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Meng Yan: why hasn't smart contract become a killer application of blockchain?

Time : 30/10/2021 Author : 7hnakg Click : + -
        Introduction: at present, there are three things that deserve the most attention in the international blockchain industry. First, digital currency and digital assets enter the international political and financial game, and the intervention of national forces may change the value logic of digital assets such as bitcoin, and bring technological innovation in this field from "barbaric growth" to "arms race". The second is the major upgrade of mainstream blockchain infrastructure, which may bring a performance improvement of 100 times or even 1000 times in two to three years. The third is the Web3 revolution. Among these three, we pay more attention to the Web3 revolution. Although this innovation movement has just emerged, it has shown its great explosive power and potential.
 
        We believe that Web3 may lead blockchain applications from virtual to real, and may stimulate a new wave of innovation sweeping hundreds of millions of Internet users, overturning the existing global digital economy. In the process of in-depth research on Web3, we have a new understanding of smart contract, a well-known technology. We firmly believe that smart contract will play a key and pillar technical role in the Web3 revolution, but it also has some key deficiencies, and smartcontracttokenization should be a must in promoting the Web3 revolution.
 
        To this end, we plan to write a series of articles to share our thoughts and findings, and welcome all circles to learn, exchange and teach first. Whenever the market is weak and volatile, people will complain about the high speculative content of the entire blockchain industry, calling for the emergence of killer mass applications. Although the total value of the digital asset market was once close to $3trillion, there has really not been an irresistible mass application that can sweep hundreds of millions of users like e-mail and web surfing. For the digital asset market, killer applications can not only create new star asset categories, but also provide a huge "utility anchor", which can make many other digital assets obtain utility and establish a stronger connection with hundreds of millions of users, thus reducing the volatility of the entire market.
 
        Now, Web3 has become the new focus. People hope to finally make breakthroughs in new fields such as gamefi and socialfi, and produce killer applications that attract hundreds of millions of users. It is certainly right to look ahead, but some treasures are not in front of us, but behind us. They are good ideas that have been thought of before, and even products that have been made. However, for various reasons, the potential of these good ideas has not really been realized. Maybe with some improvements, they have a chance to become a real killer application. Vitalikbuterin once said in a tweet in 2018 that he regretted using the name "smart contract" and should give it a more boring and technical name, such as "persistentscript".
 
        Combined with the context, his original intention is to say that because the name "smart contract" is high-end and high-grade, it has attracted the imagination of too many political, economic and legal experts, resulting in various discussions such as code is law and cryptographic law, which are beyond the capabilities of the technology itself. In fact, in a sense, this just shows that the name "smart contract" is too good, and has a far more than expected overall impact. However, from another perspective, vitalik may also sincerely believe that Ethereum's smart contract technology is not worthy of such a tall name as "smart contract". Most ordinary people learn about blockchain and digital currency because of various legends of sudden wealth and showing off their wealth. These legends may make some people imaginative and eager to try, while others disgust and sneer, but no matter what kind of reaction, it is very unfortunate to cover up the essence of blockchain.
 
        In fact, the essence of blockchain is very simple, which is a technology to ensure that all parties keep their promises. Its most rustic prototype is the pinkyswear between children, and there are only two native applications, one is the distributed ledger, which derives the digital currency application, and the other is the smart contract. "Contract", also known as "contract" and "contract", is a legally binding agreement established between several free people. It is a concept of great weight in the development of human society. As the "Bible admired by all factions of the French Revolution", Rousseau's "theory of social contract" points out that the ideal society is based on the contractual relationship between people, which can be said to position the contract as the basis of modern social civilization.
 
        Napoleon's civil code in 1804 preliminarily established "freedomofcontract" as the basic principle of all modern and contemporary civil laws. Today, the contemporary social order and legal system in which most of the world's population lives are based on the basic concept of "contract". The "decentralization" that blockchain circles like to talk about is actually just a technical realization of the concept of "freedom of contract". However, unlike most advanced political and legal concepts, "contract" is also a basic tool that everyone often uses. From currency, IOUs, tickets, employee cards, coupons and other tickets, vouchers, cards and certificates, to labor contracts, rental contracts, insurance contracts, articles of association, investment agreements, user agreements and other agreements, everyone in modern society lives under the constraints of contracts all the time, and often needs to conclude new contracts with others, or show contract evidence to others to obtain a certain right.
 
