The dark side of Smart Contracts

A new bitcoin-inspired technology, called Smart Contracts, is expected to make way for a new wave of criminal innovation . As is well known, some of the early adopters of bitcoin were criminals, who found it indispensable in online marketplaces for smuggled goods and to extort payments through lucrative "ransomware" that holds personal data hostage.

The cryptography-enabled technology consists of small computer programs that can carry out financial trades or notarize documents in a legal agreement and could eliminate the need for third-party human administrators such as lawyers.

While some companies think smart contracts could improve the efficiency of the financial system, or ease complex transactions, Ari Juels, a cryptographer and professor at the Jacobs Technion-Cornell Institute at Cornell Tech, believes they will also aid unlawful activities.

"In some ways this is the perfect vehicle for criminal acts, because it's meant to create trust in situations where otherwise it's difficult to achieve," says Juels.

In a paper titled, "The Ring of Gyges: Using Smart Contracts for Crime", Juels, fellow Cornell professor Elaine Shi, and University of Maryland researcher Ahmed Kosba cite many examples of what they call "criminal smart contracts" and how they can facilitate leakage of confidential information, theft of cryptographic keys, and various realworld crimes (murder, arson, terrorism).

Commenting on the recently launched smart-contract platform Ethereum, the paper said, "In a fully distributed system such as Ethereum, smart contracts enable general fair exchange (atomic swaps) without a trusted third party, and thus can effectively guarantee payment for committed crimes. It is thus to be expected that such smart contract systems will stimulate new forms of crime."