Where’s the love for smart contracts?


So you may have noticed that Bitcoin is on fire recently.  As I write this, the price of Bitcoin is almost $2500.  Yikes.

I continue to be surprised by the escalating price of Bitcoin.  I’m even more surprised by the price of Ethereum.  Bloomberg has an interesting article up this morning suggesting that the market capitalization of Ethereum might overtake Bitcoin by the end of the year.  Given last summer’s hack of the DAO (that literally split the currency down the middle), this competitive pressure is noteworthy.  Of course, Ethereum (as a currency) has a way to go before it’ll get to where Bitcoin currently is, but the fact that it’s very much on its way is a big deal.  That suggests a few things to me: 1) we’re definitely in a bubble, and 2) that the smart contract capability of Ethereum gives it legs (despite the hack that would have proven disastrous for another alternative currency).

One of the things that seems most fruitful to watch in my opinion is the Enterprise Ethereum Alliance.  Specifically, a number of financial, technology, and other miscellaneous enterprise players are working with the Ethereum blockchain and (I think more importantly) the smart contracts capability that Ethereum has built in under the hood.  Much of the “buzz” out there is about blockchain specifically – i.e. the Merkle tree part of how Bitcoin works (the ledger).  Ethereum is different in that there is another part to it beyond this – specifically, a virtual machine that can run decentralized processing to enforce smart contracts (really any functionality, but the original purpose was contract-related.)

If you’re new to Ethereum, the primary substantive difference is that Ethereum has a “Turing-complete” computing capability built into it for the purposes of enforcing contractual relationships.  What the hell does “Turing-complete” mean, you ask?  It’s just a fancy way of saying general-purpose computing capability. Yes, I realize that’s an oversimplification.  But the point is that it can do stuff: implement functionality the same way that (for example) a Java virtual machine can or that my laptop can.  So you can literally run application logic on the blockchain itself.

That, in itself, is interesting, and I’m thinking it’s pretty fundamental to where Blockchain applications in enterprise are likely to want to go next.  Sure, a distributed real estate ledger is interesting.  But the ability to actually build and implement application logic into a contract is the logical next step.  It’s powerful – but (as the DOA hack highlights) also ramps up the importance of implementing the logic correctly.  There’s plenty to keep up to date on here.  On the whole, I’m a little surprised we’re not seeing as much attention and “hype” on smart contracts in the industry hype as we are on blockchain specifically.  Or maybe people use “blockchain” to refer to both the ledger and also smart contracts?  I’m not sure they are though.