The concept of smart contracts has grown considerably since the birth of Ethereum. We've seen an explosion of interdisciplinary research and experimentation bundling legal, social, economic, cryptographic and even philosophical concerns into a rather strange milieu of tokenized intellect. Yet despite this digital cambrian explosion of thought, there seems to be a lack of a unified ontology for smart contracts. What exactly is an ontology? Eschewing the philosophical sense of the word, an ontology is simply a framework for connecting concepts or groups alongside their properties to the relationships between them. It's a fundamental word that generally is the attempt at bedrock for a topic. For example, it's meaningful to discuss the ontology of democracy or the ontology of mathematics.

Why would one want to develop an ontology for smart contracts? What is gained from this exercise? Is it mostly an academic exercise or is there a prescriptive value to it? I suppose there are more questions to glean, but let's take a stab at the why.

Smart contracts are essentially two concepts mashed together. One is the notion of software. Cold, austere code that does as it is written and executes for the world to see. The other is the idea of an agreement between parties. Both have semantical demands that humans have traditionally had issues with and both have connections to worlds beyond the scope in which the contract lives.

Much of the focus of our current platforms, such as Ethereum, is on performance or security, yet abstracting to a more ontological viewpoint, one ought to ask about semantics and scope.

From a semantical perspective, we are trying to establish what the authors and users of smart contracts believe to be the purpose of the contract. Here we have consent, potential for non est factum style circumstances, a hierarchy of enforceability and other factors that have challenged contract law. What about cultural and linguistic barriers? Ambiguity is also king in this land.

Where normal contracts tend to pragmatically bind to a particular jurisdiction and set of interpretations with the escape hatch of arbitration or courts to parse purposeful ambiguity, decentralized machines have no such luxury. For better or worse, there is a pipeline with smart contracts that amplifies the semantical gap and then encapsulates the extracted consensus into code that again suffers from its own gap (Loi Luu demonstrated this recently using Oyente).

Then these structures presume dominion over something of value. Whether this dominion be data, tokens or markers that represent real life commitments or things such as deeds or titles. For the last category, like software giving recommendations to act on something in physical world, the program can tell one what to do, but someone has to do it.

So we have an object that combines software and agreements that has a deep semantic and scope concern, but one could add more dimensions. There is the question of establishing facts and events. The relationship with time. The levels of interpretation for any given agreement. Should everything be strictly speaking parsed by machines? Is there room for human judgement in this model (see Nick Szabo, Wet and dry code and this presentation)?

One could make a fair argument that one of the core pieces of complexity behind protocols like Ethereum is that it actually isn't just flirting with self-enforcing smart contracts. There are inherited notions from the Bitcoin ecosystem such as maximizing decentralization, maintaining a certain level of privacy, the use of a blockchain to order facts and events. Let's not even explore the native unit of account.

These concepts and utilities are fascinating, but contaminate attempts at a reasonable ontology that could be constructive. A less opinionated effort has come from the fintech world with both Christopher Clack's work on Smart Contract Templates and Willi Brammertz’s work on Project ACTUS. Here we don't need immutability or blockchains. The execution environment doesn't matter as much. It's more about consensus on intent and evaluation to optimize processes.

What about the relationship of smart contracts with other smart contracts? In the cryptocurrency space, we tend to be blockchain focused, yet this concept actually obfuscates that there are three data domains in a system that uses smart contracts.

The blockchain accounts for facts, events and value. There is a graph of smart contracts in relation to each other. Then there is a social graph of nodes or things that can interact with smart contracts. These are all incredibly different actors. Adding relays into the mix, one could even discuss the internet of smart contract systems.

Perhaps where an ontology could be most useful is on this last point. There seems to be economic value in marrying code to law for at least the purpose of standardization and efficiency, yet the hundreds of implicit assumptions and conditions upon which these systems are built need to be modelled explicitly for interoperability.

For example, if one takes a smart contract hosted on Rootstock and then via a relay communicates with a contract hosted on Ethereum and then connects to a data feed from a service such as Bloomberg offers, then what's the trust model? What assumptions has one made about the enforceability of this agreement, the actors who can influence it and the risk to the value contained? Like using dozens of software libraries with different licenses, one is creating a digital mess.

To wrap up some of my brief thoughts, I think we need to do the following. First, decouple smart contracts conceptually from blockchains and their associated principles. Second, come to grips with the semantic gap and also scope of enforcement. Third, model the relationships of smart contracts with each other, the actors who use them and related systems. Fourth, extract some patterns, standards and common use practices from already deployed contracts to see what we can infer. Finally, come up with better ways of making assumptions explicit.

The benefits of this approach seem to be making preparations for sorting out how one will design systems that host smart contracts and how such systems will relate to each other. There seems to be a profound lack of metadata for smart contracts floating around. Perhaps an ontology could provide a coherent way of labeling things?

