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You Do Not Need Blockchain: Popular Use Cases and Why They Do Not Work (smartdec.net)
515 points by discovan 62 days ago | hide | past | web | favorite | 392 comments



I've said this several times before on this site but will keep repeating it: there's exactly one use case where the blockchain is a superior (and, in fact, the only) solution: when you can't use contracts and the legal system to ensure trust between the parties. In other words, anything illegal. For any other conceivable use case, a database and a contract between parties are a superior solution.

Edit: To clarify what I mean by "a database and a contract": I mean the way the world does business, and as been for as long as society exists. There's trust between parties, and there's a multi-layered system in place to resolve disputes, starting from the customer support call center, reviews, bad publicity, and going all the way to the courts.

Guys, this works. It's literally how the world works.


> In other words, anything illegal.

Not exactly. It's anything for which the legal system is not effective.

For example, you can have a perfectly legal contract, but the other party is in a corrupt foreign jurisdiction that would never find in your favor in the event of a breach. Then you can't contract with them because they have no incentive not to breach, without an alternative method of ensuring compliance that doesn't rely on their corrupt government.

You may also have jurisdictions (like the US) where the process may be more fair, but it's unreasonably expensive, so if you're transacting with parties with a high probability of getting into disputes, something that can resolve them programmatically without litigation is an advantage.

Then there are the false positives. You're not a criminal, but you have bad credit or are from a disreputable country etc., so you're treated as one by the government or the rules targeting actual criminals cause companies to not want to do business with you, and you thereby need some alternative way to engage in your legitimate activities.

What you're arguing is that a perfect system of government removes the need for any alternative. But we haven't got a perfect system of government.


What I see as the 'hard to solve' problem isn't the contract. That's difficult but ultimately resolves to logic and proofs of logic.

The difficult to resolve problem is enforcing what the contract is trying to measure. It doesn't magically authenticate the state of the real world or objects within it. It can't do things like answer the question: "Did the occupant cause harm or ware beyond normal to a rented unit?" It's very good at enforcing things like regular and timely payment, but can't help resolve things such as "Did the land lord fix plumbing issues when notified?".

It also can't fix things like the biased nature of arbitration (is which relate to the above and in particular relate to the inherent disadvantage of both not knowing and finding it difficult to ascertain the state of the real world at any given time), or the cost involved with performing such observations. Nor can it handle bad actors on the side of renters, either by lack of training/documentation on how to properly use things or direct acts of malice.


A lot of this stuff is just bootstrapping though.

Suppose you have someone designated to identify plumbers, call him Bob. Bob has a public key, and if a plumber, call her Alice, comes to him and proves in the usual meatspace ways that she's a licensed plumber, Bob signs the plumber's public key, along with their name and license number and the date, signature good for a year. Maybe Bob works for the government, maybe he doesn't, but in either case he's a trustworthy guy who genuinely only identifies real plumbers and both the landlords and tenants trust him to do that.

Now the contract says that if the tenant identifies a plumbing issue, the landlord will provide a plumber identified by Bob to have a look at it. So the tenant can sign a statement declaring a plumbing issue and if the landlord doesn't get a signature by an identified plumber saying it's resolved within a given time, the landlord is in breach, verifiable with math. But if the plumber comes and signs a statement that there wasn't a plumbing issue, the errant tenant has to pay their fee for showing up, again verifiable with math.

Then the remaining issue is corrupt plumbers. But you can't solve every problem all at once, so you rely on the state to revoke licenses in demonstrated cases of corruption. Or on Bob to stop authorizing them.


How is this better than today's plumber licensing?


> so you rely on the state to revoke licenses in demonstrated cases of corruption.

Revoke how? Does the state, or anyone else besides Bob, have the authority to unilaterally modify the blockchain? If so, why don't they just use a central database, since you are forced to trust them anyway?


This is way more complex than what we have now and adds no practical benefits.


A blockchain isn't necessary for this. Public key encryption is sufficient.


Still though, in this scenario, (and which is why I think smart contracts themselves are waaaaaaay oversold) is that most real-world contracts deal with real-world things: e.g. you will deliver a set of goods, at a specified level of quality, at a set time.

But as the author points out so well (I really like his "Blockchain is not IOT" mantra) once you're dealing with real-world objects, you are relying on an oracle that you must trust.


There is no question that there is excessive hype. But not being good for everything isn't the same as being good for nothing.


What does a republic get you that a dictatorship couldn't do more efficiently?

