An Introduction To Smart Contracts

When most of us hear the word “blockchain”, our minds usually go to Bitcoin.

In fact, a lot of people still think that Bitcoin and the Blockchains are one and the same. This is of course, a mistake. Bitcoin is a cryptocurrency. Blockchain on the other hand, is the technology Bitcoin and all other cryptocurrencies are built on.

Cryptocurrencies are just one application of the Blockchain technology. In this article though, we are going to introduce another very important application.

The smart contract.

A little bit of History…

The idea of smart contracts was introduced in 1996 by a computer and cryptography scientist, called Nick Szabo. Szabo saw the digital revolution that was coming.

He realized that the rapid technological innovations that people would experience in the future, would inevitably change the relationships they have. Both in business and in their personal lives.

So, he theorized about the introduction of new institutions and new ways to formalize our relationships in this future environment.

His theories became a reality in 2015, with the launch of the Ethereum blockchain. Ethereum is today the second biggest blockchain in the world.

It was mainly created by Vitalik Buterin for one reason: Smart contracts.

What is a smart contract?

A smart contract is essentially a piece of code. It holds the rules of an agreement between two or more parties. It also makes sure the agreement is fulfilled. Finally, it executes the terms that the parties agreed upon.

Smart contracts help two or more counterparts to make an agreement directly with each other, without the need of a third party to guarantee the transaction.

By doing so, it allows people to trust a digital contract –a few lines of code actually-, instead of an institution (like a bank), or a human. It’s like a vending machine. You put in a dollar, press a button, and you get your coffee.

If your dollar is in bad shape, you get it back, but no coffee. If you press the wrong button, again, no coffee. As long as you keep your end of the deal, the machine delivers a cup of coffee. This is how a smart contract works, more or less.

Why should I trust smart contracts?

Well, mainly because they possess two very distinct characteristics. The first one is what we call immutability. Because they exist on the Blockchain, it is very hard to change them.

Unlike their physical counterparts (paper or electronic contracts which can be altered a lot easier), you can’t just change smart contracts once they are deployed.

Smart contracts are also, distributed. The moment a contract goes live, every step of it is validated by everyone on the network. Everyone has to agree that step one is fulfilled in order to go to step two.

For example, if the landlord doesn’t get the rent and security payment agreed by the tenant, the contract doesn’t release the code to unlock the front door of the apartment rented. This specific characteristic has another advantage. Nobody can go and change the terms of the deal after its completion.

For example, you can’t just go to the city’s Office of Register and change public records. Because it will take the creation of a new smart contract to change such an agreement, it makes any effort to tamper with it, futile.

Let’s talk about benefits.


As we said earlier, smart contracts eliminate the need of an intermediary. So, if we don’t need a third party when we are making a deal with someone, the cost of processing and finalizing that deal will be lower.

In some cases, not paying legal, accounting and other fees has a substantial effect on the final price of the underlying product or service.


You and your counterpart are the only ones who deal with your agreement. You agree on the terms of your contract, and the network you are on goes ahead and executes it. No one else interferes. No third party needs to give permission for you to proceed.


Smart contracts are executed automatically. So, if you have reviewed the steps it will follow during its creation, you can be certain that there will be no mistakes. No human errors. Things like “I forgot to go”, or “the traffic was crazy”, are a thing of the past. The contact is always error-free, and nobody can debate that.

Hacker and Bad actor-Free

Since these contracts are distributed among the network of participants, there is no central location to keep them. They are not stored inside a file cabinet, or a computer.

So, without a point-of-entrance or point-of-access, it becomes really hard for anyone to access your documents. If you add the security cryptography offers (a native ingredient of any Blockchain), cracking such a network is an even harder effort for any potential bad actor.


Encryption and distribution make sure that any contract you issue is safe. Those attributes also create the feeling of trust to all participating entities, that the contracts they signed cannot be altered by any external party.


Smart contracts can be duplicated. As long as they are deployed on the blockchain, they are available at any given time. So, even if a party loses any document attached to the contract, a copy of it is stored, and ready to be used.

