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Ask HN: What benefits does the blockchain provide?
62 points by kypro on Jan 7, 2018 | hide | past | web | favorite | 87 comments
I've heard many people stating blockchain will become ubiquitous over the next few years, but I'm not entirely sure what benefits it provides.

The internet obviously provided companies a way to reach and connect with millions of people from all over the world. AI allows companies to use machines to do tasks once only humans could do. Cloud computing frees companies from the hassle of maintaining physical hardware.

But what does the blockchain offer me if it's really on par with these other innovations?




The blockchain's (current) prime use case: triple entry accounting. In double entry accounting, a ledger only contains debits and credits. With the blockchain, the blockchain's attestation of the validity of the debit and credits is the third entry. This removes the need to trust whether the credits and debits were correct in the first place. Were financial systems to be based on blockchain design, an Enron situation would not be able to occur. It might even prevent the likes of Madoff. This technology is only getting started. While there is hype, this hype is necessary for the market to test out many ideas and applications, until those that make sense remain standing.


No. I support the blockchain and think it will be revolutionary. However, Enron's issues weren't attributable to some discrepancy between credits and debits.

Accounting, surprisingly to folks who've never studied it and think it's simple arithmetic, requires judgment, based on rules that are sometimes grey and subjective. When you add in legal complexities, it becomes... well, more complex and therefore open to manipulation.

For instance, Enron was able to hide many liabilities by marking it (in hindsight) below market, since... there was no market for said liabilities. So it was impossible to value them. Furthermore, it hid other debt in obscure subsidiaries that were only tangentially, legally and fiscally speaking, connected to Enron.

The blockchain confirms, with better accuracy than existing systems, "X transaction occurred between Y and Z partners." It does not confirm "X's assets were appropriately valued and marked as such to a non-existent market, and X is most definitely a legal subsidiary and is overseen by the fiduciary duty of A Holdings, Corp."

The blockchain has the potential to be a far more efficient settlement system. But saying it prevents Enron or Madoff is simply not true at all.


It's a step towards preventing corruption.


The automated clearing house system, our current means of settling payments, is pretty secure. The bigger threats are someone getting ahold of your credit card or checking account info, which is the same threat level whenever you want to convert your Coinbase balance back into your local currency (or someone getting ahold of your public key).

The blockchain, rather, represents a better clearinghouse merely by being a decentralized platform to account for payments rather than a centralized one.

OP says this prevents accounting fraud. Not one iota.


It won't prevent corruption. It will alter the logistics of corruption though.


Uh, no. Enron’s debits and credits always added up. It was what they claimed as credits that was the problem.


It's not the only the correctness of the debits and credits that is possible, but also determining their nature. Of course these implementations would have to be molded to fit for each use case. The technology is nascent.


Yea, the hard part is when it comes to determining the value of the collateral for some obscure project in rural Africa, vouched for by the trader who sold the trade and signed for by somebody 10,000 miles away who might be the traders pal.


Yes, OP seems to think the blockchain somehow solves the (extremely subjective) issue of valuation, as opposed to simply "did this transaction occur between counterparties?


Precisely.


I think you are a little optimistic about blockchains preventing Enron type situations. From wikipedia their issues were:

>by the use of accounting loopholes, special purpose entities, and poor financial reporting – were able to hide billions of dollars in debt from failed deals and projects.

which you could probably spot if you had access to all their bank accounts including those of the special purpose entities but no large company is going to make all that stuff public. If it's on a blockchain it'll be encrypted some how. The people who are supposed to have access to that stuff and check it are the auditors, in this case Arthur Andersen who screwed up and were destroyed by it going from 85,000 employees to mostly closed.


I think I understand the advantages in this specific example and I can see how it's a great solution, even if I don't believe it's the future of banking/currency.

However, I was really asking for the benefits of blockchains more generally. I've been hearing a lot of smart people say it's the future, and I've seen news articles about numerous companies looking into building their own blockchains, but I don't really see what the general use case is for it. The only example that's ever made much sense to me is the example of cryptocurrency.


What's the general use case of the internet? Any answer to that still leaves you to connect the dots with real-world effects. It sounds like you wants some of those real-world effects for blockchain technology listed for you. Here are some far-reaching possibilities...

* Puts the whole world on the same level of financial freedom and participation - farmer in Africa without an internet connection permissionlessly invests in a Chinese tractor company via text.

