CHAPTER 12Contracts (the Internet of Money or Cryptocurrencies 2.0)

A wide range of applications are possible using Bitcoin, besides the storage and transfer of funds, thanks to the transaction scripting language (section 6.1), multisignature transactions (section 6.3), transaction signature options (section 6.5), and pay-to-script-hash (P2SH) transactions (section 6.6).

This chapter will present some applications that the community has come up with. Although there has not been wide deployment of any of these applications yet, it is interesting to understand them, as some of them might become important in the future.

The blockchain technology and cryptography allow users to enter into contracts with no central entity to enforce their clauses. Digital contracts could in some cases substitute the legal system: interactions that today are governed by law could be governed in the future by digital contracts and cryptoledgers1.

Many of the applications of this chapter could be achieved using Bitcoin’s block-chain as it is today or with minor modifications. But some examples require more profound extensions to the current Bitcoin protocol. The technologies that aim to extend or supersede Bitcoin are usually called meta-coins, and will be introduced in section 12.7.

An extensive catalogue of contract applications can be found in Bitcoin wiki (2014f) and Swanson (2014).

12.1 DIGITAL ASSETS

A digital asset is an asset whose ownership is recorded digitally and which is directly controlled ...

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