Laurence Kirk of Extropy.io explains the underpinnings behind Ethereum Smart Contracts.
Laurence Kirk is the founder of Extropy.io, a company that undertakes to implement its clients’ technology on the Ethereum blockchain, guides startups seeking help to take advantage of the blockchain technology and conducts researches on how to make smart contracts safer. Mr. Kirk, one of the most knowledgeable people in developing Ethereum Smart Contracts, in his speech shares his experience and provides information about the benefits, downsides and application areas of the smart contracts.
He tells that the basic tasks for Ethereum Smart Contracts are to move ether (cryptocurrency of Ethereum) linked to digital assets under the Ethereum Smart Contracts allowing computational transaction on blockchain, thus enabling the movement of digital assets. Mr. Kirk explains that the Ethereum Smart Contracts run on every node on the Ethereum network, in a way that each node runs the transaction individually and the codes do the exact same thing simultaneously, allowing to reach an agreement between transacting people involved around the said smart contracts. He initially thought that, such process would be inefficient.
However, Mr. Kirk says he later realized that the whole point is to reach a consensus among the nodes running the same code and create trust in the system. He highlights the four key elements of smart contracts, which he identifies as transparency, immutability, resilience and easy accessibility. Under the control of the Ethereum Smart Contracts every person on the network gets the same copy of the code and everyone is also able to identify what the code is doing. Mr. Kirk emphasizes that the existing contract processing applications lack such transparency. He further states that the users of the current applications do not know what the code is doing because the users can’t see the source code and even if they do see it there is no guarantee that the deployed version is not going to be altered, so in a way the users of the current contract processing applications trust every application on their smart phone blindly.
Although transparency helps to build trust in Ethereum Smart Contracts, it also brings a problem with it: privacy. With incoming regulations, upon request personal data has to be removed from the transactions, and in order the coop with this the personal data must be encrypted before putting them on blockchain. He further explains that, since smart contracts are immutable they increase trust and eliminate fraud. The piece of code distributed to every node cannot be changed and even if it is somehow changed the consensus mechanism of the Ethereum Smart Contracts covers it up. After each node reaches a conclusion for the transaction the consensus mechanism gets rid of the differentiating node and drops the feedback from that node.
However, he also divulges that there is a drawback in contracts being immutable, a required update or a bug fix on the initial code cannot be implemented. What is done instead is that a proxy contract calls to the new contract with the necessary fixes made on it. For the same reason smart contracts cannot have the function to get data because one node failing to acquire the desired information will fail the consensus as well. He discloses that that is why smart contracts have restrictions. Mr. Kirk also underscores the resilience of these smart contracts and says that it is certain that the network won’t fail because there is no single point of failure, and it is a peer-to-peer network. In his opinion, anyone can access this network easily and there are browser plug-ins available for this, so special software is not needed. Although the Ethereum network is publicly available, private networks can also be created where the people joining the network could be restricted. Mr. Kirk states that besides computation, Ethereum can also be used for storage and secure messaging. Mr. Kirk also believes that one of the reasons for why ICOs are becoming really popular on Ethereum is due the reason that it is very simplified to write your own cryptocurrency on Ethereum. He says as of today the Ethereum Smart Contracts are also in use by industries such as energy, healthcare and insurance. Laurence Kirk’s clients seek his advice for all of the above reasons and get in line to take advantage of Ethereum for their technologies. However, Mr. Kirk claims to follow a procedure to test whether the companies actually need blockchain or want it just because of the hype around it. He basically asks if the company sees trust as their top priority, need an environment to build resistance against fraud, require immutability of a specific information verified earlier to be correct and would permit data to be available to public for to be seen by everyone or otherwise wishes to encrypt the data as it is the usual case with financial institutions.
Upon a question regarding how the price of ether will affect transaction fees, Mr. Kirk explains that there is a dynamic equilibrium between the price of Ether and the gas price (extra layer of exchange rate). As the price of Ether rises the gas price will go down so the overall cost of the transaction won’t change.