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COMP6212 > Smart Contracts > Flashcards

Smart Contracts Flashcards

1
Q

Traditional Contracts Drawbacks

A

Manual Processing (Drafting, signing, enforcing)
Legal Costs (Legal expertise for draft, enforce, resolve, all expensive)
Limited Transparency (One party misinterprets the contract)

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2
Q

Smart Contract Definition

A

Computerise transaction protocol that executes the terms of a contract (introduced by ethereum)

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3
Q

Smart contract properties

A

Self-executing, autonomous and enforceable through computer code
Facilitates exchange of digital value
Digital representation of legal contract, deterministically executed (set of outcomes, predetermined beforehand, all parties know exactlywhat will happen and when)

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4
Q

Contract execution (traditional vs smart)

A

Interactions between humans and objects, punishment application. Definitions interpreted in a trial
Program execution with only 1 interpretation, not reversible and autonomous

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5
Q

Contract definition (traditional vs smart)

A

Paper vs Software program

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6
Q

Contract audit/control (traditional vs smart)

A

Semi-manual data recollection vs real time immutable

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7
Q

Smart contract immutability

A

Account on the blockchain controlled by code instead of a user
Code cannot be changed by any individual/organisation in anyway

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8
Q

Smart contract trustless

A

Smart contract conditions evaluated and executed by computer code

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9
Q

Smart contracts vs the cloud pros

A

Application logic transparaency (less corruption)
Application logic and execution can’t be tampered with
No censorship in permissionless blockchains
Non-repudiation of execution as execution results stored as transactions

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10
Q

Smart contracts vs the cloud cons

A

Slower performance with transaction latency
Difficult maintenance with immutable application logic
Expensive due to fees and gas-based execution model

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11
Q

Smart Contract Life Cycle Phases

A

Development, deployment, invocation, execution

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12
Q

Smart contract development phase

A

Smart contract written in one of the available languages

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13
Q

Smart contract deployment phase

A

Written smart contract is compiled and then deployed on the blockchain as a transaction

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14
Q

Smart contract invocation phase

A

Deployed smart contract is invoked by an external actor (or another smart contract) with specific input

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15
Q

Smart contract execution phase

A

Invoked smart contract executed the chosen function returns the outputs and applies the changes in the blockchain state
Transaction

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16
Q

Smart contract binary

A

Stored in the blockchain before being invoked and then executed

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17
Q

Smart contract execution storage

A

Execution of contract stored in the blockchain
Result as well as updated state
Transaction

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18
Q

Decentralised Applications

A

Software applications which run on a decentralised p2p network which is often a blockchain

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19
Q

Decentralised application pros

A

Secure, transparent and accountable because the data and transactions stored on blockchain
More democratic and open-source development process
No single node has complete control (no single point of failure/vulnerability)

20
Q

dApps examples

A

Augur (prediction markets)
Filecoin (filestorage network)
Brave (web browser)

21
Q

dApps challenges

A

Scalability and performance
Regulatory uncertainty
Usability and accessibility

22
Q

dApps scability and performance

A

Can be slower and less efficient depending on consensus algorithms and network status
Improved with sharding, sidechains and layer 2 solutions

23
Q

dApps regulatory uncertainty

A

Not controlled by any single entity/jurisdiction. Difficult to determine how existing laws and regulations apply
New frameworks and regulations required

24
Q

dApps usability and accessibility

A

Dependent on complex cryptographic systems requiring users to manage their own private keys and digital wallets. Difficult for non-technical users

25
Q

Smart contract inputs

A

inputs may not be available within the network
Inputs often associated with some trusted 3rd party centralised organisation

26
Q

Oracle definition

A

Third-party service or program
Provides external data and triggers smart contract execution when predefined conditions are met
Agent which finds and verifies real-world occurrences and provides this information to a blockchain to be used by smart contracts
Allows interaction with outside world so actions can be performed

27
Q

Oracle trustworthiness

A

Not part of the blockchain consensus mechanism, need trustworthy information source
Smart contracts only as good as the data input they receive
Cascading bad data input
Careful choice of trustworthy oracles, need mechanisms to verify and validate data from oracles

28
Q

Best use for smart contracts

A

Creating trust and resolving uncertainty (nothing routine)

29
Q

Smart contract minimalism

A

Simplify information in contract as much as possible
Ensures users understand the contract
Reduces risk of misunderstandings or disputes

Fewest possible elements, reduce elements to essentials whilst still maintaining intended function

First defence against defects with non-trivial consequences
So simple there are no defects

30
Q

Achieving smart contract minimalism

A

Define essential enduring facts about the application. Narrow scope of concerns.
What needs to be proven and the minimum logic and data required to construct the proof

31
Q

Future proofing

A

Smart contracts run automatically -> Lack of execution control after deployment
Need highly secure code, not practicable as blockchain technology is still changing
Can cause bugs and security issue

32
Q

Non-trivial contracts

A

Non trivial contracts will have bugs in (need to reposing to these gracefully)
Software patterns to help protect contracts against unexpected events

33
Q

Smart contract plans for failures

A

Natural language description of the code
Test cases
Write constructors, validate all arguments passed, exceptions when arguments aren’t valid inputs
Write code to change the state of the contract

34
Q

Future proofing examples

A

Emergency stop
Rate limiters
Delay action
Limit the balance

35
Q

Emergency stop

A

Stop deployed contract by trusted admins defined in contract

36
Q

Rate limiters

A

Stop a method in a contract being called so often it effects the operation of the contract

37
Q

Delay actions

A

Slow things down to give contract owners time to react to a malicious event

38
Q

Limit the balance

A

Monitor the amount of Ether and reject payments which exceeed the predefined maximum

39
Q

Smart contract drawbacks (governing body)

A

Encoding and automating the execution of a complex agreement dependent on formal rules with well-specified inputs
Not flexible for unpredictable and unforeseen events. Rules may need to be slightly altered.
Need for human oversight as people are better at responding to complex eventualities (May need governing body intervention)

40
Q

Smart contract drawbacks (early stages)

A

Long way away from being an independent contract with no reference to natural language document.
Natural language contracts with encoded payment and performance mechanisms. Still far away from contract being written in code fully

41
Q

Smart contract drawbacks (Grey Areas)

A

No flexibility in contract or ability to provide reasoned analysis
E.g. indemnity and amounts payable subject to individual facts in question subject to court interpretation

42
Q

Smart contract drawbacks (Acts as a judge)

A

Smart contracts would need to act as a judge. Taking spirit of contract into account and make a decision which is fair in unclear circumstances and extenuating circumstances.
Smart contracts follow the rules encoded and cannot look at circumstances or the spirit of a contract

43
Q

Smart contract drawbacks (Unclear Legal Justification)

A

Generally don’t encode obligiations and rights which are legally binding
Software agent acts within a distributed ledger in an automated way
Emulates contract logic in the real world in the distributed ledger world. Legal justification unclear.

44
Q

Smart contract drawbacks (Flexibility)

A

Flexibility key in ensuring commercial agreements operate as intended. Smart contracts are black and white by nature
Traditional contracts have flex room in them (“reasonable efforts”, “material adverse change” are expressions with flexibility and allow parties to resolve issues by not determining in advance exactly what the obligation involves)

45
Q

Smart contract drawbacks (Oracles as judge)

A

Oracles act as dumped down version of a judge
Rights to a digital asset ultimately decided by some authority and oracle needs to be trusted
Contract written with the subjectivity and risk of human judgement

COMP6212 (3 decks)

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