Editing Dumb contracts (section)

= Dumb contracts =

I would like to try take back the meaning behind some of these words by introducing a new term: the '''dumb contract'''. A dumb contract is any contract that relies heavily on the actions of other people to carry out its basic functionality, and thus requires third-party trust to operate.

A dumb contract is said to be dumb because people can easily be misguided, hacked, or tricked into doing things outside the parameters of the contract, making the dumb contract no better than using IOUs. Examples of dumb contracts are pervasive and include:

* Escrow systems of any kind where a third-party acts as a clearing house (e.g. Trading systems and currency exchanges.)
* Voting systems (e.g. Bitshares as an organizational structure.)
* Oracle and external state anything (e.g. Augur)
* Multi-sig exchanges (e.g. B &amp; C exchange)
* Tokens for physical derivatives, goods, stocks, or IOUs (e.g. Colored coins, Counterparty, etc - since they may or may not exist and require trust to be redeemed.)
* Virtually all “Decentralized” “autonomous” anything (e.g. The DAO – because voting can be subverted – imagine if we voted in Bitcoin to achieve consensus. Absolutely disastrous.)
* Collateral backed protocols that don’t account for irrational actors
* Projects that use reputation systems as a magic solution for everything

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