When Smart Contracts Are Not So Smart

Smart contracts – that is, computer-code-based contracts that automatically enforce themselves – are based on a simple insight: old-fashioned contracts are an awful lot like computer code. Like code, contracts contain a series of rules that force contracting parties to do things. But words, the thinking goes, are ambiguous and lead to arguments when people don't agree on what the words say. And arguments are settled in front of fusty, inefficient courts.

Code, on the other hand, is unambiguous. Code does not need courts. Make the code the contract and mix in some crypto-currency blockchainery and you have the digital currency "ether," one of the hottest products in tech.

This solution is not perfect: We can write bad code just like we can write bad contracts and, when that happens, we need those fusty old courts to save us.