9 Misconceptions About Smart Contracts

About the author: William Mougayar is an entrepreneur from Toronto, Canada, an advisor to the Ethereum Foundation and an event advisor for CoinDesk’s Consensus 2016. He is also the author of The Business Blockchain.

In this article, Mogayel explores and attempts to debunk some of the biggest misconceptions about blockchain smart contracts.

Smart contracts are the key supporting technology of blockchain, but many people have many misunderstandings about various aspects of smart contracts.

When smart contracts are fully deployed, they will be as significant as the invention of the HTML markup language that enables all information to be published publicly online. Smart contracts will allow us to program the world we want on the blockchain and replace many expensive or inefficient intermediaries to perform their functions.

The concept of smart contracts was first introduced by Nick Szabo in 1994. However, for a long time afterwards, smart contracts were in a state of obscurity and failed to attract people's attention because there was no platform that could execute such smart contracts at that time, until the emergence of blockchain technology in 2009. Now, smart contracts are entering their heyday. Especially since Ethereum further promoted smart contracts, the rapid development of smart contracts is unprecedented.

Just like other buzzwords, the more famous smart contracts become, the more widely they will be used. The more widely they are used, the more likely they are to be misused or abused. This is because smart contracts have different meanings to different people.

This article lists 9 misunderstandings about smart contracts:

1. Smart contracts are the same as protocol contracts

The fact is no. According to Nick Szabo’s original definition of smart contracts, smart contracts can make the party that violates the agreement pay a high price, and smart contracts are to control valuable assets in the real world through “digital means”.

So, smart contracts can implement a specific requirement through execution, and can prove whether certain conditions are met. These implementation processes will be quite strict. For example, if you fail to pay for a car on time, the car will be digitally locked by the smart contract until the payment is completed.

2. Smart contracts are like “Ricardian contracts”

No. Ian Grigg’s “Ricardian Contract” is a semantic representation that keeps track of the obligations of both parties to an agreement. However, this can be done with or without smart contracts on the blockchain. And, typically, multiple signatures are required for the execution of a Ricardian Contract.

3. Smart contracts have legal effect

Smart contracts are not currently laws, but they can represent part of a legal agreement. In addition, the legalization of smart contracts is currently underway.

The results of smart contract execution can serve as an audit trail to prove whether the terms of the legal agreement have been executed.

4. Smart contracts include artificial intelligence

Smart contracts themselves are not really very smart.

Smart contracts are actually software codes running on the blockchain. They are triggered by some external data and then modify other data.

5. Smart contracts are blockchain applications

Smart contracts are usually part of decentralized (blockchain) applications. A specific decentralized application can contain multiple smart contracts.

For example, if certain conditions of a smart contract are met, then the program will be allowed to update data.

6. The process of writing smart contracts is simple

This statement is both true and false. Writing a simple smart contract is quite simple. Especially when you use a special smart contract language (such as Ethereum's Solidity language), you can write a very complex program with just a few lines of code.

However, there are more advanced ways to generate smart contracts – using “oracles.” Oracles are data sources that transmit actionable information to smart contracts.

7. Smart contracts are only for developers

This is true at the moment, but we will soon see more user-friendly approaches that allow business users to configure smart contracts through a graphical user interface or text language input. For example, the Mist browser for Ethereum is working in this direction.

8. Smart contracts are not secure

This is not the case. For example, in the Ethereum implementation, smart contracts are run as Turing-complete programs, which means that the execution of smart contracts will eventually end and will not loop indefinitely.

9. Smart contracts limit applications

Not really. Like HTML, applications are limited by who writes them. Smart contracts could be an ideal way to connect real assets, smart assets, IoT, and financial services tools.

Smart contracts can be applied to almost anything whose state changes over time.

Original article: http://www.coindesk.com/smart-contract-myths-blockchain/
By William Mougayar
Compiled by: Kyle
Source (translation): Babbitt Information (http://www.8btc.com/smart-contract-myths)