Thanks for reading,

Charles

This article is inspired by my recent visit to a blockchain technology conference and my discussions with colleagues about ideas to improve blockchain. Most of the conference speakers were from big Russian banks and their talks were about blockchain use cases, mainly as databases or smart contract platforms. However, none of the speakers were able to answer the question, ‘why did they really need blockchain?’. The correct answer for this question recently came from the R3 CEV consortium: "no blockchain because we don't need one". Blockchain is not needed for banks, it is needed instead of banks. It is required for decentralized systems only, applications with a trusted party will always be more efficient, simple, etc. The meaning of decentralization has been widely discussed (see, for example, this post from Vitalik Buterin and it is the only real purpose of blockchains. In this blog post I'm going to discuss the degree of centralization of existing cryptocurrencies and the reasons leading to it.

Governance and development centralization

Let's start with a non-technical topic. It is nice to think that no-one controls blockchain, ie that network participants (miners) act as a decentralized community and chose the direction of development. In fact, everything is much worse.

The first source of centralization here, is the source of the protocol for improvement. Only a small group of core developers is able to accept changes to the source code or even understand some protocol improvement proposals. No-one works for free and the organization that pays money to the core team in fact controls the cryptocurrency’s source code. For example, Bitcoin development is controlled by Blockstream, and this organization has its own interests. A treasury system like the one for Dash or the one proposed for Ethereum Classic may be the solution here. However, a lot of questions are still open (for example, the 78 pages of ETC treasury proposal are quite complicated, while the Dash treasury system was developed without any documentation).

The next centralization risk in governance is the cult of personality. While Vitalik tells us in his post, that no-one controls cryptocurrencies, his opinion is so important for the Ethereum community, that most of its members accepted the bailout of the DAO, which breaks the basic immutability principle of cryptocurrencies.

Finally, there are a lot of interested parties behind cryptocurrencies, and the opinion of some of them (for example the end users of the currency) is usually ignored. Anyway, the development of cryptocurrencies is a social consensus, and it is good to have a manifesto, declaring its purpose from the start.

Services centralization

One of the biggest problems with existing cryptocurrencies is the centralization of services. Blockchain processing is heavy (eg Ethereum processing from the genesis block may take weeks) and regular users that just want to send some coins have to trust centralized services. Most Bitcoin users trust blockchain.info, Ethereum users trust myetherwallet and so on. If these popular wallets were to be compromised, users’ funds would be lost.

Moreover, most users trust in blockchain explorers and never check that the blocks in it are correct. What is the meaning of the "decentralized" social network Steemit, if almost none of its users download a blockchain and believe that the data on Steemit.com is correct? Or imagine that blockchain.info was compromised: an attacker could steal all the users’ money from their wallets, hide the criminal transactions and show user-created transactions in blockchain explorer, and the attack could go unnoticed for a long time. Thus, trust in centralized services produces a single point of failure, allows censorship and puts user coins in jeopardy.

Mining centralization

With popular cryptocurrencies, hardware requirements are high even just for blockchain validation. Even if you own modern hardware able to process blocks fast, your network channel may not be wide enough to download the created blocks fast enough. This leads to a situation where only a few high-end computers are able to create new blocks, which leads to mining centralization. Being open by design, Bitcoin mining power is now concentrated in a limited group of miners, which could easily meet and agree to perform a 51% attack (or just censor selected transactions or blocks). Mining pools worsen the situation, for example, in Bitcoin just five mining pools control more than 50% of the hash rate (at least if you believe blockchain.info. Another option for miners is to skip transaction processing and produce empty blocks, which would also make blockchain meaningless.

Proof-of-Stake is usually regarded as more hardware friendly, however, a really popular blockchain requires a wide network channel to synchronize the network anyway. Also, it is usually unprofitable to keep a mining node in PoS and just a small percentage of coins are online that makes the network vulnerable. This is usually fixed by delegating mining power to someone else, that also leads to a small amount of mining nodes.

Centralization as a solution

The most scary point of all this is that more and more often, centralization is regarded as a solution for some problems of cryptocurrencies. To fix scalability issues, cryptocurrencies propose to use a limited number of trusted "masternodes", "witnesses", "delegates", "federations" and so on to "fix" the too-large amount of mining nodes in the network. The number of these trusted nodes may vary, but by using this method to fix scalability issues, developers also destroy the decentralized nature of the currency. Eventually this would lead to a cryptocurrency with only one performing node, that processes transactions very efficiently, without confirmation delays and forks, but suddenly a blockchain is not needed, as in R3's case.

Unfortunately, most users are not able to determine the lie in cryptocurrencies and like these centralized blockchains more and more, because for sure, the centralized way is (and will always be) more simple and user-friendly.

