Smart contracts
Encyclopedia
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.
schemes are smart contracts for copyright licenses, as are financial cryptography
schemes for financial contracts. Admission control schemes, token bucket
algorithms, and other quality of service
mechanisms help facilitate network service level agreement
s. Some P2P
networks need mechanisms to ensure that remote strangers contribute as well as consume resources, without requiring the overhead of actual legal contracts. Two examples of such protocols are the storage trading protocol in flŭd backup http://www.flud.org/wiki/index.php/Fairness and the Mojo Nation filesharing auction. Cryptographic authentication of one product part by another has been used, in lieu of a contract between manufacturer and consumer, to enforce tying
strategies.http://www.cpppe.umd.edu/rhsmith3/papers/Final_session1_anderson.pdf
The Bitcoin
protocol has extensive support for smart contracts. There are Bitcoin-based protocols for assurance contracts
, anti-spam deposits, dispute mediation
https://en.bitcoin.it/wiki/Contracts, and smart propertyhttps://en.bitcoin.it/wiki/Smart_Property. Smart property contracts provide automation of security interests over digitally controlled goods and services, and in particular secure and nonviolent repossession. For example it can be used to remotely buy, sell and loan cars or houses.
such as auctions to computational resource management
.
Meanwhile public key cryptography revolutionized what was possible in online security.
The phrase "smart contracts" was coined by computer scientist Nick Szabo, probably around 1993, to
emphasize the goal of bringing what he calls the "highly evolved" practices of
contract law and related business practices to the design of electronic commerce
protocols
between strangers on the Internet. Szabo, inspired by researchers like David Chaum
, also had a broader expectation that specification through clear logic, and verification or enforcement through cryptographic protocols and other digital security mechanisms, might constitute a sharp improvement over traditional contract law, even for some traditional kinds of contractual clauses (such as automobile security interests that provide for repossession) that could be brought under the dominion of computer protocols. Mark Miller
and others have stressed capabilities as the security basis of smart contracts, in contrast to Chaum and other researchers in the financial cryptography
community who have emphasized advanced cryptographic protocols to bring security and privacy to digital money, credentials, contract signing, auctions, and other commercial mechanisms. Most of the above-cited examples have however probably been developed largely independently of these lines of work, and indeed some proponents see smart contracts as the inevitable outcome of many independent efforts to improve transactions in various industries using digital technology. Several formal languages have been developed or proposed for specifying contractual clauses http://www.erights.org/, http://szabo.best.vwh.net/contractlanguage.html,http://research.microsoft.com/~simonpj/Papers/financial-contracts/pj-eber.ps. The IEEE has held two workshops on electronic contracting http://tab.computer.org/tcec/cec04/programWEC.html which have furthered this research.
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
, 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.
Examples
Digital rights managementDigital rights management
Digital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...
schemes are smart contracts for copyright licenses, as are financial cryptography
Financial cryptography
Financial cryptography is the use of cryptography in applications in which financial loss could result from subversion of the message system.Cryptographers think of the field as originating in the work of Dr David Chaum who invented the blinded signature...
schemes for financial contracts. Admission control schemes, token bucket
Token bucket
The token bucket is an algorithm used in packet switched computer networks and telecommunications networks to check that data transmissions conform to defined limits on bandwidth and burstiness ....
algorithms, and other quality of service
Quality of service
The quality of service refers to several related aspects of telephony and computer networks that allow the transport of traffic with special requirements...
mechanisms help facilitate network service level agreement
Service Level Agreement
A service-level agreement is a part of a service contract where the level of service is formally defined. In practice, the term SLA is sometimes used to refer to the contracted delivery time or performance...
s. Some P2P
Peer-to-peer file sharing
P2P or Peer-to-peer file sharing allows users to download files such as music, movies, and games using a P2P software client that searches for other connected computers. The "peers" are computer systems connected to each other through internet. Thus, the only requirements for a computer to join...
networks need mechanisms to ensure that remote strangers contribute as well as consume resources, without requiring the overhead of actual legal contracts. Two examples of such protocols are the storage trading protocol in flŭd backup http://www.flud.org/wiki/index.php/Fairness and the Mojo Nation filesharing auction. Cryptographic authentication of one product part by another has been used, in lieu of a contract between manufacturer and consumer, to enforce tying
Tying
Tying is the practice of making the sale of one good to the de facto or de jure customer conditional on the purchase of a second distinctive good . It is often illegal when the products are not naturally related, for example requiring a bookstore to stock up on an unpopular title before allowing...
strategies.http://www.cpppe.umd.edu/rhsmith3/papers/Final_session1_anderson.pdf
The Bitcoin
Bitcoin
Bitcoin is a decentralized, peer-to-peer network over which users make transactions that are tracked and verified through this network. The word Bitcoin also refers to the digital currency implemented as the currency medium for user transactions over this network...
protocol has extensive support for smart contracts. There are Bitcoin-based protocols for assurance contracts
Assurance contracts
An assurance contract, also known as a provision point mechanism, is a game theoretic mechanism and a financial technology that facilitates the voluntary creation of public goods and club goods in the face of the free rider problem....
