Writing the contract

In Corda, the ledger is updated via transactions. Each transaction is a proposal to mark zero or more existing states as historic (the inputs), while creating zero or more new states (the outputs).

It’s easy to imagine that most CorDapps will want to impose some constraints on how their states evolve over time:

  • A cash CorDapp would not want to allow users to create transactions that generate money out of thin air (at least without the involvement of a central bank or commercial bank)
  • A loan CorDapp might not want to allow the creation of negative-valued loans
  • An asset-trading CorDapp would not want to allow users to finalise a trade without the agreement of their counterparty

In Corda, we impose constraints on what transactions are allowed using contracts. These contracts are very different to the smart contracts of other distributed ledger platforms. In Corda, contracts do not represent the current state of the ledger. Instead, like a real-world contract, they simply impose rules on what kinds of agreements are allowed.

Every state is associated with a contract. A transaction is invalid if it does not satisfy the contract of every input and output state in the transaction.

The Contract interface

Just as every Corda state must implement the ContractState interface, every contract must implement the Contract interface:

interface Contract {
    // Implements the contract constraints in code.
    @Throws(IllegalArgumentException::class)
    fun verify(tx: LedgerTransaction)

    // Expresses the contract constraints as legal prose.
    val legalContractReference: SecureHash
}

You can read about function declarations in Kotlin here.

We can see that Contract expresses its constraints in two ways:

  • In legal prose, through a hash referencing a legal contract that expresses the contract’s constraints in legal prose
  • In code, through a verify function that takes a transaction as input, and:
    • Throws an IllegalArgumentException if it rejects the transaction proposal
    • Returns silently if it accepts the transaction proposal

Controlling IOU evolution

What would a good contract for an IOUState look like? There is no right or wrong answer - it depends on how you want your CorDapp to behave.

For our CorDapp, let’s impose the constraint that we only want to allow the creation of IOUs. We don’t want nodes to transfer them or redeem them for cash. One way to enforce this behaviour would be by imposing the following constraints:

  • A transaction involving IOUs must consume zero inputs, and create one output of type IOUState
  • The transaction should also include a Create command, indicating the transaction’s intent (more on commands shortly)
  • For the transactions’s output IOU state:
    • Its value must be non-negative
    • The lender and the borrower cannot be the same entity
    • The IOU’s lender must sign the transaction

We can picture this transaction as follows:

_images/simple-tutorial-transaction.png

Defining IOUContract

Let’s write a contract that enforces these constraints. We’ll do this by modifying either TemplateContract.java or App.kt and updating TemplateContract to define an IOUContract:

...

import net.corda.core.contracts.*

...

class IOUContract : Contract {
    // Our Create command.
    class Create : CommandData

    override fun verify(tx: LedgerTransaction) {
        val command = tx.commands.requireSingleCommand<Create>()

        requireThat {
            // Constraints on the shape of the transaction.
            "No inputs should be consumed when issuing an IOU." using (tx.inputs.isEmpty())
            "There should be one output state of type IOUState." using (tx.outputs.size == 1)

            // IOU-specific constraints.
            val out = tx.outputs.single().data as IOUState
            "The IOU's value must be non-negative." using (out.value > 0)
            "The lender and the borrower cannot be the same entity." using (out.lender != out.borrower)

            // Constraints on the signers.
            "There must only be one signer." using (command.signers.toSet().size == 1)
            "The signer must be the lender." using (command.signers.contains(out.lender.owningKey))
        }
    }

    // The legal contract reference - we'll leave this as a dummy hash for now.
    override val legalContractReference = SecureHash.zeroHash
}

package com.template.contract;

import com.template.state.IOUState;
import net.corda.core.contracts.AuthenticatedObject;
import net.corda.core.contracts.CommandData;
import net.corda.core.contracts.Contract;
import net.corda.core.transactions.LedgerTransaction;
import net.corda.core.crypto.SecureHash;
import net.corda.core.identity.Party;

import static net.corda.core.contracts.ContractsDSL.requireSingleCommand;
import static net.corda.core.contracts.ContractsDSL.requireThat;

public class IOUContract implements Contract {
    // Our Create command.
    public static class Create implements CommandData {}

    @Override
    public void verify(LedgerTransaction tx) {
        final AuthenticatedObject<Create> command = requireSingleCommand(tx.getCommands(), Create.class);

        requireThat(check -> {
            // Constraints on the shape of the transaction.
            check.using("No inputs should be consumed when issuing an IOU.", tx.getInputs().isEmpty());
            check.using("There should be one output state of type IOUState.", tx.getOutputs().size() == 1);

