Questions about Marlowe and Financial Contracts

Why should Financial Institutions use Marlowe and Cardano?
What defines a financial contract ?
Why is it better to run them OnChain?

Lets take the “escrow” as an example.

Just trying to fully understand the product :slight_smile:

Hey @Pierre_Pt so a little bit of my personal experience, but i need to say im not so deep into the technical thing and this developer area isnt the space for me.

Why should Financial Institutions use Marlowe and Cardano?:
Marlowe is an Smart-Contract Builder where you can build this natively on the blockchain. In my opinion this isnt for financial institutions, its more for the regular business and end users.
Actual if a business want to offer complex financial instruments they need to do this over their bank. For example:
If a company want to offer shares and want to be listet on an exchange they do this over their bank.
If a company want to offer an corporate bond they do this over their bank.
If two people want to trade an property they do this with contracts or in germany even over an notary public which acts as an Trustee.

So the problem here is that this companys need to trust and also pay an third party. With Marlowe and Cardano they can offer and build this financial instruments by themself.

What defines a financial contract?
In the world of finances a financial contract is the same as a financial instrument. If you know shares, bonds or certificates which are traded on an exchange you know what it is. A simple example:
With a share, you get ownerrights and dividends from the company in exchange for capital. And there can happen so much things that normal transactioncs cant show.

So you can say that a financial contract is everything where more happens that only a transaction for something. As example: You exchange rights for money over a certain time that starts at the point where Ada rise over 2 US$ but this need to happen right before Cardano post an “Hello” under this post.

Why is it better to rum them OnChain?
There my knowlegde ends sorry.

I hope i could help you a little bit.


Hey @Jonny22 thank you so much for your answer. It helpped me alot !

What do you mean with that ?
Greetings from Germany :slight_smile:

I mean with this that a financial contract can transfer things that a normal transaction cant.

As an example:
You want to build an house,
10% at the beginning
40% at the time where they build it
50% when they finished it

So with normal transactions you only pay

But with an smart contract you can write this as code that run by itself. The code is your trustee, it is your third party and so on.

1 Like