If you have spent just 5-10 minutes in the crypto space you have certainly heard the term “smart contract” thrown around so much you would think it is the holy grail of crypto. But what even are they? What makes them “smart”? Why are they special and do they have any pitfalls? Well buckle up and get ready to geek out on the future of contracts with me!
What are Smart Contracts?
A smart contract is a computer program that automates the enforcement of the rules and regulations of a contract between two or more parties. Smart contracts are built on blockchain technology, making them transparent, tamper-proof, and decentralized. When the terms of the contract are agreed upon, the code will automatically execute and enforce the terms of the contract. The most popular platform for smart contracts is Ethereum which executes all smart contracts on its EVM. Many EVM clones have come up over time, and other technologies are now popular as well for smart contract execution.
Although often criticized and not necessarily true in all cases a lot of people say that smart contracts enforce “code is law” where the only true law is the code any given smart contract is built on. This, however, can be a rather dangerous notion as what if the code malfunctions? Or if it has a bad bug? Clearly that was not intended behaviour, and humans are not perfect. So should they truly be law and we accept the loss or is there something to be said about how it is more important to remember that every smart contract written has some actual intent behind it.
Benefits of Smart Contracts
One of the most significant benefits of smart contracts is that they provide transparency. Smart contracts provide an auditable record of the transaction that all parties can see. They can also automate many processes that would otherwise require manual intervention, which can reduce transaction costs and increase the speed of execution.
Another key benefit of smart contracts is trust. By being self-executing and tamper-proof, they increase trust between parties involved in a transaction. They can be designed to be fair and just, reflecting our collective aspirations for a better world.
Potential Dangers of Smart Contracts
Unfortunately, not everything is perfect as smart contracts also have some potential dangers. The security risks associated with smart contracts are one potential danger. Like all software, smart contracts can contain vulnerabilities that can be exploited by hackers. Even a single flaw in the code could result in the loss of funds, privacy breaches, or other negative outcomes.
Another potential danger is the lack of flexibility. Smart contracts are designed to execute according to pre-defined rules and conditions, which can be problematic if those conditions are not sufficiently flexible. If the contract's terms do not account for unexpected or changing circumstances, the contract may not be able to adapt and could lead to unintended consequences.
Philosophical Implications of Smart Contracts
Smart contracts represent a fundamental shift in the way we approach contracts and trust in the digital age. They challenge us to question the traditional role of intermediaries and institutions in facilitating transactions, and force us to rethink the relationship between technology and human agency.
Smart contracts represent a convergence of technology and philosophy. At their core, they are built on the principles of transparency, immutability, and trust. The underlying code and architecture of a system are imbued with values and principles that reflect our collective aspirations for a better world.
As we rely more and more on these systems to automate complex processes, we must ensure that they are designed and implemented in a way that reflects our values and priorities. They must not undermine the human agency and autonomy that are essential to a just and equitable society.
Smart contracts represent a fundamental shift in the way we approach contracts and trust in the digital age. They have the potential to revolutionize the way we do business, increasing efficiency, reducing costs, and improving transparency. However, they also come with potential risks that should be taken into consideration. As we continue to explore the possibilities of this new technology, we must remain mindful of its philosophical implications and ensure that it serves the greater good.