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Smart Contracts are definitely not a ‘cure-all’, claims 2016 Nobel Laureate

Biraajmaan Tamuly

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Smart Contracts does not solve long-term economic relationship between parties, claims 2016 Nobel Prize Winner
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Cryptocurrencies around the world usually differ with respect to their functionalities and objectives. Ethereum [ETH], the second largest virtual asset in the world is widely known for its smart contracts option. This is a feature that was later adopted by several other networks as well. The developers of Ontology [ONT], a reputed “distributed trust” network had even claimed that smart contract security was one of “hottest topics” in the evolving blockchain space.

However, positive feedback about Smart Contracts is not shared by everyone.

Oliver Hart, the Nobel Laureate who won the 2016 Nobel Prize in Economics for contract theory, made news after he suggested that Smart Contracts did not solve major issues regarding large-scale contractual agreements.

Hart stated that the basic outlines of a Smart Contract seem very convenient due to its automated nature of execution. However, it was definitely not a “cure-all”, he said. He stressed that Smart Contracts did not solve problems or conditions where the contracts were drawn out for a long-term situation; where people were in a “long-term economic relationship”.

He said,

“People are trying to anticipate what might happen in the future which is very difficult to do and write a contract which will take into accounts these eventualities, which they can’t do because the future’s very uncertain, and many things can happen that people don’t really expect or are able to predict.”

Hart said that Smart Contracts would not be solving such problems as of yet, where the uncertainty factor is very high. He stated that long-term economic contracts were more about communication between the two parties, before writing an agreement or contract.

It was important that both parties were on the same page and in the wake of an unexpected event, both parties were comfortable with the outcome, rather than some automated device settling it.

Hart’s opinion comes with a disclaimer, however. Hart conceded that he had “little knowledge” regarding smart contracts, blockchain, and Bitcoin from a practical outlook, and was currently trying to learn more about it.





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Biraajmaan is an engineering graduate who is exploring the ever-changing crypto verse while traversing his passion for cryptocurrency news writing. He is a Chelsea fan and a part-time poet and does not hold any value in cryptocurrencies yet.

Bitcoin

ErisX goes all hands on deck to launch a Bitcoin Futures market

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ErisX goes all-hands on deck to launch a Bitcoin Futures market
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ErisX’s CSO, Matt Trudeau, detailed the company’s four important plans for the future, which includes launching a spot market, to secure a Bit License, DCO, and to launch a futures market.

ErisX currently has a DCM contract, which is a Derivative Contract Market that allows ErisX to run a CFTC-regulated futures exchange. However, ErisX aims to get a DCO [Derivatives Organization], which will effectively allow it to run a CFTC-regulated clearinghouse. A clearinghouse would mean that ErisX can take control of the custody of the assets and clear and settled trades.

The CSO explained the benefit of this, stating,

“There is some efficiency for firms like producers [like mining companies]; if they need to hedge their inventory or need liquidity on a spot market, they could do that conveniently on a single platform. “

Trudeau added that from the “post-trade standpoint” and “the collateral management standpoint,” ErisX would have cash, crypto, and the futures, all stored in their clearinghouse. This would boost efficiency since it would be available for all customers under a single platform. The CSO added,

“… so there is some efficiency in terms of managing collateral, if you don’t have assets on  multiple platforms, it can all be in our clearinghouse.”

Apart from the aforementioned plans, Trudeau added that the crypto-industry needs to mature more and that ErisX plans to make a significant contribution to that. He added,

“The market is professionalizing and we think that in terms of what institutions are expecting from a trading/custody experience, we will bring some of the solutions to the market and that’s really the foundational pieces that they are looking in order to build their businesses on top of us.”

Apart from ErisX, LedgerX has also received a go-sign from the CFTC to settle Bitcoin Futures in Bitcoins. Other exchanges include Intercontinental Exchange’s Bakkt and Seed CX.





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