corda/docs/source/tut-two-party-contract.rst

Writing the contract

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

• A cash CorDapp will 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 will not want to allow users to finalise a trade without the agreement of their counterparty

In Corda, we impose constraints on how states can evolve using contracts.

Note

Contracts in Corda are very different to the smart contracts of other distributed ledger platforms. They are not stateful objects representing the current state of the world. Instead, like a real-world contract, they simply impose rules on what kinds of transactions are allowed.

Every state has an associated 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)
}

We can see that Contract expresses its constraints 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)

We might also want to impose some constraints on the properties of the issued IOUState:

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

And finally, we'll want to impose constraints on who is required to sign the transaction:

• The IOU's lender must sign
• The IOU's borrower must sign

We can picture this transaction as follows:

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:

example-code/src/main/kotlin/net/corda/docs/tutorial/twoparty/contract.kt

example-code/src/main/java/net/corda/docs/java/tutorial/twoparty/IOUContract.java

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 for different types of transaction. For example, a transaction proposing the creation of an IOU could have to meet 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 by implementing verify. 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

As well as to the transaction's attachments and time-window, which we won't use here.

Based on the constraints enumerated above, we need to 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.

If the Create command isn't present, or if the transaction has multiple Create commands, an exception will be thrown and 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 block. 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 causes the transaction to be considered invalid.

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, extracting the transaction's single IOUState and assigning it to a variable.

Signer constraints

Finally, we require both the lender and the borrower to be required signers 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.

This is an absolutely essential constraint - it ensures that no IOUState can ever be created on the ledger without the express agreement of both the lender and borrower nodes.

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

Next, we'll update the IOUFlow so that it obeys these contract constraints when issuing an IOUState onto the ledger.