Where can we use smart contracts?

The applications for smart contracts are almost as many as the industries we have today and the ones that are not created yet. Collaterals, blockchain mortgages, finance, media, reward applications, health, e-commerce. These are just a few examples of possible uses one can think of.

The most prominent examples though are those of healthcare, banking, and government. Three institutions that affect the quality of our lives every day. In healthcare, we can use contracts and the blockchain to provide access to medical data to doctors all over the world.

So, if you live in Sweden and you get sick in Singapore, your physician could have your whole history in a matter of seconds, without wasting time with telephone calls and emails. You could also have your medical insurance as a smart contract, providing additional data to doctors and all other interested parties with a permission and selective access to your medical history.

In the banking sector, smart contracts can reduce unnecessary costs for all sorts of banking transactions. At the same time, they can serve as a barrier to fraudulent transactions that cost every year millions to banks all around the world and affect the lives of people that fall prey to such criminal activities.

Finally, governments can use them to deliver their services faster, and more efficiently. Without the red tape and the introduction of automation, citizens will be able to receive services and fulfill their obligations a lot quicker.

Smart contracts will also help governments fight fraudulent activities from their employees because they will be able to verify all transactions the moment they occur.

Smart contracts are here to stay. They were introduced as a concept more than two decades ago, but with the evolution of technology and the application of the Blockchain, they are now available to all of us.

They will make our transactions safer, faster, and more efficient. They have obvious advantages over traditional contracts, and their further development is necessary in order to perfect them and make them more flexible. They are not without problems, of course.

For example, it is very difficult (or impossible) to correct a mistake recorded in such a contract. It will most probably have to be declared void and create a new one, an action that could cost a lot of money and work hours. But we are still at the beginning. As Blockchain technology evolves, so do these contracts become better, safer, and error-free.

I am sure that a lot of industries and professional associations will fight to keep them from becoming legal alternatives, but I believe that like all other technological innovations, they will lose. Spectacularly and beyond any doubt. Because you cannot stop progress. It’s that simple.

Half Truths, Half Politics: Amazon’s Wages ,Welfare, And What’s Coming Next.

Machines and automation create jobs.

At the same time, they take away jobs.

Both statements are true.

And all our policy-makers and elected officials have to do, is find the sweet spot between introducing automation, and steering capital and human resources to the right direction.

But efficiency and common sense are not always top priorities in our society.

And sometimes, tech and automation are used to hide the real problems under the rug.

Problems like laziness and shallow politics.

O.K, but where does Amazon fit into this?

Keep reading to find out..

10% of Amazon employees in Ohio, are on food stamps.

In case you missed it, the story made the headlines a few weeks ago.

Apparently, according to a study from nonprofit group Policy Matters Ohio, 700 Amazon employees in Ohio (about 10% of the company’s entire workforce in the state) receive assistance from the Supplemental Nutrition Assistance Program.

At the root of this: temporary workers

2 years ago, Ohio won a bid for 2 Amazon fulfillment centers — and since then, the e-commerce company has gotten $125m in tax breaks and cash grants. In exchange, the state figured it would get thousands of decent-paying jobs.

Though Amazon pays full-time workers in these centers around $15-per-hour, they also rely heavily on a large force of “temporary workers” who are not assigned enough hours to support themselves without government assistance.

What’s the story here?

If we go a few years back, we’ll remember the effects of the recession that hit the US as well as many other countries in the West.

Tech bubbles, Stock exchange crises, the big House market collapse..

They all made lives for millions of people hard in the last 20 years.

And each one of them, was more difficult to overcome than the previous.

So, when Amazon stepped in and started buying property and building warehouses, who would complain?

What could the people of San Bernardino say when 1000 new jobs were created into their struggling community back in 2012?

And today, 15,000 workers in the Inland Empire alone..

Eight fulfillment centers, and one sortation center.

Jobs, prosperity, low unemployment retes (from 15% in 2012, to 5% today in San Bernardino).

So, where’s Amazon’s fault in this?

There’s no fault here.

Well, there are complaints about working conditions.

