Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause. Smart contracts usually also have a user interface and often emulate the logic of contractual clauses. Proponents of smart contracts claim that many kinds of contractual clauses may thus be made partially or fully self-executing, self-enforcing, or both. Smart contracts aim to provide security superior to traditional contract law and to reduce other transaction costs associated with contracting.
The implementation layer of all these fancy dreams is pretty simple: a smart contract envisages taking certain kinds of simple paper agreements and representing them as software.
Mostly we deal with web sites, and show the people in the system who help us (like airline gate staff) proof that we’ve completed the transaction with the computers, for example by showing them our boarding passes. We go about our business by filling in some forms and computers go out and sort it all out for us, no humans required except when something goes wrong.
what Ethereum offers is a “smart contract platform” which takes a lot of that expensive, difficult stuff and automates it. It’s early days yet, so we can’t do everything, but we are seeing a surprising amount of capability even from the first version of the world’s first generally available smart contract platform.
So how does a smart contract platform work? Just like bitcoin, lots and lots of people run the software, and get a few tokens (ether) for doing it. Those computers in the network all work together and share a common database, called the blockchain. Bitcoin’s blockchain stores financial transactions. Ethereum’s blockchain stores smart contracts. You don’t rent space in a data center and hire a bunch of system administrators. Rather, you use the shared global resource, the “world computer” and the resources you put into the system go to the people whose computers make up this global resource. The system is fair and equitable.
The smart contracts themselves, which run on the Ethereum platform, are written in simple languages: not hard to learn for working programmers. There’s a learning curve, but it’s not different from things that working professionals do every few years as a matter of course. Smart contracts are typically short: 500 lines would be long. But because they leverage the huge power of cryptography and blockchains, because they operate across organizations and between individuals, there is enormous power in even relatively short programs.
We think this is kind of a big deal.
A smart contract can store records on who owns what. It can store promises to pay, and promises to deliver without having middleman or exposing people to the risk of fraud. It can automatically move funds in accordance with instructions given long in the past, like a will or a futures contract. For pure digital assets there is no “counterparty risk” because the value to be transferred can be locked into the contract when it is created, and released automatically when the conditions and terms are met: if the contract is clear, then fraud is impossible, because the program actually has real control of the assets involved rather than requiring trustworthy middle men like ATM machines or car rental agents.
what if ownership becomes (could/should be) irrelevant (gupta roadblock law). what if contracts (could/should be)… are irrelevant. meaning .. what if we work more on helping/letting people be what they desire to be.. rather than regulating their promises/transactions. seems we have a better shot at betterness that way. ie: look at where we are now.. with all the b. not sure putting the b on free steroids is a long term/healthy fix.
we have the means now – so why don’t we use tech to coordinate/regroup/re self organize us.. rather than making b more efficient… ie: what if our thinking about consensus is what’s getting in the way. i’m seeing Louis‘s magnets pulling the puck. ie: why is there a puck. we have the means now – so why don’t we use tech to coordinate/regroup/re self organize us.. rather than keep on forcing us to consensus..
And this system runs globally, with tens and eventually hundreds of thousands of computers sharing the workload and, more importantly, backing up the cultural memory of who promised what to whom. Yes, fraud is still possible, at the edge of the digitial, but many kinds of outright banditry are likely to simply die out: you can check the blockchain and find out if the house has been sold twice, for example.
imagine ie: banditry dies out if everyone has something else to do…
Who really owns this bridge in Brooklyn? What happens if this loan defaults? All there, as clear as crystal, in a single shared global blockchain. That’s the plan, anyway.
MIT (@MIT) tweeted at 5:43 AM – 10 Oct 2016 :
MIT News: Economist Bengt Holmström shares Nobel Prize in #economics https://t.co/A5Oz4zcjWvhttps://t.co/orMaVBDolb (http://twitter.com/MIT/status/785445766051528704?s=17)
“MIT is a wonderful place,” Holmström said, noting that he was “very glad” to represent the Institute as a Nobel winner. Holmström holds a joint appointment between the Department of Economics and the MIT Sloan School of Management.
The Royal Swedish Academy of Sciences, in granting the award, notes that *contracts “are essential to the functioning of modern societies,” and states that the work of the two economists had been “invaluable in helping us understand real-life contracts and institutions, as well as the potential pitfalls when designing new contracts.”
The Academy’s award cites multiple aspects of Holmström’s work on contracts that have contributed significantly to our understanding of the issue, dating to the 1970s.
One of these, the “informativeness principle,” was developed and published by Holmström in 1979, addressing the “principal-agent problem” (the structure of contracts between employers and employees). This principle suggests that optimal contracts should structure compensation based on “all outcomes that can potentially provide information about actions that have been taken,” as the Academy observes.
oy.. *contracts as essential to a functioning society..
via michel fb share:
wow, a very specific linkage here between commons governance and smart contracts:
“Ostrom’s principles can give us great insights into why economic cooperation can succeed or fail. What if we can compile Ostrom’s principles into a software product? Basically an economy-to-go for all the regions where Ostrom’s principles are naturally missing? Would this “deliverable economy” then indeed enable cooperation and sustainable self-governance?
Astonishingly, it is possible to translate Ostrom’s groundbreaking ideas into digital equivalences — thanks to smart contracts.”
AI smart contractsleverage this new kind of programming.They are machine learning algorithms with blockchain-based business logic — or in other words,an analytical machine that can guide human behavior via designed incentives.
i’m thinking if we think we need incentives.. we’re doing it wrong
In this blog post, we argue that these incentive programs are highly scalable and might even provide a design-principled solution to one of the biggest environmental problems in human society: The Tragedy of the Commons.
biggest environ problems isn’t tragedy of commons.. it’s that we disturbed the undisturbed ecosystem.. thinking.. tragedy of commons.. is keeping us in that disturbed state.. we need to let go .. set people truly free.. and trust that dance