Professor Michael Mainelli is executive chairman of Z/Yen Group and principal advisor to Long Finance. Bob McDowall is an Associate of Z/Yen and additionally chairman of the policy and finance committee, States of Alderney, Channel Islands.
In this opinion piece, Mainelli and McDowall explore challenges facing blockchain-based smart contracts, putting forth recommendations for how they can be best utilized in the short term as they mature. How smart is your code? So-called " smart contracts " are science fiction realized. Executable pieces of code stored on a mutual distributed ledger for future execution bind people and payments to actions and outcomes.
Computer scientist Nick Szabo has promoted the term since the early 1990s and describes bringing the "highly evolved" practices of contract law to the design of electronic commerce protocols between strangers on the Internet. Interest in the term “smart contract” has risen recently in line with interest in bitcoin and blockchain.
Claims have been made that virtually all of finance can move to smart contracts when combined with an appropriate payment system, often a cryptocurrency.
Here we draw a distinction between smart contracts and “dumb code”.
Computer code can be extremely stupid. Bits of code are Sorcerer’s Apprentices, doing what we thought was our bidding at the time we wrote the code, oblivious to changes in our intentions.
Author Larry Niven explains: “That’s the thing about people who think they hate computers. What they really hate is lousy programmers.” Code embedded in mutual distributed ledgers is real and useful, and sometimes dangerous. If that code is written to emulate real-world contracts it should perhaps more appropriately be called a “code contract”.
Smart contracts have a number of parts. The transactions must involve more than the mere transfer of a virtual currency from one person to another (i.e. a payment transfer) and involve two […]
