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Smart Contracts that are Too Big to Fail

By jer979!! | www.publish0x.com/jer979 | 28 Sep 2022


The other day, we introduced the concept of Composability vs. Interoperability, inspired by the article, Composability in the Context of Defi.

In that post, I focused a lot on the benefits of composability, calling it the “superpower” of crypto.

That’s all true, however, it does come with risk and this risk is known as “Smart Contract Failure.”

Basically, if any one of the smart contracts which serve as the proverbial “money legos” doesn’t work the way it is intended, the financial app that it underpins is at risk and, because of interoperability and composability, there could be cascading effects throughout the entire ecosystem (and beyond).

Said better in the original article:

The key systemic risk associated with composable systems is Smart Contract Failure. Since every platform and protocol is built with Smart Contracts interacting and “speaking to each other”, Smart Contract failure in a component of a composable system could have a cascading financial effect.

It’s “too big to fail” but without the backstop of a central bank.

Ouch.

This is why, in order for DeFi to win (which it must), we have to have a system that dramatically minimizes the possibility and probability of smart contract failure.

In so doing, developers can feel much more secure about building dapps and more secure about the platform on which they are choosing to build.

So far, despite a perception among a small handful that the core infrastructure of Web3 has been finalized, I don’t think we have evidence that there are too many low-risk smart contract environments that don’t compromise on the superpower of composability.

This is why the game isn’t over yet.

Good news is that I know of at least one.

The question is whether the story can be told effectively.

How do you rate this article?

9



www.publish0x.com/jer979
www.publish0x.com/jer979

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