Nobel Prize-Winning Economist Shares His Thoughts On Smart Contracts
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- เผยแพร่เมื่อ 8 ก.ย. 2024
- Oliver Hart won the Nobel Memorial Prize in Economic Sciences in 2016 for his work in contract theory, the study of how contracts and incentives influence decision-making and business relationships.
Hart sat down with Business Insider's Sara Silverstein at UBS's Nobel Perspectives Live event in Brooklyn. Hart talks about the rise of blockchain-based smart contracts. He explains that smart contracts don't solve the problems of incomplete contracts that his work is focused on.
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Following is a transcript of the video:
Sara Silverstein: You won the Nobel Prize for your work in contract theory. Can you tell me at all about what you think about smart contracts that we're seeing now? Are they gonna revolutionize everything? Do they solve all the problems that you were working on?
Oliver Hart: That's right, they're gonna take the prize away. It's all gonna be irrelevant.
I must admit - first, that I know little about smart contracts. I'm trying to understand more about them as I am about bitcoin, blockchain, all the rest. It's all a bit mysterious. I'm doubtful that it's going to be a cure-all. I mean, it seems that for some things it could be quite useful 'cause it can automate certain things. And so, you know, if I have some sort of insurance contract which says that if a certain event happens then I'm gonna get paid something, then we can sort of make that automatic so it just comes right into my account. I don't have to check on anything or call up the insurance company. So, things like that can certainly help but they're not going to solve - unfortunately the problems I've been particularly concerned with are contracts that are written for the long-term and where people are in long-term relationships and economic relationships and they're trying to anticipate what might happen in the future which is very difficult to do, and write a contract which takes into account these eventualities. They can't do it because the future's very uncertain, many things can happen that we don't really expect, or are able to predict. I don't see how smart contracts are gonna solve that problem. Or to be more concrete, I mean, if we have a long-term economic relationship I think it's important that we're on the same page, we understand each other, if something unexpected comes up we have some reasonable way of dealing with it that makes us both comfortable, happy. I don't - that's much more about communication between us I think, at the time we write the contract than it is about any sort of automated device.
Silverstein: And last question can you give an example of the types of incomplete contracts and the bad incentives that those create?
Hart: I use the example of a power plant that locates next to a coal mine and wants to use the coal to burn to make electricity. And this is a real example - I mean there's empirical work on things like this and the thing is once you've located next to the mine, you really want that relationship to work out, because it's very costly to now ship the coal in from somewhere else. But many things can happen during the course of this relationship so just deciding ahead of time, you know, exactly what kind of coal, how much, how much I should pay you, and all that. Very difficult given that the world's going to be changing. New sources of energy, solar power gonna come along and that's gonna affect the industry but we probably can't anticipate that and write that into the contract. And so later on we may get into some argument about: "I want a different kind of coal," and the question is how much should I pay for it and this can be costly, this kind of argument and distort incentives and, you know ... I don't think a smart - you know - I'd love to see a computer solve that problem, but I think we're some way away from that.
Many people here bashing him for being ignorant I think he laid forward a very compelling argument as to the weight of the aspects of an agreement that can not be defined precisely enough to be automated - which is very relevant to think about if you want to understand smart contracts.
I did think he undervalued the decentralisation part of the whole idea.
In real world his claim is a true hurdle to application.
Maybe, the set of instructions in the smart contract can be updated based on the that-time's conditions and concerning all the parties involved in the contract, I think it might work if this type of feature is feasible.
With Chainlink we can connect to external data and have a contract that adapts as externalities change
Yes. Chainlink had not gone live back when this interview occurred. The more I learn, the more I realize Defi is to traditional finance, what money was to trade and barter. It can solve every problem he was talking about and accelerate the world economy. The problem of trust between agents in an economy drains huge resources, and makes the entire market much less liquid. Smart contracts, with Chainlink Oracles for data, and DAOs, solves all it.
But this data not always available in oracle database. Sometimes even breach of contract was clearly defined, the counterparty still have the right to annul and delay payment (based on so many things). That's why dispute happens. We still need the court of justice to determine it. What the professor is trying to say is this, the typical contract that is too personalized and not generic. Smart contract, in the contrary, is only tool to automate contractual terms that is for now not essential, like credit card limit for examples, and claim management. Even when now the credit card limit is already based on smartcontract-like mechanism, people still appeal personally to the bank.
@@charlytesch256 DAO's and smart contracts may be used by companies in the background to save on costs, increase liquidity, and reduce risks, without customers knowing so trust would not need to be built for these use cases. For example, smart contracts for the transfer of stock behind apps like robin hood, and other trading apps, instead of the current system which is slow, involves physically delivering cash, expensive, illiquid, and fails when there's not enough cash reserves for the volume of trades. Bank to bank transfers in the background is another example.
@@charlytesch256 Like you said the data is not always available so the court of justice is still needed. But the trend is clear that more and more data is coming online and will continue to come online, so the use cases for smart contracts will expand. A recent play example of using this new data, is some one wrote a smart contract to transfer ownership of some one's tesla for crypto payment for renting for a period of time.
@@user-yl7kl7sl1gut money has to be locked in the smart contract and what happens if their is accident or if he doesn't deposit money in smart contract. smart contract is a automation tool and there is dependency on Oracle which defeat the whole purpose.
