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The blockchain platform focused on the OpenLaw law has previously announced that it is working with Rohmbus to initiate the automation of standardized derivative contracts. These derivative contracts could be enforceable in court and work similarly to traditional contracts, but faster, cheaper and more accessible.
In a blog post announcing the news, OpenLaw shows an example of how the partnership will work, with an automated standard call option contract based on the current price of ETH on gold.
"One of the visions of Ethereum is to build an open, more efficient, fair and globally accessible financial system," explains OpenLaw.
OpenLaw uses the Ethereum ecosystem to build the future of law, including legally binding smart contracts and other blockchain-based legal agreements.
Thanks to the partnership with the Rhombus oracle provider, OpenLaw will now present some derivative contracts on its market.
"In OpenLaw, we have been fascinated by the derivatives market and the blockchains are rapidly maturing to the point where we can begin automating the creation and execution of these agreements in a legally compliant and familiar way."
Rhombus is an oracle provider that offers several ways to securely provide real calculation data in an intelligent contract.
Like other oracles, Rhombus of oracles allow smart contracts to use real-world data to execute the smart contract. OpenLaw option contracts will use these oracles to retrieve real data on, for example, the price of raw materials such as gold.
"Using our Oracle tools and services provided by Rhombus, we have the ability to simplify the creation, execution and regulation of a derivative using blockchain technology and in a format compatible with the legacy world. a standard call option contract and we have integrated with a personalized Rhombus oracle based on the current price of ETH on gold. "
You can view a video that highlights the intelligent contract of derivatives based on Ethereum here:
In that video we see how Rhombus implemented his oracular contract. So, OpenLaw has written an intelligent contract that is based on this oracle. The oracle was cryptographically linked to the underlying agreement. This allows you to execute the smart contract based on the price of the pair of goods in question, in this case ETH and gold.
Once the smart contract on the Ethereum network is made and available, the parties can execute the option in a matter of seconds. Here's how it would work from the customer's point of view:
"For example, if the oracle shows a current price of 10 ETH to Troy Ounce, the customer may generate an option contract whereby the holder of the option has the right to purchase 1 Troy Ounce for 11 ETH, 24 hours from the present. "
In this intelligent contract, the user has a choice to make after 24 hours. After 24 hours passes, if the ETH / gold price is higher than 11 ETH, the user has the option (not the obligation) to complete the purchase. If the user decides to exercise the option, however, 11 ETH is transferred and the user automatically receives a token that represents one & rsquo; ounce of gold held in a vault.
OpenLaw contracts are enforceable in court
Smart contracts are not just a nice digital toy: they are legally binding contracts that can be enforced in court.
Contracts are useless if they are not legally binding. The whole point of a contract is to create a legally binding agreement between two parties. OpenLaw recognizes that if smart contracts and decentralized governance systems are about to take off, smart contracts must be legally binding in traditional classrooms.
The future of finance: OpenLaw, using the @RhombusNetwork oracle, it is opening the derivatives market. We have simplified the creation and execution of a legally applicable option contract, reducing the need for intermediaries. 💹 https://t.co/tr03ezNoGl#ethereum #fintech pic.twitter.com/KA0kofbnbH
– OpenLaw (@OpenLawOfficial) 5 December 2018
That's why OpenLaw's smart contracts are legal agreements. With this last call option, the customer has the legal right to be paid through the options contract.
The ultimate goal of this system is to create a system of legal documents, smart contracts and oracles to create a more transparent financial ecosystem. The ETH / gold example listed above is just the tip of the iceberg. In the future, you can create multiple options contracts using the OpenLaw smart contract platform and the Rhombus oracles, eventually leading to a cheaper and faster financial ecosystem.
Today, OpenLaw continues to build "the future of law" using blockchain technology. The partnership with Rhombus now allows OpenLaw to create options contracts that link to real commodity prices. In the future, this partnership could lead to the creation of an entire ecosystem of options based on the OpenLaw blockchain.
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