Please keep everything like I'm 5. I don't know computer science or programming. Please help me understand this ELI5 comment? I simplified names.

Bob opens a candy shop called BCS (Bob's Candy Shop).

He has no idea how taxes and all this adult stuff work so he asks his brother Charlie, a smart IT guy, to write him a magical SmartContract that cares about everything. [Question 1] He just needs a buyer to show the QR code Charlie gave him.

Alice comes by to buy some chocolate. She scans the QR code with her phone and sends the amount to the SmartContract Charlie made.

This contract automatically orders new chocolate and pays for it. The chocolate is already on its way to BCS. The taxes are calculated and stored in the SmartContract. This cares about paying the taxes and tells the taxman some other stuff in order to make taxman happy. The rest gets transferred to Bob's account. This all happens magically and faster as Bob can say "Thank you".

After the first day he buys a ticket for the film "Frozen" from the money he just earned. [Question 2] He only has to copy the address code which the cinema has on their website. He sends the amount of money and the name of the film to this address. The magical SmartContract of the cinema sends the ticket back.

Bob coincidentally meets Alice in the cinema. Both loved the film.

  1. What does this mean? Buyer like Alice has QR Code. Why Charlie gave Bob QR code?

  2. This is just QR Code and buying movie ticket online What do with Block Chain?

  3. Where's Block Chain in this analogy? Does Blockchain suppose be the "magical SmartContract"?

1 Answer 1


Bob's Candy Shop

What does this mean?

Sadly I think some of it is nonsense. Or at least overenthusiastic. Firstly when the author says taxes I think they are only referring to sales tax in the USA, not to other taxes such as income tax. Secondly I'd be very surprised if the taxman wants to receive individual tax payments for each customer transaction, normally these sort of taxes are paid periodically - e.g. at the end of a month. Thirdly, tax is often complex, there are often different tax-rates for different categories of product, different tax-thresholds and so on. Fourthly, I suspect the US taxman wants to be paid in USD not BTC and will want the unit-conversion to be based on an exchange-rate from a specific source - I don't think Bitcoin payment scripts have access to this sort of external data.Therefore I'd by very surprised if any but the most simple tax payment could be encompassed wholly within a purely Bitcoin transaction without some off-chain support.

Buyer like Alice has QR Code. Why Charlie gave Bob QR code?

I believe the author is probably just referring to the standard way that a seller communicates a receiving-address to a buyer. Nothing special there.

This is just QR Code and buying movie ticket online What do with Block Chain?

If you purchase anything with bitcoin, the transaction involves a bitcoin-script. The transaction details, including this script are recorded in the blockchain.

The script is written in a simplified programming language and in an abstract way defines the parties involved and defines how they must prove they are entitled to spend the proceeeds.

There are some standard scripts.

Where's Block Chain in this analogy? Does Blockchain suppose be the "magical SmartContract"?

The blockchain is simply a list of transactions. It is like an accountants journal.

Smart contracts are either in the bitcoin-script in the transaction details or in some extra layer of software that sits on top of the Bitcoin network and only uses the bitcoin blockchain for final settlement (e.g. monthly reconciliation of accounts) not necessarily for each transaction.

Smart Contracts in Bitcoin

Wikipedia says

Bitcoin provides a Turing-incomplete script language that allows the creation of custom smart contracts on top of Bitcoin like multisignature accounts, payment channels, escrows, time locks, atomic cross-chain trading, oracles, or multi-party lottery with no operator.

The article refers to this PDF file: Atzei, Nicola; Bartoletti, Massimo; Cimoli, Tiziana; Lande, Stefano; Zunino, Roberto (2018), "SoK: unraveling Bitcoin smart contracts" (PDF), 7th International Conference on Principles of Security and Trust (POST), European Joint Conferences on Theory and Practice of Software


This is the problem with ELI5. Many explanations to five year olds are of the form: "If you don't eat your greens the bogeyman will eat you in the night". You are not a five year old and are unlikely to find those sorts of explanation satisfying.

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