Summary of Smart Contract.

NAME : BILLY JOHANES COLLIN NUMBER ID:

017201700007
WHAT IS SMART CONTRACT?
A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce
the negotiation or performance of a contract. Smart contracts allow the performance of
credible transactions without third parties. These transactions are trackable and
irreversible.
Proponents of smart contracts claim that many kinds of contractual clauses may be
made partially or fully self-executing, self-enforcing, or both. The aim of smart contracts
is to provide security that is superior to traditional contract law and to reduce other
transaction costs associated with contracting. Various cryptocurrencies have
implemented types of smart contracts.
HISTORY OF SMART CONTRACT
Smart contracts were first proposed by Nick Szabo, who coined the term. With the
present implementations, based on block chains, "smart contract" is mostly used more
specifically in the sense of general purpose computation that takes place on a block
chain or distributed ledger. In this interpretation, used for example by the Ethereum
Foundation or IBM, a smart contract is not necessarily related to the classical concept of
a contract, but can be any kind of computer program.
In 2018, a US Senate report said: "While smart contracts might sound new, the concept
is rooted in basic contract law. Usually, the judicial system adjudicates contractual
disputes and enforces terms, but it is also common to have another arbitration method,
especially for international transactions. With smart contracts, a program enforces the
contract built into the code.
EXAMPLES OF SMART CONTRACT
Byzantine fault tolerant algorithms allowed digital security through decentralization to
form smart contracts. Additionally, the programming languages with various degrees of
Turing-completeness as a built-in feature of some block chains make the creation of
custom sophisticated logic possible.
Notable examples of implementation of smart contracts are:
Bitcoin also provides a Turing-incomplete Script language that allows the creation of
custom smart contracts on top of Bitcoin like multi signature accounts, payment
channels, escrows, time locks, atomic cross-chain trading, oracles, or multi-party lottery
with no operator.
Ethereum implements a nearly Turing-complete language on its block chain, a
prominent smart contract framework.
Root Stock (RSK) is a smart contract platform that is connected to the Bitcoin block
chain through sidechain technology. RSK is compatible with smart contracts created for
Ethereum.
Ripple (Codius), smart contract development halted in 2015.

SECURITY OF SMART CONTRACT.

A smart contract is "a computerized transaction protocol that executes the terms of a
contract". A block chain - based smart contract is visible to all users of said block chain.
However, this leads to a situation where bugs, including security holes, are visible to all
yet may not be quickly fixed.
Such an attack, difficult to fix quickly, was successfully executed on The DAO in June
2016, draining US$50 million in Ether while developers attempted to come to a solution
that would gain consensus. The DAO program had a time delay in place before the
hacker could remove the funds; a hard fork of the Ethereum software was done to claw
back the funds from the attacker before the time limit expired.
Issues in Ethereum smart contracts, in particular, include ambiguities and easy-but-
insecure constructs in its contract language Solidity, compiler bugs, Ethereum Virtual
Machine bugs, attacks on the block chain network, the immutability of bugs and that
there is no central source documenting known vulnerabilities, attacks and problematic
constructs.

HOW INDONESIAN LAW REGULATES SMART CONTRACT AND BLOCK CHAIN?

Indonesia have the law to regulate any kind of internet-based activities called the
Electronic Information and Transaction Law (ITE). And there’s a law from Menkominfo
that regulates the usage of the content of Internet ( Law No. 19 of 2014 concerning
handling negatively charged internet sites.
Minister of Communication and Information, Rudiantara states that “There is no need for
regulation because we must provide something more flexible to the community. Don't

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say that everything must be arranged. Block chain doesn't use frequency, the layer is
still above the cellular operator, it runs on the internet.”
WHY DOWE NEED SMART CONTRACT ?
1. Offer the higher decree of trust and reduced risks
2. Reduced administration and service costs
3. Potential to weed out inefficient Business Processes

WHERE CAN ISLAMIC FINANCE ADOPT?

• Possible Automation in Islamic Finance
• Murabahah
• Collateralised Murabahah - Collateral Management
and Margining
• Wakalah
• Tahawwut Master Agreement – Profit Rate Swap