Topic: How do you enforce a smart contract - page 2. (Read 1441 times)
Here is how: https://github.com/ethereum/wiki/wiki/White-Paper
A paper contract on its own is of use.
I have a piece of paper that says I own the earth.
The only way that becomes true is if an entity that owns a lot of guns recognizes it as valid.
I have a piece of paper that says I own the earth.
The only way that becomes true is if an entity that owns a lot of guns recognizes it as valid.
Another problem is the loss of the private key. In real world when you lose the key of the house, you can ask the police/housing company to change the lock, since there are multiple places record the ownership of the house. But on blockchain, the ownership is gone when the private key is gone
OP, you are mixing up two issues with smart contracts, both of which are real issues:
#1:
That's actually more specific than the general idea of smart contracts. You are talking about colored coins here, and yes, they do create fungibility issues. That's one of the reasons I don't think colored coins is the best way to implement smart contracts. There are, however, other ways.
#2:
Yes, smart contracts dealing with non-bitcoin things have to somehow be attached to the real world. This attachment point is tricky. If you're thinking about for example representing ownership of a house, or a car, say, you're going to have to get governments to recognize the token as the true notion of ownership. Otherwise a buyer buys a house token for, say, 1000 bitcoins, the seller hands over the token but never signs the deed over; as far as the local gov't is concerned the seller still owns the house and the buyer just got shafted for 1000 btc.
There are lots of kinds of smart contracts though; some are more tractable. Like for example futures, forward contracts or other derivatives that are purely settled in BTC. Or next step up, something involving one or more trusted or semi-trusted "oracles" which interface to the real world by giving truth values about events.
#1:
The idea of smart contract is that you can let a bitcoin address represent anything. Let's say that one bitcoin at a certain address represent the earth, then who owns that bitcoin will own the planet
That's actually more specific than the general idea of smart contracts. You are talking about colored coins here, and yes, they do create fungibility issues. That's one of the reasons I don't think colored coins is the best way to implement smart contracts. There are, however, other ways.
#2:
Quote
And the worst thing is, the bank could just refuse to redeem the dollar when they have spent the coins at that address. So you must have some mechanism to physically lock the address and the assets that backing them. This lock can only be enforced by an auditor with a written contract from the bank and a reserve of one million dollars controlled by the auditor
So I think it is difficult to use blockchain to guarantee the ownership of anything outside, better focus on bitcoin itself, it is already one of the most liquid form of assets
So I think it is difficult to use blockchain to guarantee the ownership of anything outside, better focus on bitcoin itself, it is already one of the most liquid form of assets
Yes, smart contracts dealing with non-bitcoin things have to somehow be attached to the real world. This attachment point is tricky. If you're thinking about for example representing ownership of a house, or a car, say, you're going to have to get governments to recognize the token as the true notion of ownership. Otherwise a buyer buys a house token for, say, 1000 bitcoins, the seller hands over the token but never signs the deed over; as far as the local gov't is concerned the seller still owns the house and the buyer just got shafted for 1000 btc.
There are lots of kinds of smart contracts though; some are more tractable. Like for example futures, forward contracts or other derivatives that are purely settled in BTC. Or next step up, something involving one or more trusted or semi-trusted "oracles" which interface to the real world by giving truth values about events.
When you buy something, you want to check out if the owner is really the owner. Maybe he is a swindler, and is attempting to sell you stolen property.
Wherever the property is registered, the registration could have listed in its paperwork, the corresponding smart property contract that would have to be activated before the sale is possible.
It would be something like a trust, where the trust owns the property. The thing you do when transferring trust property is to simply change the trustees. Many trusts are written so that the trustee can be changed. The new trustee is the one that now controls the property.
If the property is owned by a smart property contract, the new administrator of the contract is the new controller, and essentially the new owner.
Wherever the property is registered, the registration could have listed in its paperwork, the corresponding smart property contract that would have to be activated before the sale is possible.
