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Excellent and very clear summary, as far as I can tell. My only niggle is that smart contracts are, in practice, neither legally binding nor unstoppable... the

Excellent and very clear summary, as far as I can tell. My only niggle is that smart contracts are, in practice, neither legally binding nor unstoppable... the story of the DAO Hack/Hard Fork [0] proved that consensus can overrule "the invisible hand of the blockchain" during a particularly egregious incident. [0] https://ogucluturk.medium.com/the-dao-hack-explained-unfortunate-take-off-of-smart-contracts-2bd8c8db3562 https://ogucluturk.medium.com/the-dao-hack-explained-unfortu...

tornato7 4y ago
Everything comes down to social consensus at the end of the day. But for 99.9999% of transactions you can count on immutability.
- pjc50 4y ago
  "99% of the time it works every time"
  - Intermernet 4y ago
    "One in a million chances come up nine times out of ten"
  - nisegami 4y ago
    That's substantially higher than the legal system in any country
- jollybean 4y ago
  Except when you can't and you must undo a transaction, and if you can't, you can't use it. Like for example in the world of finance, where you have to be able to backtrack. Meaning such 'contracts' are least useful for things like, well, 'currency' and 'stores of value' ... hmm ...
  - syzygyhack 4y ago
    Sounds like you haven't wrapped your head around the basics of smart contracts. Yes, a blockchain gives you an (ideally) immutable foundation. No, that doesn't mean that every transaction that invokes a smart contract has to be immutable. If a smart contract for a particular use case needs to have the ability to "backtrack", so it can, there's nothing stopping it.
    - johnnymorgan 4y ago
      Great reply, the rule for thumb of 'anything that can be done manually can be automated' applies here. Needs backtrack, code it in, then everyone knows how the rules work and there isn't any side deals or exceptions. Cheers!
- bko 4y ago
  The problem with exploitable systems is that the 0.00001% is not random. It's not like a random 1 in a million transactions is dropped. I think the bigger issue is that the system is somewhat arbitrarily controlled by the large players. That could work out well in some cases (funds hacked are returned) but it could also be less optimal (e.g. you're thrown on some list and all of a sudden your transactions are not valid). We've already seen hackers and obviously malicious actors dinged, which is good. But this opens up an avenue for things like forcing participants to go through regular banking protocols that starts to affect more and more people (e.g. political dissidents). By then you just recreated the modern financial system with all its flaws and gatekeepers, except its less efficient.
fsloth 4y ago
The only reason contracts are binding is because they are enforced by courts. Legally enforceable contracts and the courts that enforce them was one of the killer features of western societies an a non-trivial reason for their economic success. I have no idea how smart contract could be globally enforced, or can they be, but if they can, the way I see it, this should create new prosperity for those who have been unable to enjoy access to fair courts and binding contracts.
- jollybean 4y ago
  "this should create new prosperity for those who have been unable to enjoy access to fair courts and binding contracts. " This is the heady mythology of those who said 'Crypto would create XYZ for those who cannot'. Except it's been 10 years of Crypto popularity and they have no material function, are a huge drain of energy and human intellectual capital. Contracts are subject to legal oversight of a Judicial system, the credibility of which is require of a system to function. Digitization of a 'contract' really doesn't make sense so much at all in terms of it's 'legality'. The algorithm whether it's in regular code or Ehterium makes no difference. If someone really wanted to 'help those without legal recourse' they'd just use a foreign legal system for transaction record. So, contracts between 2 people in Haiti could be designated under 'Canadian Law'. But even that would be besides the point: It's not the 'legal system' that makes things work, it's the integrity of the system overall, maintained by a 'legal system'. Canada isn't rich because it has a 'legal system' - that's just one component. It's rich because people and groups act with integrity. The 'law' is involved very rarely. There's no technical utopia that will replace 'integrity'. Or frankly 'values'. Ehterium is a neat experiment, that's all it is for now.
  - andsoitis 4y ago
    > There's no technical utopia that will replace 'integrity'. Or frankly 'values'. This is so important. If someone is trustworthy, you need fewer checks in balances to be able to be confident that transactions with them will go well. If, on the other hand, someone is not trustworthy, all the systems in the world cannot guarantee good outcomes.