* Solves the problem of ownership - no need for house, car, etc title companies.

* Brings a new level of honesty to the financial world - auditing industry goes away because it's not possible to cook the books.

* Every movement of value becomes near-instant and doesn't require trusted middlemen - elimination of clearing houses.

* Breaks down national borders - vastly improved supply-chain logistics.

It has the potential of reshaping almost every corner of the underlying structures of modern economies. Just like the internet, it's the foundation for a new chapter of innovation. Who knows what will come of it?


I’ve seen some pretty useful models for delegation of authorization come up. For example, a contract deploys trust to a root node in the chain (somewhere in the chain), then the chain allows public distributed rules regarding that trust encoded in the contract via transaction. Effectively, the holder of the trust “pays” the currency of privileges to the receiver. The advantage here is the ability to transmit privileges is entirely autonomous.


Do you have a source on this I can read more about this? It sounds interesting, but as someone who works in security and understands the basics of blockchain/contracts, your description was highly confusing.


Please spend sometime reading up on Enron before saying this. As it has been pointed out Enron's book was clean. The problem was mainly due to "Revenue Recognition" [1] and valuations. It basically describes when a revenue can be added on to the books. Enron booked it's revenue as soon as deal was booked. So, if they got 100 million deal for next 5 years, they should be booking 20 million each year. What they were doing was to show 100 million as revenue for this year. This is not a single entry as many people believed rather a series of credit and debits which always balanced.

The amazing thing is blockchain, specially things like Monero or Zercoin, makes it even more difficult to spot this as Enron would have been able to open accounts as they wanted.

I am writing a piece on blockchain transactions and I still don't understand how this triple account thing applies.

Let me explain how double accounting works - You and I have 100 in Bank A. The Bank A notes:

Bank's Liability to: You - 100

Me - 100

Total - 200

Asset for:

You - 100

Me - 100

Total - 200

When I pay you 50 out of it, the book shifts:

Bank's Liability to :

You - 150

Me - 50

Total - 200

Asset for:

You - 150

Me - 50

Total - 200

Both side in balance.

Now this book is obviously internal. Can you use this same example and explain how triple accounting works in blockchain?

[1]: https://www.investopedia.com/terms/r/revenuerecognition.asp


This is indeed not what blockchains prevent. If you have bad rules (ie. government is complicit either accidentally or intentionally) there is nothing that can be done.

And because governments really don't want to admit to their constituents how much they really spend and what they spend it on, the rules are ... less than perfect.

But a blockchain can vouch for the fact that the ledger was made according to the (supposed to be published and fair) rules, and that the rules didn't change except with total agreement.

So enron would have been able to book things in against the rules, but an easily written automated program would have detected such shenanigans, and there would not be anything Enron could do to prevent that program from raising red flags when the transactions don't follow the rules (so it would not be possible to book in such transactions, then not book in payment in full when it's due. If you're wondering how that's possible, consider that in bitcoin there just isn't any credit. So the only way to place an order using a bitcoin directly is to stake they money ahead of time, optionally with an instruction that it'd be paid back if an "oracle" (anyone else on the blockchain) says it's not delivered correctly)


One question - Before you pass a judgement on government "bad" rules, let ask you something, have you ever run any company of decent size? Because if you do, you will realize things are more difficult than you realize.

Let's take an example of a retailer. She buys stuff from a company to sell in her stores. And she has How or when does her book it as a revenue? When it is bought? When it is sold? Common sense says after it is sold. What happens if there is a return? There are so many rules to cater to so many things. It's something you can hardcode into program code.

> bitcoin there just isn't any credit.

And far from you belief, it is not a good thing.

> optionally with an instruction that it'd be paid back if an "oracle" (anyone else on the blockchain)

I like how a statement defending cryptocurrencies goes all over the place.

Pray tell, how are "oracles" implemented in "bitcoin"?

Also, why should people not trust the government but random "anyone else on the blockchain"?

That said, I am still waiting for someone to explain me this "triple accounting" thing on blockchain.


I do not think lack of credit is a good thing. Or rather, I have the game theory opinion. It is not a survivable thing.

Given 2 economic systems. One with credit and one without. The credit based one will crush the non-credit-based one.

Does that mean credit is good ? No, but it makes it a moot point: we will have credit. Point. Bitcoin will not survive, in the long term. I get that.


Triple accounting is explained. You have an incorruptible third party that attests to the accuracy of the computation.