        Therefore, if the "smart contract" really lives up to its name, it should first be a tool used by the public every day, even to the extent that "people use it every day without knowing it". Secondly, since it is called "smart contract", it has the advantage of "intelligence". Specifically, smart contracts can interact with the outside world, perceive and confirm the condition state, and self enforce the contract terms according to the conditions. This ability can undoubtedly greatly reduce the cost of contract execution and improve the efficiency and accuracy of contract execution. Usually people will say that when a technology improves the efficiency of a certain work by 10 times, it will trigger a revolution.
 
        However, if the smart contract is properly applied, it can improve the efficiency of contract execution by ten million times, so it is undoubtedly revolutionary. More importantly, smart contract is a technology with "integrity" as the core value proposition, and "integrity" is highly respected in the mainstream value system of all civilized societies in the East and the West. If smart contracts can be widely used, combined with the trusted and tamper proof account and data management capabilities provided by DLT technology, it can greatly improve the difficulty of breach of contract, reduce the cost of law enforcement, standardize commercial and social cooperation, eliminate the vast majority of fraud, and make it very easy to track down and know and act afterwards.
 
        For a society ruled by law, smart contract is no less than a technology of civilization transition level. People may have various concerns about private digital currency for various reasons, but it is difficult for anyone to find any legitimate reason to oppose the application of smart contracts, unless he is willing to publicly admit that he is trying to obtain illegitimate benefits through default. Considering these, if we go back to 2016, when Ethereum smart contract just became available, it should be said that it is a very reasonable expectation to think that smart contract itself has become a killer application and a star of hope for the whole blockchain application. By 2022, this application should have captured hundreds of millions of users and entered many industries.
 
        For example, businesses and individuals should use smart contracts to generate debit slips and warehouse receipts, create tickets, discount cards, coupons, leases, passes, real estate certificates, etc., financial institutions launch a large number of financial products based on smart contracts, AI manufacturers develop equipment and machines that can be managed with smart contracts, enterprises use smart contracts to manage office space, and organize department collaboration. But as we know, none of this has happened. Until early 2022, smart contracts in Ethereum and other second-generation blockchains were mainly created and used by developers as buildingblocks. Ordinary users and even professionals are far away from smart contracts, let alone put them into daily use as a tool.
 
        Of course, we can say that the development of decentralized Finance (DFI) is a little comforting. Over the past two years, defi has achieved more than 200 times of growth, becoming the only bright spot in smart contract applications. There is certainly a reason for this. The particularity of financial business is that its core product itself is financial contract, and there is nothing else. Therefore, it is just right for smart contract applications, and it is reasonable to take the lead in landing. The core of leading projects such as uniswap, AAVE, compound and curve in DFI is actually a group of smart contracts, and their business is to "sell" these contracts.
 
        Therefore, it can be considered that the success of defi just confirms the judgment that "smart contracts should become blockchain killer applications". But even the success of defi is very limited. There are only 4million users involved, and there may be only hundreds of thousands of real active users. Many famous defi products live only a few hundred days a day. Moreover, due to the particularity of financial business, the whole DFI community is based on the enthusiasm of "obtaining high yield", which swings sharply between greed and fear, and cannot provide a strong "utility anchor" for the whole industry. More importantly, although many technical mechanisms of defi should be able to be used in traditional finance, there is no such sign so far.
 
        In short, although smart contracts have the potential to become killer applications in theory, they have not really achieved such market achievements in more than five years of practice. On the other hand, this has also delayed the Web3 revolution, making it difficult for a large number of Web3 applications to land immediately or show their huge competitive advantages. The first reason that most people can think of must be the limitations of insufficient external infrastructure, supporting equipment and applications, as well as the cost problems caused by these limitations, such as:. Major economies in the world have not yet launched the legal digital currency of the blockchain, nor have they given a clear legal positioning to the existing digital assets on the blockchain;.
 