“High-stress” and “grueling” are some of the words used around the web from sites and people to describe the working conditions in these warehouses.

“People don’t stay long enough to enjoy the benefits the company offers”.

People in seasonal and part-time positions, complained they “didn’t know how many hours or when” will they work.

But these are just symptoms.

Symptoms of a much bigger problem that is coming our way faster than we anticipated.

It’s called “Automation”.

These “temp” jobs (along with millions of similar ones) like grocery store cashiers, clerical and secretarial positions, will most probably vanish, in the next 15-20 years.

In fact, one third of the working force in countries like the US and Germany, is expected to lose their jobs, or forced to “migrate” to new positions to survive this shift.

Even today, 50% of current work activities are technically automatable by using already available technology. This percentage will go higher in the next few years.

So, year after year, it will become more difficult for people to find this type of jobs.

And they will need more government aid.

That’s why the talk about universal income has come into play.

But, if the jobs lost in the following years are so many (as many as 400 million positions by 2030, according to a McKinsey study), these solutions (like free healthcare, Universal income) will be as useful as a band aid on a gunshot wound.

There’s simply not enough money to cover such a cataclysmic shift in our working force.

These options don’t look so viable under the prism of a reality that is catching us faster than we expected.

So, what happened to the techno-utopian dream?

One of the core beliefs of most prominent technologists is that technological advancements should ultimately work toward “solving” societal ills and inequalities. Bezos himself has spoken of the coming “golden era” of tech.

And it’s true. technology is the biggest driving force of innovation and prosperity.

Globally, and historically.

But we need a plan.

Technology will replace jobs.

But it will also create new ones.

Like when the PC was created back in the 80’s.

Think of how many jobs were created, outside the technology-producing sector itself.

Call center representatives, Financial analysts, inventory managers..

Millions of jobs.

So we need to steer people to the righ direction.

To be educated, trained, and seek employment in industries with a future.

Like health care. For aging poplulations.

People live longer than they used to even 30 years ago.

Life expectancy will continue to increase.

Because technology in the medical field is advancing rapidly.

By 2030, there will be at lest 300 million more people over the age of 65.

So, more people will need more care.

Also, infrastructure and energy.

Investments in these two sectors are steadily rising evey year.

Technology does create more jobs than it destroys, in the end.

We just have to use our common sense. To adapt and make rational choices.

It’s the only way to help ourselves and the people we care about.

And give a fighting chance to all those temp workers who live with the aid of the government, and see their living standards diminish.

Be safe everybody.


Bitcoin: The case of Utility

If you are an adult living in an organized society, you conduct your every day business with some sort of money (unless a witch doctor or a mentalist has convinced you that bartering in chickens and bananas is the way to live your life, which is totally fine by me.. whatever makes you happy!).

And chances are you’ve heard of Bitcoin.

Funny money for lots of people.

Here’s the thing, though,

Bitcoin (like all the other cryptocurrencies) is not money.

Cryptos are actually validators of processes and enablers of transactions.

But that’s a different story…

Maybe we’ll talk about it some other time. Not today.

Today, let’s talk about Bitcoin’s price.

I am sure you’ve heard or read all those expert opinions from mainstream and fringe media panelists, journalists, and experts of sorts.

“How can a virtual currency with no real value, have a price of 10,000 American dollars?”

“It’s a bubble filled with speculators that will burst.”

“Even at a thousand bucks, it’s a bubble”.


Well, let’s see..

It’s true that Bitcoin’s price (as the price of other cryptos), has experienced a meteoric rise in the last couple of years.

No doubt there’s speculation in there..

People buying and selling coins in Crypto Exchanges for the pure purpose of making money.

But each one of these cryptocurrencies, has also a utility value.

It is created to serve a purpose.

– Like securing transactions…

– Validating medical records…

– Or making sure, the money you donated to a charity, are delivered to the hurricane victim you chose, and not into the pockets of a crooked politician.

That’s the real value behind cryptos.


But, most of us are only hearing about “how much Bitcoin’s price has risen this week”.

Just like financial derivatives.

You know, options and futures.

