Quick notes on smart contracts

January 14, 2023

A smart contract is a contract with aditional blockchain features. It is a computer program or a transaction protocol to automatically execute, control or document legally relevant actions/events according to some contract terms.

What does it solve?

  • the need of trusted intermediates
  • accidental exceptions
  • malicious attacks
  • fraud losses
  • arbitrations and enforcement costs
  • cost reduction (no intermediates)
  • speed (no intermediates)

Vending machine analogy

A smart contract is like a vending machine, you just insert the coin and select what you want, reducing the need for an intermediate to get your snack.

A smart contract is a "virtual and online" vending machine

Law

Some legal academics say that smart contracts are not legal agreements.

A smart contract is not necessarily legally enforceable as a contract. But a smart legal contract has all the elements of a legally blinding contract in the jurisdiction where applicable.

A smart legal contract can be enforced by a court of law.

  • A smart contract can be any kind of computer program. It can be viewed as a collection of code and data deployed using cryptographically signed transactions on the blockchain.

  • For database experts, a smart contract can be viewed as a secure stored procedure.

  • Smart contracts cannot be modified after a transactions (after being stored in the blockchain).

How does a smart contract works?

A smart contract occurs by sending a transaction from a wallet. Transactions include the compiled code for the smart contract and a receiver address

Smart contracts can store arbitrary states and execute arbitrary computations.

Once deployed it cannot be updated.

What are blockchain transactions?

  1. Transactions must be included in a blockchain block.
  2. End-clients interact with a smart contract through transactions.
  3. Transactions can invoke other smart contracts.
  4. Transactions might result in changing the state and sending coins from one account to another.

Programming languages for smart contracts

ETH blockchain:

  • Solidity
  • Vyper

Solana blockchain:

  • Rust (yes, Rust!!!)

Other programming languages:

  • JavaScript (Hyperledge Fabric)
  • Ivy
  • Scilla
  • Bitcoin Script

Security Issues

A blockchain-based smart contract is visible to all blockchain users. This can lead to a situation where bugs (including security holes), are visible to all, but yet, not easily fixable.

Ethereum issues

  • No central resource for documenting known vulnerabilities
  • Blockchain network attacks
  • Bugs immutability (once deployed, smart contracts can't be modified)
  • Compiler bugs
  • EVM (Ethereum Virtual Machine) bugs