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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.




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