Smart Contracts: Seven Omissions to Watch For
Trust can cost you everything if you put it in hands of a wrong person. But what if there was a way to enforce the terms of any contract without putting trust in another person’s execution of a performance. What if the contract itself could assure it?
Smart contracts are not something new, but they have been successfully implemented in a sphere of cryptofinance quite recently. Smart contracts are programs that not only define terms and conditions of the agreement, but also enforce them, serving as means of performing transactions in the blockchain.
There are many advantages to smart contracts: they function on a decentralized, open network where trust and law are replaced by a deterministic software. Performance, monitoring and enforcement of a promise does not require human involvement; and smart contracts are cost and errors reducing. When parties commit themselves to the contract they are bound by the code as by the law, and they cannot dispute the outcome.
However, there are always some holes to poke. So, let’s dive into them.
1. The codes can be flawed and a program can have bugs that subsequently may give rise to unintended outcomes.
2. Furthermore, a smart contract is drafted by a developer, not a lawyer. Thus, developers who draft the contracts must be knowledgeable about a subject matter.
3. Furthermore, the information available to a smart contract during execution is quite limited. Contracts cannot draw on external sources of information because a successful execution of a contract requires both nodes to receive the same information, and that cannot be guaranteed if the information is drawn from an external source.
4. Smart contracts are also reactive; you cannot go back in time and change any terms or conditions. Smart contracts do not allow any procedure for cases where a mistake has been made. For example, the DAO lost $50 million due to a mistake in the smart contract.
5. Smart contracts do not allow re-negotiation and do not take into consideration future gains and losses that parties might face.
6. How do courts decide on cases where ‘the code is the law’, but the code was compromised?
7. There is a growing concern of a foul play: programs can be hacked and the funds can be diverted to a different account.
Smart contracts have a great potential; it is a technology that can replace the traditional legal institutions and their bureaucratic binds. However, smart contracts lack a foundation and advantages of the traditional legal institutions. I hope the irony is not lost on you. Things they want to dismantle are the things they need to build upon. Smart contracts need to be written by law experts and developers, codes need to be tested before they are implemented, and legal rules need to be written by legal professionals.
Our mission at Ternion is to bridge the gap between the traditional financial world and the world of cryptocurrency; and similarly, smart contracts need to reconcile the traditional legal world with the world of technology.
Ternion tokens are Ethereum-based and we adopt an Ethereum-based wallet that utilizes a smart contract. However, we are aware of all the vulnerabilities that a smart contract exposes our system to. That is why we implement enhanced security measures to ensure an efficient and safe process of receiving contributions and sending out our tokens as well as protecting the system from hackers and malware.
We, at Ternion, understand the importance of a hybrid connection between feasible and untouchable, our product is based on the reliability that traditional systems have and on aspirations that technology brings.