It would be something like a trust, where the trust owns the property. The thing you do when transferring trust property is to simply change the trustees. Many trusts are written so that the trustee can be changed. The new trustee is the one that now controls the property.
If the property is owned by a smart property contract, the new administrator of the contract is the new controller, and essentially the new owner.
Colored coins allow you to represent things on the Bitcoin blockchain. If you own a colored coin that represents a cow, then you own that cow. It is also possible for someone to own something that they don't have control over. e.g. the cow is stolen or it ran away. For real world examples such as these, you would need to find a way to enforce control over the assets you own. e.g. a fence.
In your example, the bank could choose to refuse to redeem the coins for dollars but most good banks with a good reputation aren't going to do this. When you get such a coin, you don't really own dollars. You own dollar IOUs. Whether or not the bank will redeem these IOUs for actual dollars is solely up to the bank's decision.
Smart contracts are pieces of code stored on the blockchain which both parties must agree to follow and other nodes will observe and enforce. Usually they work best when the data is on-chain and verifiable. Hence it doesn't really work for the cow example and it doesn't really work for your dollar IOUs either.
In your example, the bank could choose to refuse to redeem the coins for dollars but most good banks with a good reputation aren't going to do this. When you get such a coin, you don't really own dollars. You own dollar IOUs. Whether or not the bank will redeem these IOUs for actual dollars is solely up to the bank's decision.
Smart contracts are pieces of code stored on the blockchain which both parties must agree to follow and other nodes will observe and enforce. Usually they work best when the data is on-chain and verifiable. Hence it doesn't really work for the cow example and it doesn't really work for your dollar IOUs either.
The idea of smart contract is that you can let a bitcoin address represent anything. Let's say that one bitcoin at a certain address represent the earth, then who owns that bitcoin will own the planet
Does that make any sense?
Ownership means the total control of the object. Even the blockchain is a universal transparent ledger that can not be compromised, a bitcoin owner can only have total control over his bitcoin, nothing else. Not USD, not Stocks, not a house. The total control of those things require the control of bank account/equity account/the land
Suppose that a bank claims that one bitcoin in a special address represent one million dollars (Of course the bank owns that address). Then he can use that bitcoin to purchase one million dollars worth of products, because anyone who received those coins can redeem them at that bank, at an exchange rate of one million dollars per coin. This is in fact the process of money creation backed by assets
However, that will destroy the fungibility of bitcoin. You will have to check each bitcoin address to decide the value of those addresses depends on their backing
And the worst thing is, the bank could just refuse to redeem the dollar when they have spent the coins at that address. So you must have some mechanism to physically lock the address and the assets that backing them. This lock can only be enforced by an auditor with a written contract from the bank and a reserve of one million dollars controlled by the auditor
So I think it is difficult to use blockchain to guarantee the ownership of anything outside, better focus on bitcoin itself, it is already one of the most liquid form of assets
Does that make any sense?
Ownership means the total control of the object. Even the blockchain is a universal transparent ledger that can not be compromised, a bitcoin owner can only have total control over his bitcoin, nothing else. Not USD, not Stocks, not a house. The total control of those things require the control of bank account/equity account/the land
Suppose that a bank claims that one bitcoin in a special address represent one million dollars (Of course the bank owns that address). Then he can use that bitcoin to purchase one million dollars worth of products, because anyone who received those coins can redeem them at that bank, at an exchange rate of one million dollars per coin. This is in fact the process of money creation backed by assets
However, that will destroy the fungibility of bitcoin. You will have to check each bitcoin address to decide the value of those addresses depends on their backing
And the worst thing is, the bank could just refuse to redeem the dollar when they have spent the coins at that address. So you must have some mechanism to physically lock the address and the assets that backing them. This lock can only be enforced by an auditor with a written contract from the bank and a reserve of one million dollars controlled by the auditor
So I think it is difficult to use blockchain to guarantee the ownership of anything outside, better focus on bitcoin itself, it is already one of the most liquid form of assets
Jump to: