cryptocurrencies fundamentally re-landscape markets and agreements as we know them. Unfortunately, you've probably only been bombarded with people screaming about NFTs and money. Now, some of the memes are fun, but let's forget the noise and get down to the essence of this space. If you're already in Web 3, this is the video to send to your friends to explain why you're so excited about this space and explain why we're here. And then, if you're not into crypto, you've come to the right place. And yes, there are fun memes and markets, and there's some money stuff, and there are all these things, but outside of all that, the purpose of blockchains relates to the age-old elementary school unbreakable promise: the pinky swear. Let's get froggy. Nearly everything you do in life is the result of an agreement or a contract. Your chair was the result of an agreement to buy and sell lumber, to assemble and sell the chair to a retailer on Amazon. Then you made an agreement to buy the chair for forty

dollars. The lights in your house are powered by electricity, which is an agreement from you and the electric company. You agree to pay them; in return, they'll keep the lights on. The electricity that generates is agreements between them and engineers who built turbines to generate the electricity. With insurance, you agreed to pay some amount of money to them every month, and in return, they will do nothing, or I mean they'll cover your medical bills. Almost everything you do and everything you interact with is the result of some form of agreement or contract in some aspect. Now, agreements and contracts can feel kind of abstract and boring to really grasp onto, so to simplify, we can also refer to them as promises. When you get an oil change, they're promising that they will faithfully change your oil in exchange for money. When you put money in the bank, they promise to keep it safe in exchange for them to use your money to give out loans. When you buy a lottery ticket, the lottery promises to give you a fair chance at winning a ton of money.

in exchange for you buying the ticket. Whenever you make one of these agreements, in a way, you're asking them to pinky swear to not screw you over and to treat you fairly. But this doesn't always happen. Let's look at a real-world example of someone breaking the pinky swear. Back in the 80s and 90s, McDonald's ran a promotion for people to win money by collecting McDonald's Monopoly game cards. The idea was simple: you buy McDonald's, and in return, you get a chance to win one million dollars. You can imagine McDonald's literally going, Hey everybody, I promise if you buy our food and McNuggets, we'll give you a fair chance of winning this money. But they ended up breaking this promise. Instead of having a fair chance of winning, your chance was, in fact, zero. In the mid-90s, between 13 and 24 million dollars went into the pockets of not people playing the game honestly, but a group of corrupt insiders who had rigged the game. Meaning that when you played

the McDonald's Monopoly game. You are buying into a set of lies and promises that were 100 percent always going to be broken. And the thing is, it doesn't really matter if this was McDonald's fault or not. They were the ones making the promises that they ultimately could not keep. Another way you could think about it is that that's 24 million dollars that they essentially stole from you and I. Now, if this system was deployed on a blockchain with something called a smart contract, it would have been impossible to defraud this 24 million dollars due to smart contracts being immutable, decentralized, and transparent. But I'll get back to that in a minute. And all the agreements and contracts we make. Imagine making a pinky swear with a 10-year-old and imagining how that agreement would hold up. Hey buddy, could you please keep my money safe? You can play with it if you like, but just please have it when I come back immediately. You might get that worrying feeling in your chest. Something might go

wrong this 10-year-old might lose your money. You might be thinking, How could I trust them? Will they break their promise? And this feeling, I can't breathe because of untrustworthy situations, happens to us all the time. Can I trust this used car salesperson to give me a good car? Can I trust this tag that says 'machine washable' or will it make my shirt shrink? Will my insurance provider break their promise of covering my medical bills when I get hit by a bus? When Patrick promises he'll go on a hike with me, will he actually? I actually will. The issue with our current agreements and contracts is we have to trust the people who are making them to do the right thing. However, often they're actually incentivized to not do the right thing. Insurance doesn't want to pay out money sometimes. Salespeople just want to get the off their shelves. And with my girlfriend, I promise to go on a hike but I hate hikes. Where else has this happened? Now you might be thinking, Okay Patrick, this seems cool but like where

