Smart contracts sound enticing. The allure of cutting out attorneys, endless paperwork, and exorbitant legal fees is what drew me into learning about cryptocurrency in the first place. Unfortunately, my dreams were shortly crushed. It was clear that reality didn’t live up to the advertising hype and “smart contracting platforms” had fundamental problems with the nature of contracts.
Many have encountered these problems and decided smart contracts are something that can never work, I disagree. In fact, Bitcoin has made the proper design choices to make smart contracts possible where others have failed.
In this essay, I will cover the basics of contracts, explain the problems with naive “smart contracting platforms”, and finally show how Bitcoin is keeping the dream of smart contracts alive.
Part One: Contract Basics
First, let’s cover the basics of a contract. A contract is an enforceable agreement between consenting parties. Here is an example:
Alice agrees with Bob to purchase $1000 dollars of coffee beans from him per month for the next 3 years. Alice will pay Bob on the first of each month.
The contract is the agreement between the two parties (Alice and Bob) for the transaction (coffee beans for dollars) and can…
