MIT 15.S12 Blockchain and Money Note (Lec 6)

Study Questions:

1. What are smart contracts? How do they compare to traditional contracts? What are tokens?
2. What are smart contract platforms such as Ethereum? What generally distinguishes them from Bitcoin?

Ethereum has high inflation rate, so the monetary policy could be made by the core developers of the Ethereum Foundation to adjust the inflation rate.

Questions: Multi-language platform v.s. Single-language platform: multi ones have the potential to attract more developer but also comes in vulnerability while single language has fewer vulnerabilities.

Initial Coin Offering

Proceeds used to build networks
• Tokens usually issued prior to being functional
• Development, while open source, is largely centralized
• Promoters allocate themselves ‘premined’ tokens
• Tokens are fungible & transferable
• Scarcity is fostered with preset ‘Monetary policy’
• Purchasers anticipate profits through appreciation

Contract

Smart Contract
• “A set of promises, specified in digital form, including protocols within which the parties perform on these promises.”

promise or performance given in exchange for promise or performance

e.g. Vending Machine or Laundry: Performance in exchange for performance

Parties of contract: promisor & promisee & State(central agent to enforce the contract)

The objective of contract is not to eliminate risk but to allocate risk

Even though the blockchain won’t get the contract 100% right but the amount of work (mistake) that goes to the legal system can be handled.

If the contract parties are from different region or country, when there is a breach of contract, then it need extra-international legal system to deal with it. Same as the blockchain world.