has this actually affected me? Well, the McDonald's Lottery that we just spoke about above during the Great Depression with the run of the banks. Banks promise to keep our money safe and that when we went back to go get it, they would actually have the money there. And well and behold, there were times that they didn't have the money there. Just last year, Robin Hood painted this amazing picture. Come user application, we will give you access to the markets. We promise we will give you a retail investor a fair chance of interacting with the world of finance. Psych, but not this asset, this asset, this asset, or this asset. The 2008 financial crisis. Remember that shady deals behind closed doors combined with lies about financial products brought the world to its economic knees. How are you hyperinflation in Zimbabwe, hyperinflation in Brazil? Faradams history is a relentless lesson of trustworthy entities being notorious promise breakers. We finally have a way to fix it with smart contracts. Now, before I jump into smart contracts, a lot of people might be thinking, Hey, cool and

all however we have systems in place to protect against a lot of these things, which is true and which is great, and that is a very helpful step forward. So, these systems often break. The ones in 2008 definitely didn't work. The ones with the Robin Hood crisis definitely didn't work. And even if these systems apply and you go to court to try to work them out, maybe you're in court for years before you actually see a resolution, and by that time, what you needed the money for is long gone. So, what is this technology? What is this tool that can fix this fundamental problem in our agreements today? This tool is smart contracts, and this tool is what the blockchain was built for. Now, I'm going to give you a quick overview of what a smart contract is. However, I'm leaving some links in the description for more in-depth explanations, but the basics of them is a smart contract is an agreement, a contract, or a set of instructions deployed on a decentralized blockchain. And once the contractor set of instructions is deployed, it cannot be

altered it automatically executes, and everyone can see the terms of the agreement. The real basics of it is that the code is executed by a decentralized collective, like a group of people, but a group of people running a certain software. This means that no one person or entity can actually alter any of these agreements or change the terms of the arrangement. In these traditional agreements, whoever owns the contract, whoever owns the execution, the contract can flip a switch and say we're not going to do that anymore. In smart contracts and web3 and blockchain, you no longer can do that. Typically, these smart contracts are in a decentralized blockchain and used in combination with a decentralized Oracle Network to get the real-world assets and information. And if these words sound like I'm conjuring up a magic spell, well again, check the links in the description if you want to learn more about the technical implications. If you're not a technical person and you're not interested in getting to the nitty-gritty, you can kind of think of it like HTTPS. I bet the vast majority of

you don't even know what https stands for, and yet you use it every single day whenever you log onto the internet. So how does this fix the McDonald's Monopoly issue? In its traditional form, the lottery was executed behind closed doors. Somebody operated and owned the code and the contracts and the agreements that ran the lottery, and they had the power to alter it, and nobody other than the people internal on the lottery could audit this altering happening. Now, if the code for this Lottery was deployed onto a blockchain, every time a hacker attempted to alter it, everyone would be notified. Not only that, but you couldn't even alter it because the terms of a smart contract cannot be altered once deployed. Combine that smart contract with a chain link vrf Oracle to get a verifiably random number, and Presto, you now have a perfectly decentralized, unalterable agreement that is impossible to hack, commit fraud, or manipulate. We have just saved the public between 13 million and 24 million dollars just by fixing the issue of trust.

how does this fix Robin Hood? Well, the problem with Robin Hood is already fixed, right? Again, the problem is that there's a centralized body that can flip a switch at any time and say, Yeah, you can't access these markets anymore. We're breaking our promise of actually giving you access to the markets. This is already fixed with something called decentralized exchanges, and these exist today. One of these exchanges is one called Uniswap. You can swap ERC20 tokens, which are kind of the equivalent of stocks, but some aren't, some are. It's a little confusing; I won't get into that here either. But it doesn't have that centralized body that can flip a switch and ruin access to the markets. And had these investors been on a decentralized exchange, it would have saved them hundreds of millions of dollars, and it would have prevented fraudulent market manipulation. How does it fix one of the banks with transparency built in and automated solvency checks? You can build bank flight smart contracts that have insolvency checks built in that make it

