The era of unintelligible contracts written in legalese by lawyers in $2,000 suits with degrees from Ivy League schools is over. The contracts of the next century will be hybrid smart contracts, written in code by programmers wearing $20 hoodies and living in their NYC-shared apartment.
What is a hybrid smart contract?
Smart contracts are self-enforcing contracts, written in code and executed by the blockchain. These smart contracts are great at sending and receiving money, and doing simple calculations, but they cannot access off-chain data, perform complex calculations or generate random numbers on their own.
Those limitations previously prohibited smart contracts from fulfilling many of the roles that traditional legal contracts currently hold. Now, the introduction of oracle networks onto the blockchain promises to solve this problem. Oracle networks can provide verifiable randomness, off-chain data and additional computational resources to smart contracts.
Oracle networks are made up of validators that write data onto the blockchain. The oracle aggregates inputs from multiple validators so that no one validator has control over the oracle feed. Validators might also use different mechanisms to come up with the data they write to further increase robustness. For example, oracle networks that provide verifiable randomness might want each validator to use a different pseudorandom number generator.
Oracle networks are decentralized, so using an oracle network doesn’t require sacrificing the benefits of decentralization that blockchain provides. A smart contract that makes use of an oracle network is called a hybrid smart contract.
Use cases for hybrid smart contracts
Once hybrid smart contracts have access to off-chain data through an oracle network, they can begin to replace traditional contracts. For example, weather insurance — a type of insurance that pays out in the event of extreme weather, is currently supported by traditional contracts. If an oracle…