completed, the product is sent.” That would not just make the entire process more efficient, it also makes it less vulnerable to human error or corruption.
The smart contract concept was first described by American cryptographer Nick Szabo in 1994, years before Bitcoin or the implementation of smart contracts for blockchain. However, smart contracts are now almost always referring to contracts in the context of cryptocurrencies and blockchain.
And that is not without reason, smart contracts play a vital role in the blockchain space and digital asset markets, specifically to ERC-20 tokens, which represent a class of tokens created on the Ethereum network that follow the ERC-20 standard. Now you might wonder why that is? Well, smart contracts play a vital role because these digital assets are often distributed through Initial Coin Offering (ICO) events, and the use of smart contracts allows for a trustless and cost-effective exchange of funds during sales. Their use can also help decentralized applications (DApps) or decentralized exchanges with payment processing (DEX).
Furthermore, smart contracts are a suitable solution for the financial services industry and often used by Decentralized Finance Apps (DeFi). Smart contracts can be used to automate transactions such as payments, trades, or even the calculations of liquidity pool payouts or yield farming. Now, what makes smart contracts even more interesting is that despite their obvious applications in the blockchain and finance field, they are versatile enough to apply to almost any industry in which funds or information needs to be transferred between parties (digitally).
So, if smart contracts are such a great solution, why does VAIOT implement Intelligent Contracts and what is the difference?
Well, Intelligent Contracts are a continued development of smart contracts as they are an integration between blockchain and artificial intelligence. Intelligent Contracts offer the possibility to improve various business and daily processes such as i.a. sales (new, innovative digital sales and marketing channel), customer service or legal services (AI legal advisor for both businesses and consumers), and of course, generate well-defined contracts both traditional as on the blockchain.
VAIOT’s Intelligent Contracts enable the end-user to create contracts to utilize a simple user interface, to create a contract backed by an advanced AI, serving as a personal contract assistant. The end-user provides the requirements and basic data via text or voice analysis on the user interface. VAIOT’s AI will review its legal database, prepare a contract tailored to the user’s needs, and make it secure with blockchain technology.
With VAIOT, no programming skills or expertise are required anymore to design digital contracts. Through AI and the VAIOT Code Generation Engine (VCGE) automatic conversion of an abstract description into an executable program is made possible. The user-friendly application will allow consumers to input key elements of the contract. Then AI will identify the basic contract patterns and convert them into a clean, standardized, and fraud-resistant Intelligent Contract. Certain aspects of the Intelligent Contract are coded, and whenever set conditions are met, the contract is executed, and an irreversible entry is made in the ledger on a Blockchain. The usage of AI guarantees the highest level of Intelligent Contract security and best code performance.
The difference between smart contracts and Intelligent Contracts
Like mentioned earlier in this article, Intelligent Contracts develop further on smart contracts while also developing an entirely novel approach to digital blockchain-based contracts. First, smart contracts are intended to enable transactions without the involvement of a trusted third party, however, they come with challenges as their structure is complicated and they require the creator to have programming skills as well as legal knowledge in case of specific smart contracts types and application.
Finally, the key purpose of a smart contract is the automatic fulfillment of specific provisions of the contract, as agreed between the participating parties. This means, that for more complicated agreements and transactions, the parties are required to have some level of familiarity with the legal environment. However, with Intelligent Contracts VAIOT offers a solution as we are delivering both the programming’s skills (VCGE) and legal knowledge (VAIOT’s Virtual AI Assistant) as a technology, taking away those needs. Thus, making it even easier to create solid, secure contracts.