            // IOU-specific constraints.
            final IOUState out = (IOUState) tx.getOutputs().get(0).getData();
            final Party lender = out.getLender();
            final Party borrower = out.getBorrower();
            check.using("The IOU's value must be non-negative.",out.getValue() > 0);
            check.using("The lender and the borrower cannot be the same entity.", lender != borrower);

            // Constraints on the signers.
            check.using("There must only be one signer.", command.getSigners().size() == 1);
            check.using("The signer must be the lender.", command.getSigners().contains(lender.getOwningKey()));

            return null;
        });
    }

    // The legal contract reference - we'll leave this as a dummy hash for now.
    private final SecureHash legalContractReference = SecureHash.Companion.getZeroHash();
    @Override public final SecureHash getLegalContractReference() { return legalContractReference; }
}

If you’re following along in Java, you’ll also need to rename TemplateContract.java to IOUContract.java.

Let’s walk through this code step by step.

The Create command

The first thing we add to our contract is a command. Commands serve two functions:

  • They indicate the transaction’s intent, allowing us to perform different verification given the situation. For example, a transaction proposing the creation of an IOU could have to satisfy different constraints to one redeeming an IOU
  • They allow us to define the required signers for the transaction. For example, IOU creation might require signatures from the lender only, whereas the transfer of an IOU might require signatures from both the IOU’s borrower and lender

Our contract has one command, a Create command. All commands must implement the CommandData interface.

The CommandData interface is a simple marker interface for commands. In fact, its declaration is only two words long (Kotlin interfaces do not require a body):

interface CommandData

The verify logic

Our contract also needs to define the actual contract constraints. For our IOU CorDapp, we won’t concern ourselves with writing valid legal prose to enforce the IOU agreement in court. Instead, we’ll focus on implementing verify.

Remember that our goal in writing the verify function is to write a function that, given a transaction:

  • Throws an IllegalArgumentException if the transaction is considered invalid
  • Does not throw an exception if the transaction is considered valid

In deciding whether the transaction is valid, the verify function only has access to the contents of the transaction:

  • tx.inputs, which lists the inputs
  • tx.outputs, which lists the outputs
  • tx.commands, which lists the commands and their associated signers

Although we won’t use them here, the verify function also has access to the transaction’s attachments, time-windows, notary and hash.

Based on the constraints enumerated above, we’ll write a verify function that rejects a transaction if any of the following are true:

  • The transaction doesn’t include a Create command
  • The transaction has inputs
  • The transaction doesn’t have exactly one output
  • The IOU itself is invalid
  • The transaction doesn’t require the lender’s signature

Command constraints

Our first constraint is around the transaction’s commands. We use Corda’s requireSingleCommand function to test for the presence of a single Create command. Here, requireSingleCommand performing a dual purpose:

  • Asserting that there is exactly one Create command in the transaction
  • Extracting the command and returning it

If the Create command isn’t present, or if the transaction has multiple Create commands, contract verification will fail.

Transaction constraints

We also want our transaction to have no inputs and only a single output - an issuance transaction.

To impose this and the subsequent constraints, we are using Corda’s built-in requireThat function. requireThat provides a terse way to write the following:

  • If the condition on the right-hand side doesn’t evaluate to true...
  • ...throw an IllegalArgumentException with the message on the left-hand side

As before, the act of throwing this exception would cause transaction verification to fail.

IOU constraints

We want to impose two constraints on the IOUState itself:

  • Its value must be non-negative
  • The lender and the borrower cannot be the same entity

We impose these constraints in the same requireThat block as before.

You can see that we’re not restricted to only writing constraints in the requireThat block. We can also write other statements - in this case, we’re extracting the transaction’s single IOUState and assigning it to a variable.

Signer constraints

Finally, we require the lender’s signature on the transaction. A transaction’s required signers is equal to the union of all the signers listed on the commands. We therefore extract the signers from the Create command we retrieved earlier.

Progress so far

We’ve now written an IOUContract constraining the evolution of each IOUState over time:

  • An IOUState can only be created, not transferred or redeemed
  • Creating an IOUState requires an issuance transaction with no inputs, a single IOUState output, and a Create command
  • The IOUState created by the issuance transaction must have a non-negative value, and the lender and borrower must be different entities

Before we move on, make sure you go back and modify IOUState to point to the new IOUContract class.

The final step in the creation of our CorDapp will be to write the IOUFlow that will allow a node to orchestrate the creation of a new IOUState on the ledger, while only sharing information on a need-to-know basis.