I'm going through the practical implication of smart contracts.
Take the white paper "Crop insurance" example: "One can easily make a financial derivatives contract but using a data feed of the weather instead of any price index. If a farmer in Iowa purchases a derivative that pays out inversely based on the precipitation in Iowa, then if there is a drought the farmer will automatically receive money and if there is enough rain the farmer will be happy because their crops would do well."
The keyword here is 'automate'. If you're not going to have collaterals on everything, you'll need trusted datafeeds. I have two concerns with datafeeds:
1) inaccuracy. I used to head the publishing of APIs for major retailers and have seen discrepancies despite enterprise level security and numerous audits.
2) collusion. it would be relatively straightforward for a 'small time' provider to manipulate the contracts by altering the datafeed. Nevermind insider manipulations for short term gains.
Please see realitykeys.com concept for reference - freebase is editable by anyone, yet they seem to 'trust' it.
What would make a datafeed genuinely trusted?