Note that there is one gray area here: contracts which are finite on one side, but infinite on the other side. an entire decentralized exchange is not a smart contract), and contracts that are not intended to exist forever are smart contracts because existing for a finite time necessarily implies the involvement of a finite number of parties. However, smart contracts that run on forever should still have a fixed number of parties (eg. Smart contracts can run on forever hedging contracts and escrow contracts are good examples there. The parties do not all have to be known at initialization-time a sell order, where A offers to sell 50 units of asset A to anyone who can provide 10 units of asset B, is also a smart contract. The key property of a smart contract is simple: there is only a fixed number of parties. If B claims that he finished the website, but A does not agree, then after a 7-day waiting period it’s up to judge J to provide a verdict in A or B’s favor. If B decides not to finish the website, B can quit by sending a message to relinquish the funds. When B finishes the website, B can send a message to the contract asking to unlock the funds. T h eco n t r a c tw o u l d w or ka s f o ll o w s : A p u t s500 into the contract, and the funds are locked up. The contract would work as follows: A puts 500 t o Bt o b u i l d a w e b s i t e. T h e c o n t r a c t w o u l d w o r k a s f o l l o w s : A p u t s 500 to B to build a website. One example of a smart contract would be an employment agreement: A wants to pay 500 t o B t o b u i l d a w e b s i t e. Smart contractsĪ smart contract is the simplest form of decentralized automation, and is most easily and accurately defined as follows: a smart contract is a mechanism involving digital assets and two or more parties, where some or all of the parties put assets in and assets are automatically redistributed among those parties according to a formula based on certain data that is not known at the time the contract is initiated. What exactly is a decentralized organization, what is the difference between an organization and an application, and what even makes something autonomous in the first place? Many of us have been frustrated by the lack of coherent terminology here as Bitshares’ Daniel Larimer points out, “everyone thinks a DAC is just a way of IPOing your centralized company.” The intent of this article will be to delve into some of these concepts, and see if we can come up with at least the beginnings of a coherent understanding of what all of these things actually are. However, one of the hidden problems lurking beneath the space is a rather blatant one: no one even knows what all of these invididual terms mean. There are now a number of groups rapidly getting involved in the space, including Bitshares (also known as Invictus Innovations) developing “decentralized autonomous companies”, BitAngels’ David Johnston with decentralized applications, our own concept of decentralized autonomous corporations which has since transformed into the much more general and not necessarily financial “decentralized autonomous organizations” (DAOs) all in all, it is safe to say that “DAOism” is well on its way to becoming a quasi-cyber-religion. One of the most popular topics in the digital consensus space (a new term for cryptocurrency 2.0 that I’m beta-testing) is the concept of decentralized autonomous entities.
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