        These reasons are really important. But if we observe carefully, we will find that these factors can be summarized as "external friction", or external causes. Either the infrastructure is not awesome, or the legislation and supervision are sluggish. In short, the problems are external, and the problems are others' problems. Common sense tells us that external factors are of course important, but internal factors are often more decisive. Is there a deeper problem that leads to the application of smart contracts not getting the development it deserves? Is there still such an important defect in the design and technical implementation of the smart contract itself, which makes it unable to stimulate the general consensus and support of the outside world, and fails to form a situation of "everyone gathering firewood, and the flame is high"?.
 
        We believe that such internal causes exist. There are indeed some deficiencies in the implementation of the current mainstream smart contracts. Perhaps these deficiencies are the key factors that hinder the large-scale application of smart contracts. To see the shortcomings of current smart contract technology, let's first imagine what functional features an ideal smart contract public application should have. First of all, as the protagonist of this application, smart contracts should be concrete and visual digital objects, just like a digital document with a graphical interface that can interact with fingers, keyboard and mouse. Materialization and visualization may be the most critical step for smart contracts to be applied to the public.
 
        Second, an ordinary user without any programming training should be allowed to create and customize the smart contract he needs in a very intuitive way, and the complexity of his operation should be lower than that of Excel and other spreadsheet software. Third, ordinary users can easily create secure and reliable smart contracts without worrying about the risks and losses caused by code vulnerabilities and hacker attacks. They can get double protection in key processes, such as rolling back transactions under certain conditions, or being adjusted and adjudicated by arbitration in case of complex disputes, etc. Fourth, users can easily discover, verify conditions and connect with each other, so that contract parties can safely conclude contracts through simple digital signatures.
 
        Sixth, under the premise of being allowed, the holder of the contract has the right to transfer and sell the contract. After the contract is transferred, the relevant rights and obligations are automatically transferred to the new holder. Seventh, under the premise of being allowed, the contract holder can freely financize the contract. The concept of financialization is abstract and has different meanings in different application scenarios. For example, in some cases, financialization means that contracts can be securitized, fragmented and homogenized. In other cases, financialization means that they can be used as collateral. In the context of defi, this also means that contracts, as an asset, should be able to enter into mainstream defi protocols.
 
        Eighth, smart contracts should also provide some assistance for things beyond their own capabilities. For example, data outside the chain can be obtained through the "oracle". For another example, it can produce legal documents in natural language, make up for the lack of code ability with the help of judicial mechanisms in the real world, and so on. Smart contract is a key innovation in the second generation blockchain represented by Ethereum. After several years of development, it can be said that it has made universally recognized achievements in the certainty, automation and accurate execution of smart contracts (Article 5 above), and the current situation in contract signing (Article 4) and off chain data acquisition (Article 8) is also basically satisfactory.
 
        However, in terms of ease of use, liquidity and other aspects, today's smart contract technology does still have major defects, which are shown as follows:. No concrete, no graphical interface: today's smart contract is a virtualmachinebycode stored in the blockchain, which has no standardized appearance. You must write DAPP programs or interact with it through professional development tools. This keeps ordinary users away. The direct consequence is what we often observe in practice. Even under professional guidance, when operating smart contracts through wallet or DAPP, ordinary users also appear to be trembling and walking on thin ice, and they will forget after a period of time without operation, resulting in a very poor user experience.
 
        It is difficult and risky to create: creating smart contracts should have been a common function of ordinary users, but in the current blockchain, it must be realized by professional developers through programming. Moreover, because the loopholes and errors in smart contracts often cause huge economic consequences, the code of smart contracts usually must go through strict testing and auditing processes, resulting in the creation of smart contracts becoming a highly difficult, high-risk and high-cost work that ordinary users can't grasp at all. No ownership, no circulation: Ethereum and almost all mainstream second-generation blockchains at present implement smart contracts as independent, ownerless code objects on the chain, similar to "executable programs" and "dynamic link libraries" in traditional computer operating systems.
 
        The execution authority of smart contract can be specified in detail based on the user's signature, but it has no ownership, that is
 
        
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