Ethereum, EOS or NEO are well known for their smart contract development features, but to hear that one such contract found its home with the IOTA’s Tangle is the piece of news well worth covering.
On September 22nd, a German computer science student, signed as MicroHash, published a report on his Medium channel about the launch of the first smart contract on IOTA.
According to the author, creating a smart contract on IOTA is an abstract thing because it has to happen in 4 layers:
- 1st Layer: IOTA (data transmission, data integrity, data persistence)
- 2nd Layer: Qubic Lite (quorum consensus framework on top of IOTA)
- 3rd Layer: TOQEN (qApp on Qubic Lite; simulates a token blockchain)
- 4th Layer: MicroHash (smart contract on TOQEN protocol)
Defining Smart Contracts on IOTA Tangle
“Since the native IOTA token does not support smart contracts, it was necessary to build a separate token on top of the Tangle for this purpose,” the author explained and added that this is the reason why TOQEN was created as a blockchain with its own native token (TQN).
“Once value transactions were live in the TOQEN network, enabling smart contracts was actually super easy,” Mr. MicroHash stated.
Qubics were allowed to hold TQN, and since they are decentralized consensus-based entities, their TQN holdings are subject to consensus, which is, basically, the definition of a smart contract.
MicroHashes – What Does the First Smart Contract on IOTA Do?
The first smart contract on IOTA is envisioned as the Lightning Network or Flash Channel equivalent for TOQEN.
The smart contract created allows micro-payments via hashes which are conveniently called – MicroHashes.
The Explanation of the Process
The report describes the smart contract micro-payment process:
“First, TQNs are sent to the smart contract by the payer and the funds are then locked up.
The payer can now open a unidirectional channel to the payee.
From here on, all transfers happen off-chain as the payer sends MicroHashes to the payee.
When a party requests to close the channel, the payee can redeem the latest MicroHash.
The end balances are then settled with a second on-chain transaction which releases the TQN from the smart contract. The redeemed funds are sent to the payee while the remainder is sent back to the payer.
What are the Benefits of the Feature?
By using a MicroHash method, a user can pay-per-decisecond and send money around the globe within fractions of a second instead of waiting for confirmation.
Moreover, transferring value through the off-chain settlement layer improves scalability and reduces multiple thousands of transfers between parties to only two single on-chain transactions – one to open and one to settle the channel.”
A World of Possibilities
IOTA can profit from this and all such innovative solutions, as by having the option to develop smart contracts on the platform can make it more appealing for other developers.
The more developers work on the project, the more innovations are to be expected.
With MicroHash instant transactions, IOTA can even decide to challenge platforms aimed at the financial institutions and fast cross-border payment protocols.
However, since MicroHash is the first smart contract on the IOTA system, it is still too early to make any predictions.