Smart contract

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 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 management 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 agreements. 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. The automation of security interests over digitally controlled goods and services, and in particular secure and nonviolent repossession, is another goal of many smart contract proponents. 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]

History

Agoric computing was a movement in the 1970s and 80s to bring market mechanismssuch 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 protocolsbetween 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.

See also

* Business Process Management
* Code and Other Laws of Cyberspace
* Design by contract
* Digital credential
* Electronic Data Interchange
* Secure multiparty computation
* Secure time-stamping
* Workflow

External links

* [http://szabo.best.vwh.net/smart_contracts_idea.html The Idea of Smart Contracts]
* [http://www.firstmonday.org/issues/issue2_9/szabo/index.html Formalizing and Securing Relationships on Public Networks]
* [http://www.erights.org/smart-contracts/index.html The E Language: Cryptographic Capabilities for Distributed Smart Contracting]
* [http://www.erights.org/talks/pisa/paper/index.html The Digital Path: Smart Contracts and the Third World]
* [http://www.venturacountystar.com/vcs/bravo/article/0,1375,VCS_1798_4769614,00.html "Late on payments? Device won't let car engine start."]
* [http://www.flud.org/wiki/index.php/Fairness Fairness in flŭd's Storage Protocol]