Avoid the Middle-Man (Smart Contracts) - Computerphile

Key Takeaways

so smart contracts are rather poorly named in the sense that they're more properly thought of as applications a series of if then else type Clauses um for um drafting up um and executing negotiations the last video I did was on blockchain technology uh with a leaning towards Bitcoin and cryptocurrencies without rehashing too much of that video a blockchain is a technology a distributed Ledger and means of validating and seeing a ser Ser of transactions such that no party in the network needs to directly trust or know anybody else um and the first application of this was cryptocurrencies most notably Bitcoin but now people have started talking about using this blockchain technology not just for storing sort of transactions of Bitcoins or cryptocurrency but as storing U smart contracts and running smart contracts just because we using an application that allows me to pay a taxi driver surely I'm still going to need the taxi lift ride sharing application to get me in touch with whoever's offering the service that gets a little bit further down the rabbit hole and introduces something called distributed applications where in fact anyone could you would have your smart contract that is your business Logic for negotiating the transfer of funds to taking the the Uber case the driver and the client and then you have your front end you can think of it like a sort of web developer if you a front-end HTML page to your backend service um but instead of having that front end be a web page it could be a web page but equally it could be a desktop application um the sorts of of line wire and uh Napster something running locally on your machine and anyone is free to create their own front end to a given smart contract application um and distribute it in any way they like so it doesn't have to be running from one particular website or run by one particular organization it could even be put on something called the interplanetary file system which is a peer-to-peer Network peer-to-peer Network file system such that it couldn't actually be taken down or moderated by anyone individual in the way a standard website can it has the potential at least to completely remove the middleman the escrow account um because your smart contract ends up performing that function an escrow is like a third sort of impartial mediating party it's the function of uber Uber take your money Uber importantly take their cut and then pays the driver if you have a smart contract taking the place of uber there's no middleman taking a cut it really is a technology that that represents a revolution rather than an evolution and it's something where you're going to move away from ownership of data or ownership of a service to uh designing the best interface to that service because the service can be put up on the blockchain technology used by anyone viewed by anyone so the best written service that performs the job is the one that's going to be used most and what determines whether an Uber type outfit make money or not is whether you've got the most userfriendly prettiest app to interface with the smart contracts um and you could charge a you know a sum for using your particular interface to the smart contract but we really are sort of talking WordPress type you know our business logic is gone we we're talking about a sort of a user interface a nice pretty way of of interfacing with it so there is absolutely nothing to stop an open- Source Community or an individual in their garage producing the nicest a graphical design student produces the nicest Uber app um and distributes it for free because he has the time because he can let's stick with Uber for now is it say that the drivers would have to say right I run with this kind of contract or they log themselves with two or three different types of contract and then you just find them through however you find them that's that's the other thing they're free to use different contracts different models so you could have a smart contract that models um a uh taxi like service um for weekdays and a different one for for weekends that offers some benefit to the driver for a weekend and they can absolutely make use of both um contracts in fact you can have the same interface to both contracts um so in terms of the client finding them it's seamless and they don't have to know or care about but in terms of the driver they're optimizing potentially the way they're getting paid depending on which contract they're using your smart contract could model a luggage allowance or something like this so you end up getting a min van if you're taking a whole bunch of people and a whole bunch of luggage would there be one blockchain that the different contracts all stack their their data on or would there be a blockchain for each of the contracts how does that work so that's an interesting question there are different um blockchain outfits out there at the moment um each with their own sort of uh intiation or ability to Express smart contracts so in fact um Bitcoin has been expanded to allow some kind of smart contract capabilities but it's not what it was designed for um the platform that's really sort of making Headway and a big name in this area of smart contract is something called ethereum um and ethereum is a blockchain that is designed not primarily to store cryptocurrencies and you know tokens and transactions but actually um to store a global computer State and a series of computational operations um ethereum could be thought of as a very large very slow um Global computer stored on the blockchain how does the money work then although I said the um ethereum blockchain was not primarily a cryptocurrency which it isn't you still do pay for things in it in cryptocurrency so you're you're ethereum blockchain stores a global computer State and a series of computational operations but you pay for performing those operations and you pay in the ethereum currency which is not Bitcoin but ether um and in fact there's a translation between the The Ether which is the cryptocurrency and the uh computation operations which are charged in gas and there's a gas to Ether exchange rate this is an example of a distributed application that exists for the the ethereum network and essentially I've got this application here missed which I downloaded as my front end My Guy by means of interfacing with the ethereum network and as a browser that actually allows me to see other distributed applications that are out there and potentially view them as well so a distributed application I've searched for here is a service for converting from one crypto currency to another called shape shift and this application I can search for it through this browser I can pull it down I can display it this missed application this interface is running locally on my machine but it's negotiating when it's sending its transactions when I'm converting um ether to bitcoin or vice versa or performing the the functions of a given uh application that I load it's then serving as my gateway to the smart contract that I hosted on the um ethereum Network and then whatever whatever function I call um which I call that function by um sending a transaction is executed on all the the nodes in the network in parallel so you've got which is why it's very slow because you've got a redundancy if this sort of computation whatever it might be you could you know add two numbers together is being performed by every single node and then agreed upon and then the result of that is added at the global state of the ethereum virtual machine Global computer is updated together and he puts in random guesses for that non value until this hash value that labels this block compression function but the idea is that the bits of A B C D and E are being combined together they're being shuffled they're being permuted around to make it look more and more