Buy something by paying a fraction of its price.

Derivatives exist to hedge your risk.

Invest 900 dollars in Apple stock, and buy an Apple put option for 50 dollars.

If the price of the stock falls, you balance your losses with the profits from the option contract.

But most traders used them to speculate.

Because derivatives use leverage.

So you can enjoy the full profits of an asset, by paying only a fraction of its value.

Derivatives destroyed many companies, and careers back in the 2000’s.

Because they were used for speculation.

And the same thing has happened with Bitcoin.

During the last few weeks, the price of many cryptocurrencies fell by A LOT!

And a lot of speculators looking for another easy profit, got hit badly.

Funny money, right?

The party is over..

Well, not quite.

Because the price of Bitcoin reflects a lot more than just what speculators do in Crypto Exchanges.

Traders are just one part of the equation to determine Bitcoin’s price.

There are also those who consider it an investment.

Those who have bought (and are still buying) Bitcoin, to keep.

This amount of Bitcoins therefore, is removed from daily circulation.

Less coins around to buy and sell.

And then, we have those who use Bitcoin for actual transactions.

Because as we have already said, Bitcoin is a transaction enabler.

Here’s an example:

Let’s say there’s a guy in Chile that produces refrigerators.

Our guy needs steel to make them, right?

He finds a steel manufacturer in China that has dropped the wholesale price by 40%.

But the offer expires tomorrow..

The money must be in their bank accounts (cleared) by tomorrow morning.

And the minimum order to get it at this price, is 200,000 tons.

Our guy needs this desperately. The profit margins for him will be I-N-S-A-N-E.

How can he pull this off?

To clear a transaction worth millions with someone he has never done business before?

How long will it take? 2 days? 3 days? A week?

What about foreign exchange rates, bank transfer costs? How much is all that?

5%..10%? More? Remember.. it’s only a day..

But if the two parties agree to complete this transaction with Bitcoin:

1) The transaction will be over in an hour (instead of up to a week).

2)The cost will be as low as 2% for both parties (the traditional route will be a lot more expensive).

How much would you pay for that?

To buy your raw materials 40% cheaper?

To sell with a 400% profit margin bacause of that cheap purchase?

And to pay a ridiculously low amount of money to complete this transaction with a country that has very strict rules for foreign businesses?

Does 10,000 dollars sound too much now?

OK, let’s say it still sounds like a lot (for the sake of the argument)..

But our guy is not alone in this world..

During the same day there are 100 more businesses that want to conduct transactions of the same magnitude..

100 million dollars each.

That’s 10 Billion Dollars worth of demand for Bitcoin.

And there are also those who want to buy a pizza..

Or an iPhone..

And the numbers keep growing..

How many Bitcoins do we have in circulation?

According to the Bitcoin ledger, there are only 16,9 million bitcoin outstanding.

Roughly 5.5 million bitcoin is held by the top 1000 addresses in the blockchain (the bitcoin ledger).

Between that, and about 10 million bitcoin needed by merchants , there are only 1,400,000 bitcoins free for people to use.

Not so many, right?

So a market is created automatically to facilitate all this new demand.

And the price can increase significantly, because there are simply not enough coins to satisfy the growing demand globally.

And by the way, you can’t just go and “print” new Bitcoins like the FED prints dollars.

Because the total sum of Bitcoin, is finite.

Only 21 million Bitcoins will be mined, to be exact.

With every new Bitcoin “mined”, the process becomes more difficult. It takes more time and resources to produce the next one..

So, you get the picture now?

It’s true, there is a speculative percentage incorporated in the daily price of Bitcoin, and that of many other cryptocurrencies.

But speculation alone does not tell the whole story.

There is a whole world of investors and businesses that generate transactions worth billions of dollars everyday.

These transactions also have a great impact on the final price you see printed in the charts.

So before you decide to buy or condemn any crypto, you should do your own due dilligence.

Emotions and self-proclaimed gurus, are mostly bad advisors for any decision that could impact your personal and financial future.

And you’re too smart to fall for that..

Be safe, everybody,