Conclusion

We are going to see more centralized cryptocurrencies and that will inevitably lead to mass disappointment in blockchain technology, because it is not needed for centralized solutions. It is still a user choice, whether to believe a beautiful and fast web interface or to use trustless, but harmful software, requiring you to download blockchain data and process it.

Most centralization risks may be fixed, if trustless full-nodes, wallets, explorers are cheap to launch and easy to use. I'm not going to propose a solution in this paper, but I hope it is coming soon!

L-R: Nikos Bentenitis, IOHK Chief Operating Officer; Aggelos Kiayias, IOHK Chief Scientist; Charles Hoskinson, IOHK Chief Executive Officer and Co-Founder; Johanna Moore, Head of the School of Informatics, University of Edinburgh; Jon Oberlander, Assistant Principal for Data Technology, University of Edinburgh Research is at the core of what IOHK does so I am extremely proud of the company’s achievement in launching blockchain research centres at two world-class universities in February. This is a recognition of the pioneering work that IOHK is doing in advancing the science of cryptocurrencies, producing research that will all be open source and patent-free and progress the industry as a whole.

We marked the launch of our [Blockchain Technology Laboratory at the University of Edinburgh’s](http://www.ed.ac.uk/informatics/news-events/recentnews/beyond-bitcoiniohk-and-university-of-edinburgh "IOHK and University of Edinburgh Blockchain Technology Lab") School of Informatics last week, which will be led by Professor Aggelos Kiayias, our Chief Scientist. It is Scotland’s first blockchain research partnership between academia and industry, and we are proud to open it at the UK’s leading university for computer science research. Starting immediately, the lab will train the next generation of cryptographers and computer scientists, from undergraduate to post doctoral and professor level. The lab will be interdisciplinary, bringing in experts from the fields that blockchain encompasses, from law to ethics, and from economics to distributed systems. The research centre will also serve as the headquarters for IOHK’s growing network of global university partnerships.

The lab will provide a direct connection between developers and researchers, helping to get projects live faster and will pursue outreach projects with entrepreneurs in Edinburgh’s vibrant local technology community. Recruiting and outreach will begin immediately, and the full facility will be operational from summer 2017, located in the School of Informatics’ newly refurbished Appleton Tower.

Professor Kiayias says: “We are very excited regarding this collaboration on blockchain technology between the School of Informatics and IOHK. Distributed ledgers is an upcoming disruptive technology that can scale information services to a global level. The academic and industry connection forged by this collaboration puts the Blockchain Technology Lab at Edinburgh at the forefront of innovation in blockchain systems.”

And it was only two weeks earlier that IOHK celebrated another significant deal, at [Tokyo Institute of Technology](http://www.titech.ac.jp/english/news/2017/037573.html "IOHK and Tokyo Institute of Technology blockchain partnership"), a prestigious Japanese university and a leader in technology. Our partnership with them in setting up a Cryptocurrency Collaborative Research Chair is the first time the university has done such a deal and we are honoured to receive this distinction.

Two of our top researchers, Mario Larangeira and Bernado David will be embedded into a team led by Professor Tanaka at Tokyo Tech’s main site, the Ookayama campus. The team, along with professors and graduate students, will tackle industry challenges in this rapidly developing area of research into cryptocurrencies and provide education for the Japanese market. The partnership also includes support for students and researchers to attend international conferences.

Tokyo Tech President, Yoshinao Mishima, says: “This agreement is important because Tokyo Tech is seeking to enhance the collaboration with industries and universities in Japan and abroad by producing groundbreaking results in research and engineering which will be published in internationally renowned scientific journals and conferences.”

These launches are just the beginning of a global network of research centres that IOHK is building, to drive collaboration between the world’s best cryptographers and developers to create the cutting edge blockchain technology that will revolutionise the world’s financial services. Further centres are planned in the US, Europe and beyond. Expect more news this year and in 2018.

I'd like to thank everyone from the Ethereum Classic community for their support. I'm really excited to present the following statement which is in reference to monetary policy for the ETC platform. The Ethereum Classic community has grown substantially since its inception in July of 2016. In order to further Ethereum Classic’s vision, the community needs to adopt a monetary policy that balances the long-term interests of investors, developers, and business operators.

This statement represents a collaborative show of support for the monetary policy proposed in ECIP 1017. As industry stakeholders, ETC community members, exchange operators, mining pool operators, miners, wallet providers, developers, the Distributed Autonomous Coalition Asia (DACA) and the China Ethereum Classic Consortium (ECC), and other industry participants; we are committed to jointly planning and implementing a road map to effect the future ETC monetary policy.

We have agreed on the following points:

• We understand that a monetary policy has been proposed that establishes an upper bound on the total number of ETC that will ever be issued, and that this policy was the result of extensive discussions within the community. The policy also defines a method of reducing the block reward over time. It is available in English here and in Chinese here.

