Extending blockchain with smart contracts

Abstract

This chapter introduces the concept of smart contracts. Basically, a smart contract is a computer program that can manipulate the state of a blockchain, using the input provided by the nodes through transactions. Smart contracts unleash the full potential of blockchain systems, turning them into full-fledged distributed information systems that can execute arbitrary business logic embedded in complex computer programs. We first make the case for extending blockchain with business logic, proposing an extended version of the BC4C system to exemplify the role of smart contracts. Then, we dive into the design aspects of smart contracts, discussing what kind of data and business logic they can handle and the constraints on their computational capabilities introduced by the distributed nature of blockchain systems. The chapter ends with a case study reviewing the first definition of smart contracts proposed in 1994 by cryptographer Nick Szabo.