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blockchain

Blockchain technology has the potential to solve a dizzying array of problems, both large and small. Many people, recognizing the depth of this promise, have hung heavy expectations on the growth of the space. In particular, a number of observers have begun to view the smart contracts that underpin many blockchain projects something close to a panacea, with the power to “fix” contracts completely. We must guard against such unmitigated exuberance if we want to harness smart contracts for their true potential.

I don’t disagree that smart contracts are a transformational tool with enormous potential to improve commerce. But I want to cool some of the hype before it turns into complacency. Remember, smart contracts are conditional instructions to perform specified actions—essentially, if/then statements—written in code. The immutability and security of the blockchain make them a powerful tool, but they are not infallible. We must make sure we do not shut our eyes to their potential pitfalls.

First, like anything else, smart contracts are prone to human error. They are written in code by programmers who themselves are imperfect and can make mistakes. An error in the coding, or incorrect data entry, can compromise a smart contract and cause it to function and execute incorrectly later in its life. Since most people, including those participating in blockchain projects, cannot read code, they must trust the developers to do the work correctly. Effectively, most laypeople in the blockchain economy are flying blind, and they need recourse when errors pop up.

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