• The new monetary policy sets a limit for the total ETC issuance. The block reward will be reduced by 20% at block number 5,000,000, and another 20% every 5,000,000 blocks thereafter. Uncle block rewards will also be reduced. Due to variations in the reward rate of ETC, we anticipate the total supply to be approximately 210 million ETC, not to exceed 230 million ETC.

• We will continue to work with the Ethereum Classic protocol development community to develop, in public, a safe hard fork procedure based on the proposed monetary policy. ETCDEV Team will provide an implementation of the monetary policy for both the geth and parity clients after the hard fork procedure is agreed upon.

• We will run consensus systems that are compatible with Ethereum Classic clients, which will eventually contain the ECIP 1017 monetary policy and the hard-fork, in production.

Based on the above points, the timeline will likely follow the below dates.

• Geth and Parity clients that include the updated monetary policy are expected to be released in June 2017.

• If there is strong network-level support, the hard-fork activation will likely happen around Fall 2017.

• If the hard fork is activated, the first reduction in block reward will happen around December 2017.

Our common goal is to make Ethereum Classic a success. We believe that the community can unite and work together to achieve a sustainable global platform.

Together, we are:

• 白洪日, CEO, 币创网bichuang
• 陈刚, CEO, ETCWin & 91pool
• 顾颖(初夏虎) Eric Gu, CEO, ViewFin & szzc.com
• 郭宏才 Chandler Guo, Miner & Investor
• 韩锋博士, Chairman, DACA区块链协会
• 黄天威, CEO, 比特时代BTC38
• 胡洪杰, Vice Chairman, DACA区块链协会
• 李大伟, CEO, CHBTC
• 毛世行, CEO, F2Pool
• 徐刚 博士, Developer
• 许子敬 Ryan Xu, Miner & Investor
• 张淞皓, CEO, BTC123
• 赵千捷, Vice President, BTCC
• 邹来辉Roy Zou, Chairman, 以太坊原链协会 (Ethereum Classic Consortium)
• Igor Artamonov, CTO, ETCDEV Team
• Charles Hoskinson, CEO, IOHK
• Michael Moro, CEO, Genesis Global Trading
• Yates Randall, CTO, epool.io
• Barry Silbert, Founder & CEO, Digital Currency Group & Grayscale Investments
• Cory Tselikis, Miner Investor and Pool Operator, etc.minerhub.io & bec.minerhub.io

One of my first priorities after coming onboard with the Grothendieck team to take forward Ethereum Classic was to get out and meet colleagues and IOHK’s developers, wherever they might be. That meant making a trip to St Petersburg and to Warsaw, which was an excellent opportunity to meet face-to-face, and all the more valuable given that we are usually spread out around the world and across timezones. When I arrived in St Petersburg at the end of January to see Alex Chepurnoy, IOHK Research Fellow and Scorex Team manager, the temperature outside was hovering below zero degrees celsius. Lunch involved Alex and I walking across a frozen lake, where a guy was fishing through the ice and another brave citizen in swimming trunks was going for a quick splash in the lake’s icy water. Later, Alex and I put our heads together to look at Scorex and whether it would be compatible for our Scala implementation of the Ethereum Client. We got into detailed discussions on how consensus is formed in ETC and the differences between it and Scorex, before going on to consider the network layer, and I also learnt from Alex about some of the potential future attacks on Ethereum. By the end of the trip we concluded that Scorex was not the right fit for use on the ETC client, because Ethereum is specified to a much greater degree of detail than Scorex was designed to accommodate. It was a useful discussion to have. We also shared thoughts on the philosophy of how blockchains work and IODB, which Jan Kotek at IOHK has developed specifically as a blockchain database and which supports versioning and key value pairs. All in all, it was a productive trip, rounded off with a visit to the State Russian museum, which I highly recommend.

In early February I visited Warsaw, to get to know the part of the Grothendieck team based in Poland. They normally work from home, so we hired a co-working space in Warsaw. True to the spirit of remote working, we set up a laptop and the Grothendieck team’s Argentine contingent – Alan Verbner and Nicolas Tallar – joined online from Buenos Aires. It was a fun variation from our usual daily call to keep up to date.

So with the Polish part of the team – Radek Tkaczyk, Adam Smolarek, Lukasz Gasior and Jan Ziniewicz – we set out a timeline for our work on ETC and walked through all the functionality filling in gaps in each other’s knowledge as we went along. It was a very useful session followed by a well deserved team dinner and a beer (Thank you Pawel Marzec for organising!) On the second day, with the help of the whiteboard, we went through gas calculation, the architectural layer and architectural layering and components in the codebase.

Next stop, Argentina!