, anti-spam deposits, dispute mediation
Mediation
Mediation, as used in law, is a form of alternative dispute resolution , a way of resolving disputes between two or more parties. A third party, the mediator, assists the parties to negotiate their own settlement...
https://en.bitcoin.it/wiki/Contracts, and smart propertyhttps://en.bitcoin.it/wiki/Smart_Property. Smart property contracts provide automation of security interests over digitally controlled goods and services, and in particular secure and nonviolent repossession. For example it can be used to remotely buy, sell and loan cars or houses.
History
Agoric computing was a movement in the 1970s and 80s to bring market mechanismssuch as auctions to computational resource management
Resource (computer science)
A resource, or system resource, is any physical or virtual component of limited availability within a computer system. Every device connected to a computer system is a resource. Every internal system component is a resource...
.
Meanwhile public key cryptography revolutionized what was possible in online security.
The phrase "smart contracts" was coined by computer scientist Nick Szabo, probably around 1993, to
emphasize the goal of bringing what he calls the "highly evolved" practices of
contract law and related business practices to the design of electronic commerce
Electronic commerce
Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...
protocols
between strangers on the Internet. Szabo, inspired by researchers like David Chaum
David Chaum
David Chaum is the inventor of many cryptographic protocols, including blind signature schemes, commitment schemes, and digital cash. In 1982, Chaum founded the International Association for Cryptologic Research , which currently organizes academic conferences in cryptography research...
, also had a broader expectation that specification through clear logic, and verification or enforcement through cryptographic protocols and other digital security mechanisms, might constitute a sharp improvement over traditional contract law, even for some traditional kinds of contractual clauses (such as automobile security interests that provide for repossession) that could be brought under the dominion of computer protocols. Mark Miller
Mark S. Miller
Mark S. Miller is an American computer scientist. He is known for his work as one of the participants in the 1979 hypertext project known as Project Xanadu; for inventing Miller Columns; as the co-creator of the Agoric Paradigm of market-based distributed secure computing; and the open-source...
and others have stressed capabilities as the security basis of smart contracts, in contrast to Chaum and other researchers in the financial cryptography
Financial cryptography
Financial cryptography is the use of cryptography in applications in which financial loss could result from subversion of the message system.Cryptographers think of the field as originating in the work of Dr David Chaum who invented the blinded signature...
community who have emphasized advanced cryptographic protocols to bring security and privacy to digital money, credentials, contract signing, auctions, and other commercial mechanisms. Most of the above-cited examples have however probably been developed largely independently of these lines of work, and indeed some proponents see smart contracts as the inevitable outcome of many independent efforts to improve transactions in various industries using digital technology. Several formal languages have been developed or proposed for specifying contractual clauses http://www.erights.org/, http://szabo.best.vwh.net/contractlanguage.html,http://research.microsoft.com/~simonpj/Papers/financial-contracts/pj-eber.ps. The IEEE has held two workshops on electronic contracting http://tab.computer.org/tcec/cec04/programWEC.html which have furthered this research.
See also
- Business Process ManagementBusiness process managementBusiness process management is a holistic management approach focused on aligning all aspects of an organization with the wants and needs of clients. It promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. BPM attempts to...
- Code and Other Laws of CyberspaceCode and Other Laws of CyberspaceCode and Other Laws of Cyberspace is a book by Lawrence Lessig. It has evolved into a partially wiki-written book Code v2 under a Creative Commons Attribution-ShareAlike 2.5 License.- Main topic :...
- Design by contractDesign by contractDesign by contract , also known as programming by contract and design-by-contract programming, is an approach to designing computer software...
- Digital credentialDigital credentialDigital credentials are the digital equivalent of paper-based credentials. Just as a paper-based credential could be a passport, a Driver's license, a membership certificate or some kind of ticket to obtain some service, such as a cinema ticket or a public transport ticket, a digital credential is...
- Electronic Data InterchangeElectronic Data InterchangeElectronic data interchange is the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents or business data from one computer system to another computer system, i.e...
- Secure multiparty computationSecure multiparty computationSecure multi-party computation is a sub field of cryptography. The goal of methods for secure multi-party computation is to enable parties to jointly compute a function over their inputs, while at the same time keeping these inputs private...
- Secure time-stampingTrusted timestampingTrusted timestamping is the process of securelykeeping track of the creation and modification time of a document. Securityhere means that no one — not even the owner of the document — should be able to change it once it has been recorded provided that the timestamper's integrity is never...
- WorkflowWorkflowA workflow consists of a sequence of connected steps. It is a depiction of a sequence of operations, declared as work of a person, a group of persons, an organization of staff, or one or more simple or complex mechanisms. Workflow may be seen as any abstraction of real work...
External links
- The Idea of Smart Contracts
- Formalizing and Securing Relationships on Public Networks
- The E Language: Cryptographic Capabilities for Distributed Smart Contracting
- The Digital Path: Smart Contracts and the Third World
- "Late on payments? Device won't let car engine start."
- Fairness in flŭd's Storage Protocol
- Bitcoin contracts
- Smart property with Bitcoin