Monday, January 27, 2014

Way Beyond Bitcoin: The Coming of "Smart Contracts"

Forget about Bitcoin as a currency. The Bitcoin technology has much more interesting applications in other areas.

Wired has a short profile on Vitalik Buterin and what he is working on.  A few weeks ago Vitalik passed through San Francisco and I had the chance to meet up with him. I found him to be very smart, intellectually honest,, a very creative thinker and a visionary. That's part of the reason, I am very excited about what he is working on.

Key snippets from Wired:
Most people think of bitcoin as a form of money, if they think of bitcoin at all. But 19-year-old hacker Vitalik Buterin sees it as something more — much more. He sees it as a new way of building just about any internet application.

The bitcoin digital currency is driven by open source software that runs across thousands of machines around the globe. Borrowing code from this rather clever piece of software, independent hackers have already built applications such as the Twitter-style social network Twister, the encrypted e-mail alternative Bitmessage, and the unseizable domain name system Namecoin. But Buterin believes that many other applications can benefit from the genius of the bitcoin software, and that’s why he’s joining forces with several other hackers to create something called Ethereum.

He envisions Ethereum as an online service that lets you build practically anything in the image of bitcoin and run it across a worldwide network of machines. At its core, bitcoin is a way of reliably storing and moving digital objects or pieces of information. Today, it stores and moves money, but Buterin believes the same basic system could give rise to a new breed of social networks, data storage systems and securities markets — all operated without the help of a central authority[...]

Ethereum won’t use the peer-to-peer network that bitcoin runs on, nor will it use the same software. Instead, Buterin and his team are building a completely new system that will run atop its own network. But the project borrows heavily from the ideas behind the bitcoin software.

All bitcoin transactions, for instance, are stored in a massive public ledger called the “blockchain.” This is a type of encrypted database, and you can use it to power other applications — as we’ve seen with Twister and BitMessage. Ethereum will feed still more applications through something similar to the blockchain, and it will offer a stripped-down version of the Python programming language — known as Ethereum Script — that’s specifically designed for building these blockchain-based applications.

As with bitcoin, the network that underpins Ethereum will be powered by machines donated by the people of the world, and to encourage donations, the system will allow these machines to collect fees from developers who build and run an applications atop the network. In similar fashion, bitcoin shares its money with those who run the machines driving its network.

The system could potentially drive everything from Dropbox-style storage systems to custom digital currencies. According to Buterin, it will be particularly well suited to something called “smart contracts.” A simple example is a betting system. Two people could place bets on, say, the outcome of the Super Bowl, entrusting a certain amount of digital currency to system. The system would then check the final score of the game via the web and distribute the funds appropriately. No bookie needed.

But Buterin also envisions far more complex smart contracts, including joint savings accounts, financial exchange markets, or even trust funds. Theoretically, these contracts would be more trustworthy because — if the software is properly designed — no one could cheat. Many bitcoin geeks even believe that smart contracts could lead to the creation “autonomous corporations” — entire companies run by bots instead of humans.

The Ethereum team plans to have a test network up and running soon, and on February 1, it will launch a crowdfunding campaign to finance its further development. The code will be open source, another reflection of the bitcoin way.

1 comment:

  1. That is a great idea. Anything that you need to be public and unchangeable seems to fit the bitcoin model. Bitcoin does not really move money or value over the Internet, it is more like a giant unchangeable public ledger of agreements. I (affress xyz) send to your (address abc) 1 Satoshi (.00000001 bitocoin). after that entry, bitcoin address get to send the one Satoshi to another address and the address xyz is forever barred from that.