I am sorry but given that you can't explain using the simple example of double book keeping makes me doubt if you even know accounting at all. Just repeating the standard blockchain lines over and over again.


The accuracy of the computation is pretty much never the issue anyway. That's checkable by any auditor. As far as I can tell triple entry accounting adds one buzzword..


When was the last time you checked the books of the bank where your money is stashed ?

Because for your bitcoins, that would be "45 minutes or less".


The essential point of the third entry has been made.


How about using the above example and showing where the third entry is made?


The blockchain is the third entry.


you are also assuming all of the accounting is on a public ledger. It's not necessarily the case, is it?


Well said.


It tackles the issue of "trust".

All of us at many points in our lives have to trust people or companies that we can't (and should't) trust, for example we give credit card numbers to some random websites on the web.

In theory, blockchains are supposed to get rid of that need, because instead of a single entity owning everything, everything is decentralized.

This means people don't have to put trust on entities they shouldn't have to trust. This will probably get rid of a lot of inefficiencies in the world.


This is the fundamental point of blockchains. Operating without large, trusted (for the time being) third parties.

Here's a specific example:

Blockchain-powered systems are an alternative to the censor-prone nature of the current networks (Internet, but also financial networks).

Governments and large corporations hold significant leverage over the omnipresent communication mechanisms that are available today. This wasn't an issue when the Internet was invented.

If a government disagrees with the existence of Wikileaks, Wikileaks can be excommunicated or financially strangled to death by applying pressure to third parties (banks or internet service providers) that allow it to function.

Blockchains and P2P networks provide an alternative to this.


Blockchains solve one piece of a puzzle I can trust the transaction to go through but I can't trust the ecosystem that it operates in -- I'll leave the definition of trust purposely ambiguous. Despite all their flaws the systems already in place are designed with the ideal to prevent anti-social malfeasance. No sane business will adopt a blockchain for a problem that already can be solved using cheaper methods -- you don't need to embed certain controls in technology, you can simply catch stuff using manual human powered processes at a much lower cost which are much more flexible than a program. Cryptocurrencies make it easy to pay any address I know exists and they also let someone purchase illegal goods easily.


I'm not sure I follow your point here. Are you adding to what I said or do you disagree in some way?


Both, and yes I quite disagree with you in some fundamental way. They have a specific niche while being severely over hyped.


I agree that blockchains are overhyped. But I don't think the value of P2P uncensorable money can be overstated in this day and age.


Again I agree ... it is nice to know the option exists but the value of this option isn't static at every point in time or every context -- the mere existence of it creates a certain level of bullshit that needs to be put up with.


How does it actually tackle the practical issue of trust, though? If I buy something in a block chain based currency and I don’t get it, doesn’t that mean I’m just SOL? On the other hand, with a credit card I can just do a chargeback.


A more simple example is a crypto contract.

Imagine a bank on Ethereum that accepts deposits and allows withdrawals (first example here: https://learnxinyminutes.com/docs/solidity/ )

Anyone can deposit and withdraw, and no central party has the right to control the funds, if the contract is designed that way. As such, there is no custodial risk that the funds are stolen - and perhaps even no need to regulate the bank itself. (obviously, someone can steal if they get your private key, just not through the bank itself)

Lots of other examples. Bitcoin lets us set a credible limit of 21 MM, but in the real world you'd have to trust a central bank's word for the same.

Or the Lightning network allows peer to peer payments through counterparties. But none of these counterparties are able to steal the money midway through. This is akin to having 20 random people help you move a payment across the world, without any of them being able to steal the money.

Finance is full of these examples where we have to trust other parties, and crypto may have a huge impact there. Also, by reducing regulations and capital requirements, may make the space more ripe for startups to attack finance.


Sorry for my continued confusion, but can you clarify how any of this stuff helps me have the same protections as when using a credit card? I just want to buy things safely when I’m not physically present - it seems like with cryto I’d send them the money and then I have to trust they’ll send me the thing, whereas with a credit card if they don’t send me the thing I just ask my issuer to reverse the transaction.


You got it right. It’s no good for that.

No crypto system can close trust beyond the network and it’s nodes. Some other dependency is required for that. Crypto might be shown to allow for some new kinds of dependency to step in at that point but I don’t know of anything like that myself.


Blockchain based currencies like Bitcoin protect you from your bank freezing or stealing your assets, or suddenly refusing to do business with you.

