Three common misconceptions about smart contracts

There is a lot of misleading commentary about smart contracts, leading to confusion about what they are and what they can do. Here are three of the most common myths that I have noticed. This builds on a previous piece, a gentle introduction to smart contracts.

Myth: Smart contracts are self-executing bits of code

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Distributed ledgers: “Confirm-as-you-go”

Following on from the “Blockchain is a solution looking for a problem” narrative of 2016, distributed ledger technology has evolved.

Distributed ledgers – databases with shared control over what and how data is added – can be seen a strategic solution to the “reconciliation” workaround that we have had to put up with until now. This strategic solution is applicable to all industries, not just financial services.

confirm-as-you-go

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What’s the difference between a distributed ledger and a blockchain?

A blockchain is a type of distributed ledger.  But new distributed ledgers are emerging. These are databases where control over the data’s evolution is shared between entities. Here’s a handy cheatsheet.

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Yes, but what’s new with distributed ledgers?

This short post is inspired by a conversation I had recently with a couple of finance professors from top business schools who had some questions about blockchains.

Prof A explained that he had heard all the fuss about blockchains but was unsure whether it was revolutionary or evolutionary (I think the word disruptive was also used). I have written about disruption in Fintech and the Evolutionary vs Revolutionary aspects of distributed ledgers before (hint: it depends, it’s both, and yes, perhaps).

Then he asked, “Yes, but is there anything new?”

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Distributed Ledgers: Shared control, not shared data

Distributed Ledgers: Shared control, not shared data

In the context of distributed ledgers, I have noticed that many commentators and consultants confuse shared control of data with the sharing of data itself. The difference is crucial, and this common simplification misses the most important aspect of distributed ledgers.

In this post I discuss three ideas:

  1. Sharing of data vs shared control of data
  2. Control of data by rules vs by power
  3. Enforcement of rules by participants

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