Smart contracts are small, independent applications running on blockchains, like Ethereum, that support them. The term “smart contract” came from Nick Szabo’s papers, including Smart Contracts: Building Blocks for Digital Markets. For example:
The basic idea of smart contracts is that many kinds of contractual clauses (such as liens, bonding, delineation of property rights, etc.) can be embedded in the hardware and software we deal with, in such a way as to make breach of contract expensive (if desired, sometimes prohibitively so) for the breacher. . . . A broad statement of the key idea of smart contracts, then, is to say that contracts should be embedded in the world.
Ethereum and Smart Contracts
Later, when Ethereum was created, Vitalik Buterin adopted Szabo’s term, smart contracts, to describe the code running on the Ethereum Virtual Machine (“EVM”). As Ethereum and blockchain has grown, however, the term has has created confusion from non-technical commentators who assume there is a legal or contractual element to them.
Perhaps because of the swirl that followed, Vitalik very recently mentioned he regrets using the term:
Vitalik would have used a more technical, “boring” term, like “persistent scripts.”
Who can know for sure, but I suspect if Vitalik actually used the term “persistent scripts” instead of smart contracts I’m pretty sure it wouldn’t have captured the broad-based attention beyond the computer science industry, especially from the legal academy, as it has.
For example, when I first heard about smart contract back in about 2014 or ’15, they were described to me as something that would completely replace the need for lawyers and courts.
Today I have lawyers who approach me and ask, “What are these smart contract things?” Had they been named differently, I’m pretty sure they wouldn’t approach me in the first place, let alone ask, “What are these persistent script things?”
Now I have lawyers who come up to me and say, “What are these smart contract things?” Pretty sure they wouldn’t say, “What are these persistent script things?”
And for me, the skills and need for legal engineering is strongly expressed in the blockchain industry, and I believe it’s largely because of Szabo and Buterin’s word choice.
So I’m glad you did it, Vitalik. Thank you!