Smart Contracts lie at the heart of Proof of Stake. If blockchain gives trustworthy data security, then smart contracts give trustworthy and automated code execution between two parties without a central coordinator.
Smart Contracts are encoded on the blockchain. Thereby they provide the same level of data security as blockchains.
Smart Contracts are openly visible on the blockchain meaning that anyone can check the correctness of previously agreed rules.
Because Smart Contracts run on a blockchain, there is no single source of control. Anyone can constantly check the updates to the blockchain and if anything is changed on the previously agreed rules of the Smart Contract, other participants on the network will reject this update.
Once a Smart Contract is on the network, it is on the network. Due to the previously discussed characteristics, it is close to impossible to change pre-agreed Smart Contract rules.
How does Pool of Stake use Smart Contracts?
Pool of Stake runs exclusively on Smart Contracts which makes it a fully decentralized pool. Pool of Stake runs on Smart Contracts embedded in all participating PoS blockchains (e.g. Qtum, BOScoin).
Smart Contracts have 3 main functions on PSK:
Create a decentralized network weight on the native blockchain in order to forge
Make automatic transactions of staked PoS coins and IOU tokens which can be triggered only by the user (e.g. for initial PoS deposit or for the withdrawal)
Automatically transfer IOU tokens into the user’s wallet for newly generated rewards
One big challenge to Smart Contract security are bugs! The cryptoworld has wittnessed spectacular hacks due to a bug in a Smart Contract, e.g. the DAO hack. This shows how immensely important Smart Contract audits by professional third party auditors is. Swiss Financial Market Supervisory Authority FINMA included Smart Contract auditing as a legal requirement for blockchain companies registered in Switzerland. Since Pool of Stake is a Swiss-based company we cooperate with Maveric SA for all our Smart Contract audits in order to be fully complient with the Swiss law and provide maximum security for our users.
What does this imply?
The PSK team cannot alter Smart Contract rules
This means that PSK is a zero trust pool Smart Contracts are distributed on the entire network, which means that it is fully decentralized