tornato7 4y ago

Everything comes down to social consensus at the end of the day. But for 99.9999% of transactions you can count on immutability.

pjc50 4y ago
"99% of the time it works every time"
- Intermernet 4y ago
  "One in a million chances come up nine times out of ten"
- nisegami 4y ago
  That's substantially higher than the legal system in any country
jollybean 4y ago
Except when you can't and you must undo a transaction, and if you can't, you can't use it. Like for example in the world of finance, where you have to be able to backtrack. Meaning such 'contracts' are least useful for things like, well, 'currency' and 'stores of value' ... hmm ...
- syzygyhack 4y ago
  Sounds like you haven't wrapped your head around the basics of smart contracts. Yes, a blockchain gives you an (ideally) immutable foundation. No, that doesn't mean that every transaction that invokes a smart contract has to be immutable. If a smart contract for a particular use case needs to have the ability to "backtrack", so it can, there's nothing stopping it.
  - johnnymorgan 4y ago
    Great reply, the rule for thumb of 'anything that can be done manually can be automated' applies here. Needs backtrack, code it in, then everyone knows how the rules work and there isn't any side deals or exceptions. Cheers!
bko 4y ago
The problem with exploitable systems is that the 0.00001% is not random. It's not like a random 1 in a million transactions is dropped. I think the bigger issue is that the system is somewhat arbitrarily controlled by the large players. That could work out well in some cases (funds hacked are returned) but it could also be less optimal (e.g. you're thrown on some list and all of a sudden your transactions are not valid). We've already seen hackers and obviously malicious actors dinged, which is good. But this opens up an avenue for things like forcing participants to go through regular banking protocols that starts to affect more and more people (e.g. political dissidents). By then you just recreated the modern financial system with all its flaws and gatekeepers, except its less efficient.

fsloth 4y ago

The only reason contracts are binding is because they are enforced by courts. Legally enforceable contracts and the courts that enforce them was one of the killer features of western societies an a non-trivial reason for their economic success. I have no idea how smart contract could be globally enforced, or can they be, but if they can, the way I see it, this should create new prosperity for those who have been unable to enjoy access to fair courts and binding contracts.

jollybean 4y ago
"this should create new prosperity for those who have been unable to enjoy access to fair courts and binding contracts. " This is the heady mythology of those who said 'Crypto would create XYZ for those who cannot'. Except it's been 10 years of Crypto popularity and they have no material function, are a huge drain of energy and human intellectual capital. Contracts are subject to legal oversight of a Judicial system, the credibility of which is require of a system to function. Digitization of a 'contract' really doesn't make sense so much at all in terms of it's 'legality'. The algorithm whether it's in regular code or Ehterium makes no difference. If someone really wanted to 'help those without legal recourse' they'd just use a foreign legal system for transaction record. So, contracts between 2 people in Haiti could be designated under 'Canadian Law'. But even that would be besides the point: It's not the 'legal system' that makes things work, it's the integrity of the system overall, maintained by a 'legal system'. Canada isn't rich because it has a 'legal system' - that's just one component. It's rich because people and groups act with integrity. The 'law' is involved very rarely. There's no technical utopia that will replace 'integrity'. Or frankly 'values'. Ehterium is a neat experiment, that's all it is for now.
- andsoitis 4y ago
  > There's no technical utopia that will replace 'integrity'. Or frankly 'values'. This is so important. If someone is trustworthy, you need fewer checks in balances to be able to be confident that transactions with them will go well. If, on the other hand, someone is not trustworthy, all the systems in the world cannot guarantee good outcomes.