impossible to get there, and solvent means broken any agreement or any history lesson where there was a trust assumption that was broken. Smart contracts can be applied to and should be applied to, especially in a time where big money runs, owns, and controls everything. We desperately need to move to a world where some self-interested centralized entity can't flip a switch and ruin people's access to the services that they need. We can move away from a world that is brand-based to a world that is math-based. Right now, if you interact with a service that you don't like or that they break their promise, the only thing you can do is walk down the street to the next service that's going to make the same set of promises, and you have to hope and pray that they're actually going to keep it. We can move from that to a world where we can just look at the map and say, Oh, okay, one plus one equals two. This is what this agreement is going to do for me every single time, guaranteed, because it's a

decentralized autonomous agent has no incentive to be evil, and everything is transparent and out in the open. If I'm a big company, and if it was better for me for one plus one to equal three, maybe I would go behind some closed doors and fudge some numbers and come back out and be like, Hey, one plus one equals three. Well, with smart contracts, that's impossible. Doing the right thing is infrastructural now. Given the choice between two agreements, one where you have to trust a single centralized entity that they're going to do the right thing for you versus a decentralized untamperable collective, which one are you gonna choose? I'm picking the one that can't screw me over every single time for every agreement I can apply it to. Now, this technology is relatively new, but we have already seen it re-landscaped entire markets and continue to do so. The traditional financial world is already getting its lunch eaten by DeFi, or decentralized finance. There's already over 200 billion dollars of people's money in these

protocols to help having a more fair, more accountable, more transparent financial system. This D5 movement is one of the main reasons I got into the space because we desperately need to move away from where we are right now and end people's chances for wealth being sucked up by some group that's bending the rules in their favor. Smart contracts are a ticket to that better world. More and more industries are also coming over to smart contracts and blockchain because of all the innovations and because of all the advantages that it has. As we grow and as we get better, we get closer to this vision of having this concept fulfilled: trust-minimized agreements. These smart contracts are minimizing the trust that we need to give other people in order for these agreements to be executed. If trust-minimized agreements are too confusing for you, just say unbreakable promises. Now, I gotta be honest with you guys, blockchains and smart contracts and cryptocurrencies can actually do more than just trust-minimized agreements. They have security benefits, uptime benefits, execution speed benefits, and a

whole lot more, but it's a lot easier to just learn about one and learn the other ones later, right? It's kind of like sprinkles on top. So, this is why we are here. This is why we're building this future, and this is why we are so excited about it. Last year, 2022, there were a lot of issues with a couple of different companies, like, for example, SBFS, FTX platform. The thing to me that's most frustrating about that situation is that FTX platform wasn't anything that I just talked about. It wasn't decentralized. It wasn't trustless. It wasn't transparent. It was purely a traditional web2 company pretending to be web3 and just using the cryptocurrency part of web3, but not actually using the smart contracts. And we're doing a much better job as a community getting rid of the bad actors. And this is something that's incredibly important for you when working with protocols and when building protocols. I want you to be incredibly successful here, but I want you to be

incredibly successful because you're making a ton of value. A lot of these platforms that we saw collapsing last year were not creating value; they were stealing value, they were siphoning value, they were faking having value. And as you learn and as you build smart contracts yourself, it'll start to become innately aware of what protocols and what companies are centralized and are not, not the ethos of web3, and the ones that are. We are building verifiable trust-minimized agreements, unbreakable promises, and if you can't verify those promises, then it's not trust-minimized, it's not web3, it's not what this industry is for. That's what I want you to do as you finish this course, is be a force for good. Unfortunately, because a lot of people haven't taken my course, not everybody understands the difference between a legitimate project and a token that's just meant to pump somebody's bags. As this space continues to grow and as people like yourself take courses like this, we will get to continue to

push real, legitimate projects forward and wash out the products that aren't actually contributing.

Lesson 1 Part 2  | The purpose of smart contracts - Solidity & Foundry Full Course

Book a smart contract audit here 👇
https://www.cyfrin.io/
