What does the 'signatory' keyword means in daml representation? - daml

Question

In a DAML contract, what does the signatory keyword do? For example, in the Iou contract, what does the line signatory issuer, owner actually mean?
Does it mean both owner and issuer should be same?

Answer 1

One of the compelling features of DAML as a modeling language is that it is designed to help solve problems involving authorization and delegation. To achieve this DAML has a first class type Party that represents independent ledger participants, and every contract on the ledger must be authorized by one or more parties before it can be created.
The signatory expression in a template defines who must authorize the creation of a contract instance of this template. It does so in terms of the data contained within the proposed contract instance — this means that any party who can see a transaction that attempts to create a contract also has enough data to verify the creation was properly authorized.
In the case of the Iou contract:
template Iou
with
issuer : Party
owner : Party
currency : Text
amount : Decimal
observers : [Party]
where
signatory issuer, owner
...
A party wishing to create an Iou must fill in the record: issuer, owner, currency, etc. Then they must pass that record to the create function within a transaction submitted to the ledger. That call to create must be authorized by issuer and owner, but does not require authorization by observers as they are not listed as a signatory.
Note that it is legal for issuer and owner to be the same party. In fact, this would be the only way for the create to be legally submitted directly to the ledger as individual ledger interactions can only be authorized by a single party. Larger authorization sets must occur as a part of a larger transaction using delegated authority from other contracts already on the ledger.
For more on this, and especially on how to do authority delegation, see the DAML documentation: https://docs.daml.com/concepts/ledger-model/ledger-structure.html
For a worked example, see: https://docs.daml.com/daml/patterns/initaccept.html and the other examples in the Patterns section of the DAML docs.