If you’ve been following this series on blockchain, you now know blockchain’s disruption beyond bitcoin, how that disruption is affecting different industries, and how to get yourself ready for that cross-industry disruption. Now, it’s time to delve into another exciting application of blockchain: smart contracts. Smart contracts are a transformative new technology that can revolutionize the way businesses process deals.
So What’s Ethereum, Anyway?
Simply put, Ethereum is a cryptocurrency you can use to build “smart contracts.” You may be thinking, if contracts start getting smart, how long do I have my job as a lawyer? Spoiler alert: The term “smart contracts” is a mis-descriptive term, at least to some extent. Smart contracts are neither “smart,” nor really “contracts,” at least not in the classic sense of the word! First, we must explore the concept of “trust” and the related concept of “permanence.” Then, we will discuss the word “contract.” Understanding these terms is the secret to understanding “smart contracts” and harnessing their power.
Let’s (finally) set this agreement in stone!
Blockchain, for all its fascinating intricacy, is really just a kind of material. Through the special mix of cryptography and decentralization that we have discussed earlier in this series, permanence, transparency, and neutrality are created. Setting something on a blockchain is like setting something in stone. It makes trust easier, because you can’t easily change it, and it’s highly visible.
Think about a blockchain as a piece of stone you can write things on (instead of a piece of currency). We have a pretty high level of trust in stone. Stone is also permanent, unlike other materials like paper. I can point to stone in the future for evidence. Stone equals solid, trusted, and tangible proof — not just any material will do!
“Contract” Is A Very Loaded, Overused Term
The word “contract” has a lot of baggage, especially if you negotiate contracts as part of your job. But “smart…