They don't protect you from a third party not shipping your products that you bought on eBay.

If you have ever dealt with companies like PayPal as a merchant, you know why this is important.


Just to clarify - as a consumer I lose utility when using crypto compared to the current status-quo?


I don't know of any cryptocurrencies that allow you do to do a chargeback, so in that specific dimension, yes.


In theory, this is true, but in practice the burden is huge, and people would still trust some centralized bank (like they do today with coinbase).


The main difference is that you actually get the choice of doing one or the other, whereas in the conventional banking system, you can't choose to be your own bank. Depending on what you are financing, this might be an essential feature.


'Trust' is sort of mangled here: what it means is that you 'trust' a single company on the other side of the transaction that makes up their rules/regulations and has their own customer service department, etc, i.e. VISA or MASTERCARD, that you have to deal with, as well as middlemen (i.e. the company that maybe issues the card to you like a bank or otherwise). They have the power to change their rules, raise your rates, close your account, etc.

With the distributed system, essentially we are trying to hardcode all of the rules, so there isn't any wiggle room for fraud, or a single person changing the rules on you, etc.

The downside to this, is that it means that it essentially becomes goverened by the software devs (or controlling body) of the altcoin. However, it sort of protects the consumer a little more by making it harder for a single governing body to make singular changes, because they'll want everyone who runs a type of exchange for the coin to participate as well so as not to alienate the coin and userbase...


Additionally, it is governed by the structures of code. Technical tools like programs operate in very precise deterministic fashions which do not map cleanly to the world of human contracts and other agreements. So it’s sort of a tough problem to have automatically executing programs that can be exploited by people who have a more sufficiently sophisticated technical understanding of a “smart contract” where there is no superior entity to resolve disputes of understanding.


Instead of having to deal with chargebacks (on both your side, and from the business's side), the funds could hypothetically be kept in an escrow all within a smart contract on a blockchain, and only released when delivery is confirmed. The confirmation of delivery could also be tracked via blockchain, say by the delivery person scanning the package on a device at your door which then signs the transaction with your key and that gets put on the blockchain, which then gets verified and funds are released from the escrow.

I do think we're still a ways off before the blockchain actually gets mass adoption in terms of real world usage (instead of it being a speculative, get rich quick scheme that it is now to a lot of people)


I think the problem is there’s no good way of adding out of network data to the blockchain. Instead of not sending the package, they could just send me a package of rocks and the delivery guy is none the wiser.


This is a different type of trust than what I was talking about. Here's a quick picture:

Alice wants to buy something from Bob. But the only way to do so is through Eve. Then Alice and Bob both need to trust that Eve won't steal their credit card or money transfer in between.

Your question is regarding whether Alice can trust Bob (Not whether Alice and Bob can trust Eve the Middleman) There isn't currently a mainstream app that does this yet. One notable example is OpenBazaar, where they created a protocol to carry this out in a trustless manner, but they're just getting started.


From reading the OpenBazaar blog (I searched for a whitepaper first), it seems like they aren’t trustless - they seem to have a concept of a moderator [0] who you need to trust (Sounds a lot like Eve)? I’m really not sure how this is technically possible, especially when dealing with physical goods.

[0] Under scam mitigation - https://www.openbazaar.org/blog/openbazaar-development-updat...


I don’t think it actually tackles the issue of trust but rather it removes it all together. Originally it was made for irreversible micro transactions where the existence of a trusted middleman made it too expensive for them to be practical.

Trusted middlemen usually serve a useful function in the system but for some use cases (i.e. irreversible micro transactions), they’re too expensive.


From your explanation, I’d argue it doesn’t remove trust, it just makes it so that you don’t particularly worry about trusting anyone (If I buy something for 50 cents who cares if you scam me). Is that a fair representation of your point?


Yes, that’s exactly what I meant. Thanks for clarifying it


It tackles a very specific problem, which is trust in the accuracy and of a ledger without third party interference or censorship. It's not meant to tackle problems outside of that. Expecting fulfillment to be handled by the blockchain is not much different from expecting the shipped product quality to be handled by the blockchain.


I was responding to a comment proposing that the blockchain allows for trust, including in cases where credit card numbers would be currently exchanged. Based on the subsequent commentary, it seems blockchain based currency (Not all blockchain uses) currently provide me, as a consumer, less protection from fraud but more freedom to transact (Censorship and interference resistance, as you mentioned).

