Smart Contracts, you may have seen this term thrown around on Twitter or maybe even in the news, but very few know what they are and why they’re important. Personally, I thought Vitalik Buterin created smart contracts while creating Ethereum; it turns out, the idea was created and written about over 20 years ago!
In 1996, a legal scholar and computer scientist named Nick Szabo wrote an article titled “Smart Contracts”. In this article, he outlined the definition of a smart contract: “a set of promises, specified in digital form, including protocols within which the parties perform on the other promises”, and laid out a vision for the digital age where users could integrate a smart contract into the possession of physical property (Smart Property) and introduced the idea of Virtual Personas.
Personally, I had no idea about Nick Szabo until I came across a podcast episode called The Quiet Master of Cryptocurrency – Nick Szabo. In this discussion, Tim Ferriss discusses the blockchain, cryptocurrencies, smart contracts, and much more with Nick and Naval Ravikant.
So, back to smart contracts. Essentially, smart contracts are created using code that allow a given transaction/task to be completed based on parameters that can not be changed once written to the blockchain. For example, if you wanted to send 1 Bitcoin to Bob on July 1, then the code would execute when the date is July 1, and Bob would receive 1 Bitcoin.
It is very easy to see where this sort of technology can lead. Imagine a world where there are no intermediaries…no middle men. Among the possibilities are the ability for a musician to distribute a digital copy of their music to their fans without a record label, banking without the use of a bank, and a more secure cloud storage environment.
I often feel like a crazy person when I talk about these possibilities…”it’s going to change everything!”, “we’ll have an entire world operating on code, instead stacks of paper”. But, I’m not the only one that sounds crazy. In the aforementioned podcast episode, when talking about how disruptive cryptocurrencies are and how easily they are to store value, Naval Ravikant said “I could cross borders with a billion dollars in my brain”.
What do you think? What do you think we’ll use smart contracts for?