I did it guys. I'm finally enlightened.


Republics and dictatorships are overlapping sets; in fact the instance of the latter from which the term derives was a designed-in temporary state of one of the best-known ancient examples of the former.

You probably meant something like “democratic republic” or the not-quite-equivalent “representative democracy” instead of bare “republic”.


> What does a republic get you that a dictatorship couldn't do more efficiently?

We're wayyyy off on a tangent here, but the removal of an unpopular leader from office...


Nah man, a dictatorship is capable of removing an unpopular leader from office more efficiently than any other form of government. Whether it's likely to or not is a different question!


You're talking about a coup or revolution. If you want to say that, I think the efficiency of a coup or revolution doesn't vary according to the government system that is getting attacked. The efficiency at which such attempts operate are a function of how organized they are.


No, I'm talking about an unpopular dictator simply resigning (because he is unpopular) and appointing his replacement! Highly efficient.


I guess hence your qualifier "whether it's likely". I'd find that even less likely than a revolution, but I have no idea what the real actual statistics are. Would be interesting to see data on coups vs resignations vs stayed in power until death or retirement.


> For example, you can have a perfectly legal contract, but the other party is in a corrupt foreign jurisdiction that would never find in your favor in the event of a breach. Then you can't contract with them because they have no incentive not to breach, without an alternative method of ensuring compliance that doesn't rely on their corrupt government.

International trade has perfectly good mechanisms for dealing with this at present. See: Letters of Credit.

> You may also have jurisdictions (like the US) where the process may be more fair, but it's unreasonably expensive, so if you're transacting with parties with a high probability of getting into disputes, something that can resolve them programmatically without litigation is an advantage.

The easy workaround to this is just to factor in additional costs for doing business...

> You're not a criminal, but you have bad credit or are from a disreputable country etc., so you're treated as one by the government or the rules targeting actual criminals cause companies to not want to do business with you, and you thereby need some alternative way to engage in your legitimate activities.

Probably still illegal to do business with you if the government has outlawed work with specific sanctioned countries, etc. Also, letters of credit.


Your workarounds have potentially higher overhead. "Just factor in additional costs" is equivalent to destroying otherwise-productive low margin transactions. Even for higher margin transactions, higher overhead is no advantage.

> Probably still illegal to do business with you if the government has outlawed work with specific sanctioned countries, etc.

The whole point is the cases where it's not.

Many banks and payment processors won't do business with you when your business isn't worth the effort of verifying you. That doesn't mean it's necessarily illegal for the bank, much less the seller of whatever you're buying, to do business with you. But you can't do the perfectly legal transaction if the customer has no way of paying.


> The whole point is the cases where it's not.

So your argument is that blockchain is only useful for international trade with tiny businesses?

> Even for higher margin transactions, higher overhead is no advantage.

Most people consider low corruption, high rule of law countries ideal places for business, with the higher overhead...


> So your argument is that blockchain is only useful for international trade with tiny businesses?

That is one use, not the only use. And don't discount the scope of international transactions with individuals.

> Most people consider low corruption, high rule of law countries ideal places for business, with the higher overhead...

When the overhead comes with something worth more than it costs you. Sometimes it doesn't.


>International trade has perfectly good mechanisms for dealing with this at present. See: Letters of Credit.

This works until you deal with a subject matter that (some) banks don't like or with people that (some) financial institutions don't like. It's entirely possible to be banned from Visa and MasterCard's services and this can sometimes mean that banks simply won't do business with you. Sometimes it's the subject matter you're dealing with that can be banned, eg certain types of (legal) porn.

>Probably still illegal to do business with you if the government has outlawed work with specific sanctioned countries, etc. Also, letters of credit.

He didn't say that the government has outlawed doing business with the country. He said that the government treats people from that country much more harshly. This would mean that businesses wouldn't want to do business with people from that country. Letters of credit don't work if the other country's banks aren't interested in dealing with businesses from your country.


"What you're arguing is that a perfect system of government removes the need for any alternative. But we haven't got a perfect system of government."

Yeah, but maybe something like bitcoin is a cancer on an imperfect system.

If you asked a tumor, maybe it would say, well, the infrastructure of the body I'm living in sucks! There are all these use cases that the immune system and the circulatory system and so on don't handle!


If you like a cancer analogy, blame the cigarettes, not the tumor.

People wouldn't be so interested in Bitcoin if the existing financial system didn't fail so many people. You don't get the cancer without the defects that cause it.

