How to Explain Smart Contracts to Outsiders When You Stay Home for the Spring Festival?

5 min readJan 25, 2019


The Spring Festival

Author | Jing Jingjiang

Presented by | Trias team

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With the rise of blockchains, smart contracts have started to enter our lives. However, how should we explain smart contracts to outsiders when we stay home for the Spring Festival and smart contracts are mentioned?

  1. What is a smart contract?

The concept of smart contracts may date back to 1994, around the time the Internet was born. Smart contracts were first proposed by Cryptographer Nick Szabo, who coined the term “smart contract”.

In nature, a smart contract resembles an if-then statement. The logic of a smart contract is: If X happens, then Y will be executed. And the triggering condition can be anything.

In the novel Miracles of the Namiya General Store written by Keigo Higashino, three thieves came to Namiya General Store and found a consultation letter about worries. After replying to the letter, they soon received another letter.

Smart Contracts

If we create an automated version of the story, then it will be like: You find a letter in Namiya General Store. If you open the letter and reply to it, you will receive a second letter; if you open the second letter and reply to it, you will receive a third letter.

That’s how smart contracts work. We create a contract on a blockchain and have the contract state: If a person transfers money to the contract, then the contract will perform the next action — maybe sending the contract to a person by email. And if that person signs the contract, that triggers other events of the contract execution in the blockchain.

In a word, when a preset condition is triggered, the smart contract will perform the corresponding contract terms.

2. Some common and simple examples

What are the changes brought by smart contracts? Here is a simple example. Take the NBA Finals for instance, you wager 1 bitcoin on the Golden State Warriors, and your friend wager 1 bitcoin on the Cleveland Cavaliers.

First of all, you and your friend need to transfer your bitcoins to a neutral account controlled by a smart contract. When the competition is over, the smart contract will confirm that the Golden State Warriors has defeated the Cleveland Cavaliers via Tencent Sports or other media, and will automatically transfer your bitcoin and your friend’s bitcoin to your account.

A more common example is online shopping. When you buy a suitcase online, you may not want to pay for it right away, and you want to pay after you receive the suitcase. In this case, you can easily create a contract that can track the suitcase for you. The contract will pay the seller only after you confirm that you have received the suitcase.

Now you must be thinking “Huh? Isn’t that Alipay?” But you need to understand that Alipay is a centralized mechanism with similar functions, which means, Alipay saves your transaction data and the automation logic to its own server. We must pray that Alipay won’t have any partiality for any party.

A true smart contract saves everything to all the nodes of the whole network and nobody has the right to perform modification. It’s an “ubiquitous and unreachable” existence.

3. Say goodbye to lawyers and banks?

When it comes to regular financial transactions, more often than not, lawyers and banks have to handle repetitive matters, and we have to pay lawyers and banks for their services.

A smart contract to some extent can automate and demystify these handling processes and help ordinary people save time and money.

Take loan repayment handling for example. A smart contract can not only save the handling expenses, but also enhance the handling efficiency, updating wills is a good example of this type.

It is difficult to determine whether such a scenario will occur at present. It depends on the development of the smart contract.

4. The successes and failure depend on one thing

Once a smart contract is deployed, all the contents of the contract cannot be modified, that is, any party of the contract cannot break the contract for its own interests.

While smart contracts were widely approved due to their low human intervention, they got into trouble due to the low human intervention. The famous DAO event is an example.

Why this event occurred is that there was a bug in the smart contract of DAO when it was designed. Because the bitcoin-based smart contract could not be intervened with by people and the bug could not be fixed online. Therefore, more ethercoins were stolen by hackers without being stopped.

5. Summary

The technological application needs to be supported by sound theories. Whether decentralization and high efficient smart contracts have matured and how to deal with attacks when face them are the topics that we are going to discuss about.

The author believes that the smart contract will be an important direction of the future Internet. The difficulties and setbacks the new technology development is now facing are only an inevitable part of the things that need to be overcome in the new technology development process before it matures.




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