The above distinction, I believe, is important - I’m not objectively better off using one or the other, it depends completely on which scenario I’m more worried about.


To further explain, I know it can sound confusing just saying we've done away with all trust, when in fact we're just replacing it with something different.

Blockchains allow parties to achieve consensus without trusting any other member. The innovation being that any social system that relies on trust brings with it the problems and implications of the trusted. Common examples include being more costly (overhead/greed), socially exclusionary / corrupt in some circumstances (eg banning protesters). It also facilitates new innovations such as cryptocurrency.

In public blockchains, trust is instead put into the security of the network in terms of its proof-of-work, its developers who maintain the software, the community at large (especially in the case of forks) and so on...

Not mentioned often however is why corporations also are loving the idea of private blockchains (IBM Hyperledger, R3, etc). Private blockchains involve trusting only a couple participants to join the network. A set of banks can define a mutual settlement protocol in a standard smart contract for example - in using a blockchain, they mitigate the risk of other banks affecting their system.

A better example of where a private blockchain would do wonders is in BGP routing. You hear almost every year of a news story where an Indian ISP accidentally broadcasts they forward for Google's IP subnet, and subsequently disrupts all of India's Google access until they manually fix it. A private blockchain among BGP hosts would vastly improve these situations if everyone could agree on which routes they were routing, and globally optimise in the case of failure.

I think the key to achieving anything with the blockchain approach is to not try replace something with a blockchain (ie Facebook) for the sake of removing trust, but pinpointing specific pains that derive from having to trust other parties and then focussing there.


> Not mentioned often however is why corporations also are loving the idea of private blockchains (IBM Hyperledger, R3, etc). Private blockchains involve trusting only a couple participants to join the network. A set of banks can define a mutual settlement protocol in a standard smart contract for example - in using a blockchain, they mitigate the risk of other banks affecting their system.

Yes, this is what really interests me. I'm trying to understand why companies like IBM and FB want to develop their own blockchains, but I'm struggling to get it.

Do you think you could give me some more details about how this would work? Do you have a real world example of how banks could use a private blockchain?


Well, that is great example.

How does it solve breaking of this "trust"?

In the same way that I shouldn't give credit card numbers to random website, I pay some coins to a random website which promptly runs away with those coins.

While for credit cards we have entities which can solve this problem for me, how does blockchain solve this problem? Because if this goes mainstream we will have people getting scammed a lot.

Or even people who get hacked due to the recent Intel bugs:

https://news.ycombinator.com/item?id=16076575


Thanks. Given the example of Bitcoin I think I understand how this works, but could you explain how the blockchain solves the issue of trust in your example?

Specifically how with the blockchain could I give a company my credit card information without me having to trust they don't misuse that information?


In practice by using Bitcoin you just send the company the funds, you never give them your credit card number at all.


So like wiring money directly basically? Plus, I actually already protect myself from this by using a separate card for online transactions which I top-up as I require. Why does the blockchain do this better than than traditional banks / solutions?

I understand a couple of disadvantages here would be the general inefficiency of the blockchain, and zero protection in cases of fraud. Do you feel the benefits of the blockchain would outweighs the negatives here?


Like wiring money directly, except it works across national borders and transactions are actually settled (and not reversible within 48 hours because the tech was invented ages ago).

The general (electrical) inefficiency is a specific characteristic of Bitcoin and PoW systems. It's not an inherent thing about Blockchains. Other cryptocurrencies don't have that problem.

I don't know about zero protection. Bitcoin-like currencies protect you from many things. One thing they don't protect you from is eBay sellers that scam you. Alternatives exist for this problem (namely money escrows).

Re: your last question, I think using a credit card is better today for buying stuff on eBay. But Bitcoin like systems solve a more fundamental issue which is that they let you and you alone control your own money. That is not essential for buying on eBay. But it is essential for other things that I would argue are more important. See my higher lever comment about Wikileaks funding, for example.


Correct me if I'm wrong or missing something here, but it sounds like you're suggesting we use the blockchain, not because it has any advantage, but because the current systems are using old tech?

Wouldn't the real solution here be to push for the tech currently used by centralised banks to be updated so transactions can happen almost instantaneously? This would also come with the advantage of preserving the protection from hackers and fraudsters that centralised banks currently offer their customers.