It shouldn't be possible to deny someone the ability to send or receive money. It sounds like a good idea (down with the bad guys), until you also push for a cashless society, at which point it's equivalent to demanding that they starve to death under a bridge because they have no way to buy food or pay rent. That's how to turn people at the margin into violent criminals.

It should be possible to electronically spend $100 anonymously. It isn't anybody's business what kind of books you want to read, or whether you want to donate to the EFF or your church or Planned Parenthood. Your sex life should be between you and your partner, not you, your partner, Paypal, Mastercard and Bank of America.

The existing system gets things like this wrong, which drives people to alternatives. If you don't like the alternatives, remove the demand for them by satisfying it within the existing system.


I get the impression most people in the general population were enamored by bitcoin based on how high and how rapidly its value was climbing, not its features or potential to upend international monetary systems.


> For example, you can have a perfectly legal contract, but the other party is in a corrupt foreign jurisdiction that would never find in your favor in the event of a breach. Then you can't contract with them because they have no incentive not to breach, without an alternative method of ensuring compliance that doesn't rely on their corrupt government.

can you give a concrete example? this requires a smart contract does it not? what is an example contract (specifically) where this is useful?


> can you give a concrete example? this requires a smart contract does it not? what is an example contract (specifically) where this is useful?

Suppose you make a loan to someone in an untrustworthy jurisdiction. The contract says you provide X amount in Bitcoin today and get paid back with interest in five years.

The borrower is a real estate developer who has a separate contract with a local buyer to purchase the property in five years, so they can use the smart contract for the real estate purchase to commit the portion of the purchase price to you equal to the loan principal plus interest.

If the borrower breaches by not building the property then you still get paid and the dispute is between the developer and the buyer over the separate contract, but they're both local which means the local courts would be fair to them (and if they're not it's still not your problem).

Using an escrow service doesn't work because the chronology of the loan requires you to release the money to them to build the property five years before they receive the money to pay you back with.


That's not how real estate development actually works in most of the world. Buyers almost never commit any cash 5 years in advance of property completion. If you want to convince anyone you're going to need a more realistic example.


oh. and how is it better than using an escrow service?


If you have a digital system that can handle disputes (by dispensing penalties say), how will it handle the other party lying about what happened in the real world? How would the other party handle you lying about what happened in the real world?


Or they could just refuse to provide the contracted service or provide bad product.

The blockchain can't fulfill the agreement.

All the blockchain does is memorialize the agreement -- which is what a contract does.


Escrow services exist for this purpose.


In some ways escrow is safer because blockchain transactions aren't reversible, no? Yeah, the transaction is there for everyone to verify, so everyone can tell the guy cheated someone, but without law enforcement (not necessarily easy across borders), how do you get the guy to honor the contract when he has no honest intent?


Depends on the definition of "honor". In a financial transaction, escrow holds the funds and releases to counter-party upon contractual delivery.

Both parties just need to agree on the "Swiss Bank" 3rd party to escrow the funds (and of course, the contract terms).

Blockchain and smart contracts seemed well suited to this task, initially. But I'd agree with the OP that low value assets (LVA) with sensors are easily spoofed and the cost of electricity isn't worth the time to miners.

High value assets (HVA) are just better served with human escrow brokers.


Exactly... a good use of crypto is for merchants who get a lot of fraud. It’s not worth trying to find and persecute every potential customer who rips you off, so you outsource that job to the client themselves (if you can get crypto and send it to me, we’re good).


Or a system where you can't trust a central entity not to twist the rules slightly over time in their favor. Oh wait, that turns out to be most systems.

Will blockchain fix it? doubt it. but a lot of people are trying.


My sense is the set of scenarios where "you can't use contracts and the legal system to ensure trust between the parties" is broader than just illegal agreements. Contract often fail when the damages for breach are too small, diffuse, and heterogeneous, making class action unsuitable. And many contract provisions are often not honored in bankruptcy. Litigation is an unwieldy tool and preferably avoided where possible.


But that's where small-claims court comes in. It mostly only costs you your time, you aren't really allowed to bring in a lawyer to argue on your behalf, etc. etc.

Depending on your location, the MAXIMUM damages for small-claims court is $5000 to $10,000. The whole system is designed so that smaller issues can be resolved quickly.

> And many contract provisions are often not honored in bankruptcy

That's literally the point of bankruptcy. The courts say "X has paid enough to its debtors and no longer needs to pay any more". You can't squeeze blood out of a stone. If the defendant doesn't have any money left, it doesn't make sense to sue them.