Smart contract is not magical in any way
Contract are followed when money is locked fully in smart contract and in that case also many things can go wrong so we may have to stop or pause the contract which is not possible in smart contract.
Also a contract also needs a legal oversight otherwise people will not fear the consequences of not following the contract.
So smart contract is very very limited in use case.
And using oracle is same as what we do ready in traditional finance
The thing about contracts ‘relative to the traditional meaning of a contract’ is no matter how meticulous you are there are ALWAYS variables you cannot cover & the reality of implementation is ultimately unpredictable.., but within the neat Platonian heavenly dimension of the blockchain smart contracts are absolute & perfect in execution of all given possibilities that exist in the world.., that is the world of the blockchain, but for us humans we have to deal with the Oracle problem.
My linkies stay super stinky
Cheers mate
I'm sure Oliver Hart knows a lot about contract theory, but I have to admit that I didn't learn anything about smart contracts by watching this video.
that wasnt the point of this video tho
You ought to watch a different type of video for that. The assumption here is that you'd know the basics about smart contracts before you hear someone give an opinion on it
What he's saying isn't untrue, though. Smart contracts that do all those things that he mentioned aren't feasible to put on a blockchain because the computational power needed to verify them would be too large. One has to make use of oracles, which to a certain degree defeats the point of smart contracts.
he knows nothing about smart contracts, hes not even close to hitting the nail on the head, he read one quick article on smart contracts prior to this interview, he's so far off, smart contracts will automate the financial world given 10 years.
@@olamsoevikyes if oracle is there than why we need smart contract
Why not interview him on so ething that he does have the knowledge on or give him time to prepare for the question? What a wasted opportunity and time of viewers.
if you can write it , you can code it the only difference between a smart-contract and a paper contract is a smart-contract once agreed on can't be stopped or ignored.
A smart contract relies on information on the blockchain. The parties would have to agree on external information (real world events) which in turn would create agency problems. Also, complex contracts require more compuational power from nodes to verify.
wow! a bank doesnt see value in a smart contract?
What he is saying is fine.... but his example of varying prices of coal. Well that is actually exactly the kind of thing a smart contract can solve. It was not a good example to use.
Say you crate some sort of stable coin to use as a index for the price coal. You can then directly reference that in the contract, and have variable adaptive pretty easily.
big things coming. BIG THINGS COMING.
And we have upgradable smart contracts so uncertainty isn't really an issue.
Thanks for the forecast! I need some advice: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). How can I transfer them to Binance?
"probability in the money feature has a counterpart probability out the money that estimates the likelihood of an option finishing out of the money just as you’d expect, if you put the two side by side, you’d see that they add up to one hundred percent neither is better than the other. some traders like to see it expressed one way, and others like to see it the other way"
nice video
Poorly prepped propaganda this is. Why can't wait for Oliver to get up to speed on the subject matter (which he himself said he's no expert on) before asking him his halfhearted thoughts ?
Chainlink 1000 eoy
evd rasting yeah 1000 sats lol
have you seen the digits?
lol shill
Hope u still got those linkies fren
8 hey there I love you voice the way you speak phone on and all question more exclamation mark
Great interview, we dropped a rap explaining smart contracts recently on the channel. I think they're such a game changer for so many industries; thanks for the awesome info
Are paper contracts "cast in stone"? No. Do they sometimes have to be renegotiated from time-to-time? Yes. Same thing for smart contracts.
Let's asks bad questions about a technology this guy admittedly doesn't yet understand.
AI, ML and quantum computing could revolutionze smart contracts.
You can create new smart contracts to disregard the previous smart contracts.🤷🏿♂️
Wow
Computers can't solve people problems and contracts are people problems, so I'm not sure how a computer can help anything here.
Holobrine spoken like a true expert...
Through smart contracts can contracts be automated as well as include a multitude of parties involved. This is great for content creators where contract can be developed to pay the graphic artist involved, the music distributor, and so forth. With Chainlink we can connect to external data and have a contract that adapts automatically as externalities change
Dogecoin is not the future I guess...
smart contracts will enable freedom
Using smart contracts to automate anything other than the execution is compuationally expensive.
Smart contracts will (or won’t) open doors for you.
watch sergey nazarov, charles hoskinson or gavin wood, for smart contract, not this dino, who already admitts he doesnt kno a thing about the tech. ong term contract can be executed inside a smart contract, plus it trustless and viewable thru blockchain.
You will need a lawyer that can understand code.
AI will be the lawyer.
Dude the guy even says he knows little about smart contract. How can he say it can’t be solved.
What else would you expect from him ? This Innovation will make Banks as Big as UBS obsolete. 🤦🏽♂️🤷🏽♂️
so this guy knows NOTHING about smart contracts yeah, doggggggg s content here hahahaha.
Knows little about sc, continued to critique them
Dude, just stake HEX. Give the nobel prize to Richard.
Dick Cheney is that u?
Blockchain is making more and more Economics Nobel laureates sound like amateurs.
No it isn't. The more complext smart contracts are, the more the more computational power is required to veify their content. Smart contracts can in of themselves only rely on information on a blockchain. To rely on external information there needs to be some level of trust between the contracting parties which in turn has agency related problems. I think he's right on the money, in terms of some of the practical contract theory issues in smart contracts.
@@olamsoevik This is where Chainlink and decentralised oracles come in
@@olamsoevik This is where Decentralised oracles come in