Blockchains are one thing and Bitcoin is another. I'm not really suggesting you use neither :)

Better bank tech exists in many places outside the US (pretty much everywhere, really). Better bank tech does not guarantee my ability to send you money, and it certainly does not provide that ability if any single one of a number of large private and/or public entities decide to preclude me from it.

Guaranteed access and censorship resistance. That is a clear advantage of cryptocurrencies at this time (not of blockchains, mind you), and I think it's a significant one. That doesn't mean you should use them.

If you are curious and up to the challenge I will give you an Argentina (where I currently live) bank account number and if you can get USD 1 in it by the end of next week I will send you $50 worth of the cryptocurrency of your choice.

PS Also I don't want to sound presumptuous but it seems to me you use the word "blockchain" as an equivalent to "bitcoin" or "cryptocurrency". It could be the case that some of the points in this type of discussion rely on the differences between those concepts.


It's just a database, but it's distributed, with integrity maintained through public keys

Coins, inventory, cars, loans, art, crypto kitties, sensor logs, records.. anything you'd put in a database, you could instead put into the distributed ledger and forget about it (at a price, the amount of data has to be very small but you can also buy hosting separately). Others can then have assurances about the integrity of that ledger without having to trust you either

The cherry on top is being able to write transform functions (ie programs) that all of the nodes simultaneously run so the ledger state can intelligently change based on conditions


Thanks, but what you're describing is already possible with traditional technologies.

What specific advantage does the blockchain provide here, given decentralisation is less efficient than the centralised cloud solutions already available from providers like AWS?


Assuming you mean public blockchains, the main advantage is censorship resistance (you cannot have an administrator delete entries or restrict access).


But where is this useful? I can already set up databases with restricted access to certain users.

In what situations am I going to want to create a database in which not even I under any circumstances can delete things or change access rights?


You are thinking of operations within a centrally controlled, trusted entity. This is useful for things that happen between entities that don't necessarily trust each other and don't have control of each other's data. Data interoperability, dealing with sketchy vendors, and chain of ownership through many companies, nations, or even departments within large organizations are huge problems that an insane amount of money is thrown at. There is a lot of value in a database of facts that no-one controls and everyone can trust.


The function of the blockchain is to suck in and burn the general public to such an extent that there will be universal support to kill any future decentralised monetary system.

Does anyone think that those that have control of the current money supply (well at least those that advise them) are going to give away this power to a bunch of nerdy anarchists with a cool idea?


I want to give a little context to why am asking this question...

Recently I've been seeing a number of really smart people and established companies claiming blockchain is going to be ubiquitous and revolutionise a large number of different industries. However, outside the case of cryptocurrencies I'm not sure what applications the blockchain has or why myself as a developer would want to start using this revolutionary technology.

I understand why in the example of cryptocurrency the blockchain is used. However why companies like Facebook or Microsoft would want to use blockchains for things is beyond me. It also confuses me why if the blockchain is as revolutionary as people say that it's only just started to get attention. Bitcoin has been around for quite a while, and has been well known in tech circles for a long time now.

If my comments here seem critical it's not because I have any opposition to using the blockchain, but simply that I'm confused and desperately trying to understand what I'm missing here. I genuinely don't understand why or how this technology is going to become ubiquitous or revolutionise much of anything - which concerns me given the track record of some of its advocates.


I had some criticism about the whole established companies going for blockchain:

https://news.ycombinator.com/item?id=16017754


Supply chain logistics and proof of ownership is a non-currency use case of blockchain technology.


Hey @thomasrognon, you’ve mentioned this twice on this thread from what I can see - care to elaborate?


For the sake of the intriguing argument I'd go with Scott Adams' AI / singularity idea:

http://blog.dilbert.com/2014/04/09/how-the-robots-will-take-...

Basically, according to that argument Bitcoin and blockchains are an AI-conceived ploy to stabilise markets and eliminate irrational human behaviour from the equation.


This article describes the parameter space of blockchain applications, calling out when a blockchain is useful and when it is pointless. As such it can help organize and compare the statements in a discussion like this.

https://medium.com/tezos/a-functional-nomenclature-of-crypto...


In practice it seems mostly just good for cryptocurrencies and equity like cryptos and for exchanging those outside government control. But that in itself could be a big deal - the financial, forex, stock and bond markets and money exchanges are a big part of the global economy and if those move to crypto that's a big change.