> Litigation is an unwieldy tool and preferably avoided where possible.

How does Blockchain stop litigation?

* If your Ethereum smart-contract says you owe your Car (or House) to somebody, but you don't give it to them... they'll be forced to go through the court system anyway to force you to give them the promised goods.

* If you fraudulently reported to the smart-contract the temperature of goods or... otherwise tricked the sensors on "smart contract temperature sensors", you have to be taken to court.

* If you put 20 BTC into an exchange (in promise for 550 ETH or whatever), but the exchange goes bankrupt... you lose both your BTC and your ETH. You have to go through the courts to try to get your money back.


>But that's where small-claims court comes in. It mostly only costs you your time, you aren't really allowed to bring in a lawyer to argue on your behalf, etc. etc.

This is such a US-centric answer it hurts. Small claims court doesn't mean anything when the other entity isn't even in your country. If you and I make a contract and you flake on it then I have no reasonable legal recourse because an international lawsuit is way too expensive for me.


> If you and I make a contract and you flake on it then I have no reasonable legal recourse because an international lawsuit is way too expensive for me.

Okay. And if the same is said about a smart contract, like The DAO, what happens?

https://medium.com/@MyPaoG/explaining-the-dao-exploit-for-be...


> If you put 20 BTC into an exchange (in promise for 550 ETH or whatever), but the exchange goes bankrupt... you lose both your BTC and your ETH. You have to go through the courts to try to get your money back.

That's actually solvable with atomic swaps [1]. They anable you to trustlessly exchange crypto currencies at an agreed on price.

[1] https://en.bitcoin.it/wiki/Atomic_swap


Nifty trick!

Unfortunately, it doesn't generalize to BTC / USD (or other fiat currency), which is probably the bigger exchange that most people use.

----------

The second issue is that BTC / ETH prices can change dramatically. Set your timer too long: and your opponent can use time to take advantage of the trade... only executing it when the BTC/ETH exchange floats towards their favor.

Because BTC / ETH prices vary dramatically on a day-to-day basis, "gaming" the exchange price is going to be trickier. With a traditional exchange, you either market order (always get a price, immediately), or limit-order (get the price as soon as the threshold is reached).


> Unfortunately, it doesn't generalize to BTC / USD (or other fiat currency)

The fact that it's impossible to implement trustless atomic swaps in USD is a USD problem, not a Bitcoin problem.

You asked how Bitcoin avoids litigation, you were given an example, and you dismissed it because it doesn't work on fiat. The reason Bitcoin had to be invented is precisely because these things aren't possible in fiat.


This is what stablecoins are for, such as USDT, TUSD, etc.

I'm sure you'll bring up the point that you still need exchanges for USD -> stablecoin. You can alternatively use crypto ATMs, or trade with someone you know.


Stablecoins rely on the trust of the company to float the value of the USD or whatever currency with the coin that is generated. USDT is owned and operated by a single, foreign company that hasn't had an audit yet and has no insurance protections what-so-ever. I'm not going to trust them with my money or business.

This about the worst of all cases: they pretend to be a blockchain, but they're really just a standard old bank operating without any regulatory behavior what-so-ever.


There is significant competition growing against Tether. The following three stablecoins have $500M+ in circulation all backed by US regulated companies: USDC, TUSD, and GUSD.


> all backed by US regulated companies

That means they aren't actually cryptocoins. That means those are banks, which are backed by the court system and the ability to sue those banks for your money if they mess up.


> That means they aren't actually cryptocoins.

That's not the argument here. I'm showing you that there are legitimate alternatives to USDT.


Trading with someone you know ruins the point of a trustless system.

If that person ends up duping you, then you need to sue them (litigation)


There’s no reality in which the scam commonly known as Tether is a stablecoin.


Unfortunately not every country has a small claims system. Also, I’m not entirely sure how etherum contracts work but if using them means money is transferred automatically upon objectivly measured completion, then I would very much like that even if I did have access to a small claims court.


> I’m not entirely sure how etherum contracts work but if using them means money is transferred automatically upon objectivly measured completion

That's the problem right there- defining "objectively measured completion" in such a way that the contract can act on.


Yes, I can imagine that would be difficult.


You can repeat it all the times you want, but it it is still a shortsighted view.

“A database and a contract”... but who owns the database? And who enforces the contract? And who owns the actual data?

Blockchain provides satisfactory answers to all those problems.

