Smart Contracts

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= Smart Contract is a formalisation of contractual relations


Description

by Steve Omohundro, George Gregory, and Tuna Oezer, ACM:

"Contract law has been fundamental to the formation of sophisticated human societies. Digital, self-enforcing “smart contracts” were proposed by Nick Szabo in 1993 (http://firstmonday.org/ojs/index.php/fm/article/view/548/469) but the economic and communications infrastructure at that time weren’t adequate to bring them into practice.

With the success of Bitcoin, several groups have proposed successor “Bitcoin 2.0″ designs that incorporate more sophisticated forms of smart contracts. The most developed of these systems is called “Ethereum” (https://www.ethereum.org/). It has a blockchain similar to bitcoin’s but allows has a Turing complete contracting language which is executed on the blockchain. This capacity allows complex contracts to be created and automatically enforced.

Ethereum’s rich contracting allows financial exchanges, insurance contracts, derivatives, and many other transactions to be precisely defined and executed. Digital services like renting out storage space, computational power, or bandwidth are also easy to implement. There are also proposals for extending contracts to include information and interactions in the physical world. These include reputation management, “smart property” ownership records for real estate and vehicles, earthquake or weather insurance, and automated room rental.

Modern corporations are defined by a set of contracts with investors, management, employees, customers, and suppliers. If these are automated, then “Decentralized Autonomous Organizations” (DAOs) become possible. These entities might buy and sell things, make decisions, and hire and fire contractors without human management. It is also possible to create human-run organizations which make decisions by voting on the blockchain. Adam Levine has proposed “Self Bootstrapped” organizations which issue cryptoequities to investors based on a mission statement and then create themselves using contractors guided by decentralized blockchain voting (https://bitsharestalk.org/index.php?topic=1854.0).

The ultimate expression of these ideas is the “Decentralized Autonomous Society” (DAS) (http://distributed-autonomous-society.quora.com/). Many of the current functions of government could be implemented more reliably and cheaply using smart contracts. For example, BitCongress (https://forum.ethereum.org/discussion/110/bitcongress-blockchain-based-voting-system) is a blockchain based voting system. Other proposals suggest blockchain implementations of taxation, the Federal Reserve, intellectual property, universal basic income, real estate records, etc." (http://steveomohundro.com/2014/10/22/cryptocurrencies-smart-contracts-and-artificial-intelligence/)

Applications

Time Banks

Rogelio Segovia:

"On Ethereum, you can manage on the Blockchain transactions, as in other cryptocurrencies, but also contracts managing these transactions. These contracts can be written in several languages (serpent, LLL and other specific ethereum languages). The creation of local or global currencies is therefore very much simplified." (email October 2014)

More Information

  • first theoretization by Nick Szabo:
  1. http://en.wikipedia.org/wiki/Nick_Szabo
  2. http://szabo.best.vwh.net/