Outside government control is a mixed blessing - less bureaucratic but more prone to tax evasion, drug dealing and investment scams.


Personally when I hear blockchain I think payments. If we can bypass the banks and the credit card companies and create a payments system that is based on the power of the internet with blockchain as the intermediary, then we have something extremely powerful.

We have to remember that the banks and the credit card companies will prevent this from happening with all their resources...


Watch this video. https://www.youtube.com/watch?v=k53LUZxUF50

It does a good job of explaining how trust evolved in the world and now that we are comfortable using computers to organize our lives, it makes sense to have a global ledger to keep track of "karma" we owe each other.


Blockchain’s potential goes far beyond currency and investing. At it’s core it’s a way to protect and validate information in a decentralized way. That can be used for ANY information.

In theory a blockchain could serve as the source of truth for birth records, health records, property records, favorite cat videos, etc... The possibilities are endless


The benefit of blockchain is distributed consensus about a database.

When compared to a central regular database, blockchain is a compromise you make so that you can have distributed consensus over the state of the database. Apart from that it doesn't give you magical new benefits.


I was wondering today if it would enable new and exciting forms of MLM (Amway, Nutrisystem, P90X, etc.) as the downline can be encoded directly.


Getting rid of parasitic middlemen


Do you want the cynical answer or the idealist answer?

The cynical answer is that banking institutions and oligarchs are adopting cryptocurrencies because with the various recent leaks and the (long overdue) political willpower in the West to do something about tax evasion, they need something more reliable than physical tax havens.

One of the reasons why I suspect the current BTC rate is not just a bubble is that it matched the recent crackdown on corruption in Saudi Arabia. Hundreds of billions of dollars are at risk of being lost. We have seen similar hikes after Cyprus banking fiasco and, IIRC, after a round of Russian sanctions. Still, when even my step-mom considers investing in BTC, there is clearly a speculation bubble going on over this, but I doubt the crash would bring it to pre-december levels.

The idealist answer is that blockchains allow to secure transactions that would normally require a trustable third party. If you want to run a virtual currency you normally need a database somewhere that says "Bob owns 176 dogecoin, Amanda owns 9871 dogecoins". The owner of that database can theoretically suddenly remove or add amounts on accounts in the database without anyone else's authorization. On the blockchain, the database is shared by thousands (millions now I guess?) of nodes constantly checking each other. To make a fraudulent modification and get away with it you need to own 2/3 of the network.

Currencies were the first things implemented but now some smart contracts have been added: contracts that are programmatically defined and that the blockchain will ensure execute if some specific conditions are met. E.g: "If the account #25676 contains more than 10 BTC at the first day of a month, split its amount between these two different accounts". This gave rise to the possibility to create enforceable shareholder contracts without having to trust a legal system.

The idealists who put that in place are called cryptoanarchists. (Warning: Bias ahead) simply put, these are people who think that big institution will always fail. That corruptable systems will be corrupted and that the people creating crucial infrastructure today are so flawed that the general demise is inevitable. They see a big value in the fact that we don't need to trust an entity to do transaction. I used to think that way too.

However, fact is that entities whose business is to be trustworthy tend to do a good job 99.99% of the time. The 0.01% of the time is when you are called Wikileaks or Khodorkovsky. If you are, then you put a lot of value in the lack of third parties, but if you are part of the 99.99% you probably don't.

I still like the fact that blockchains are creating competition for other institutions. The speed and low price of transactions (well, now it is getting higher in BTC, hopefully this will be solved) puts the big institutions to shame. Recently a 10 minutes SEPA transfer initiative was started, probably because of this. It is the main transfer system in Europe and it would typically take several days to process.

The fact that companies could exist solely on blockchains and be created in a matter of minutes will hopefully put a similar pressure on administrations.


Thanks. I understand why they're a great solution in the domain of cryptocurrencies, but I'm not sure how they will be used by a lot of the companies looking into them now like Facebook? I'm asking more for the general usecase of blockchains. Specifically, in what situations would I want to use a blockchain?

You seem to be saying that you believe it has the potential to revolutionise a few things in the world of finance, which I would agree with. How much it will change those industries in reality though I'm a little more sceptical about.


The disruptive quality companies like in blockchain technology is its ability to ignore local legislations.

Facebook is not allowed to issue dollars but may issue likecoins, warn that US residents are not allowed to sell them for dollars and get away with it.


Consensus.




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