I agree 100% with the article in that blockchain is being ‘applied’ to a whole bunch of places that don’t need it. That doesn’t mean that it can’t work well in many other (legal!) scenarios.


> but who owns the database? And who enforces the contract? And who owns the actual data?

> Blockchain provides satisfactory answers to all those problems.

What problems? I mean your arguing like something like public transportation is an impossibility without blockchain backing because: "Who owns the stations, who enforces the schedules and who owns the actual busses?"

Those are not problems. They are all just questions that are always insanely easy to answer in the specific case.

With your banking credits, who owns the database? the bank, who enforces the contracts? the legal system? And who owns the actual data? Depending on law, there's ownership relations between yourself and the bank.

You an way to many crypto proponents are arguing like ownership rights, legal systems and databases don't exist outside of blockchain based solutions.


We are talking about ownership, which of course doesn't matter in your example because you don't own the buses or the stations.

If you own a house, where's the record? The title is with an insurance company. Why? Because your ownership of this house can be questioned at any time since there's no equivocal record. It's recorded in a bunch of "databases", some of which you and your insurance company may not know exist.


Blockchain offer no satisfactory solutions to this, houses can change, people can lose access to identification, people can be evicted, people can make mistakes. The last thing I would want is to be evicted with (by design) no chance to get my house back because my computer got hacked.

I cannot understand how at the same time lots of people are worried about "superintelligent machines eating the world" and proposing to remove humans from all important decisions in our lives.

Next step is to build a social graph on blockchain?


In the US there's only one real estate database per county, maintained by the county government. Owners can purchase title insurance to protect against other claims or liens, but the insurance company doesn't hold the title. And title insurance is quite cheap because in practice the risk is miniscule.


But what if two banks are transferring money between themselves? Which bank owns the database? Why should the other bank trust that database?


"SWIFT was founded in Brussels in 1973 under the leadership of its inaugural CEO, Carl Reuterskiöld (1973–1989), and was supported by 239 banks in fifteen countries. It started to establish common standards for financial transactions and a shared data processing system and worldwide communications network designed by Logica and developed by the Burroughs Corporation. Fundamental operating procedures, rules for liability, etc., were established in 1975 and the first message was sent in 1977. SWIFT's first United States operating center was inaugurated by Governor John N. Dalton of Virginia in 1979"

https://en.wikipedia.org/wiki/Society_for_Worldwide_Interban...

See also:

https://en.wikipedia.org/wiki/Clearing_House_Interbank_Payme...

https://en.wikipedia.org/wiki/Fedwire


SWIFT is a messaging system, not a settlement system. Its also far slower than blockchain, more complex, and more prone to error. I think around 6% of transactions just disappear.


I'd be interested to see actual numbers for transaction volume, latency, and reliability of SWIFT and blockchain in practical use cases.

I worked on a payment system using the UK's Faster Payment Scheme a while ago. The SLA for latency is two seconds end-to-end, and is usually much faster than that, was simple enough for a gang of underpaid COBOL programmers to implement it successfully, and didn't have a mechanical error rate worth bothering about. In January it moved 186.1 million payments and 161 billion pounds:

http://www.fasterpayments.org.uk/statistics

FPS is UK-only, but there's nothing about the technology or the commercial and legal machinery that wouldn't work internationally. If SWIFT is really as bad as you say, it could be replaced with a better instance of the same technology; it doesn't require a haunted git repository to fix it.


I used to work for SWIFT. The 6% error rate is incorrect as errors are detected and resent using different methods, so more like 0.0001% error rate. Sometimes SWIFT transfers trillions of dollars in a single day, so yes, it is the largest trading volume in the world


> it doesn't require a haunted git repository to fix it.

lol, thanks for that.


In 15+ years of building and maintaining SWIFT-connected systems that run SWIFT-provided software, I’ve never encountered a situation where a SWIFT message has “just disappeared”.


"Citation needed" for the 6% figure.


I can't speak to banks, but I have some personal experience with this sort of thing in the case of trading. I'm guessing it's at least somewhat similar to how it works among banks.

All the big players have got real-time feeds they're sharing with each other to keep track of who's made what transactions, and they're constantly reconciling them against each other, to make sure that everyone's looking at the same picture. There are also daily reports summarizing the previous day's activity, and they are also reconciled as a second check. The proactive parties work together to sort out any discrepancies they find as soon as they find them.

None of this is strictly necessary, because there is a central source of truth that you can rely on. But it tends to operate much too slowly for a lot of people's needs, and mistakes do happen, and they can be costly, so it pays to be proactive. Meaning that, in general, nobody's actually relying on the central authority to keep this organized.

The actual real-time feeds are log-structured: You can add new records, but not delete old ones. If you want to reverse a transaction, you just add a new entry to the ledger to back it out.

In that sense, it works a lot like how a blockchain would work. The only difference is, nobody's bothering with all that crypto stuff, because all it would do is make the whole thing more expensive. Like, literally, that's the only impact I can see. It won't help with preventing errors - when mistakes happen, it's invariably because of an error at the boundary of the system, and fiddling around with hashes of the previous message when sending new ones does nothing to guard against that. All it would do is slow both the throughput and latency of transactions by introducing more spots where synchronization must occur together with a bunch of ancillary computational load.

In a world where time is money, that sure sounds to me like a $100 solution to a 1¢ problem.


This is, if i have understood correctly, called real-time gross settlement:

https://en.wikipedia.org/wiki/Real-time_gross_settlement

For euros, there's TARGET2:

https://en.wikipedia.org/wiki/TARGET2

Daily average of 342008 payments, value 1.7 trillion euros:

https://www.ecb.europa.eu/paym/target/target2/facts/html/ind...


And what if a lowly peasant like me wants to synchronize with the big trading firms' feeds? Do I need to sell a kidney to play on the same field?

Blockchain does exactly this without everybody having to sort out discrepancies. Everybody getting the same picture is built in. Just the possibility of there being discrepancies in the ledgers you described would have me looking for a better way.

I would much rather have the option of connecting to a decentralized feed that is the same for everybody regardless of resources.


> And what if a lowly peasant like me wants to synchronize with the big trading firms' feeds?

It's all pretty highly regulated, and you'd need a license before you're allowed to even think about hooking directly into an exchange. If you've got lowly peasant money to work with, it would be much more cost effective to go through the retail channels, just like every other person who isn't a corporation.

> Blockchain does exactly this without everybody having to sort out discrepancies.

No, it doesn't. The nature of the discrepancies that cause trouble in practice, and the ways they sneak in, are simply not things you can solve by chaining hashes and throwing a proof-of-work algorithm into the mix. The very suggestion puts you one blue suit and some pointy hair away from being able to star in a Dilbert strip about trying to use buzzwords to solve problems you don't understand.


Nobody said proof-of-work. Bitcoin is not the only game in town. Ledger consensus can be reaches without wasting resources on a proof-of-work algorithm.


Which answer none of the point presented.

Financial markets are heavily regulated for a good reason, Bitcoin need to find a good way to "clone" that if it want to be used for actual finance.

Errors can come from outside the system, any kind of consensus protocol cannot solve that. So cryptocoins do not have any particular advantage here.


> All the big players have got real-time feeds they're sharing with each other to keep track of who's made what transactions, and they're constantly reconciling them against each other, to make sure that everyone's looking at the same picture.

That is exactly what blockchain is. It is literally doing that.

> None of this is strictly necessary, because there is a central source of truth that you can rely on.

But who is running that? And why do you trust them not to change things around every so often?

> it works a lot like how a blockchain would work

Except there's no central source of truth because no one trusts anyone. Which is why its so strong. There's no need to trust.

> The only difference is, nobody's bothering with all that crypto stuff, because all it would do is make the whole thing more expensive

That's what makes blockchain immutable. You can't alter it without an enormous amount of resources. And even then, the actions of the rest of the network work to discourage that sort of thing. In PoW, everyone else is checking the non-altered data, and in consensus, everyone else has already agreed on non-altered data.


"That is exactly what blockchain is. It is literally doing that."

It isn't: it's a chain of hashes with signature. Those predate blockchains that do things like wasteful mining. An example was Surety's timestamping service. A hashchain using standard primitives is way less wasteful, supports higher transaction volume, is cheaper, and can take advantage of hardware acceleration in client and server devices.

One of reasons I oppose blockchain tech is that you get better cost-benefit ratio out of high-performance, centralized protocols with decentralized checking. We also have some of that mathematically verified for correctness down to assembly. So, they will be more secure than complex, decentralized protocols.


There are more blockchain consensus algorithms than just Proof-of-Work. Its probably the most inefficient, and that's well known. I personally prefer Ripple's consensus algorithm.


In every jurisdiction I can think of, this was answered decades ago. Each country has a national association or clearinghouse. In some it's government operated, in some it's a consortium of businesses. The US has NATCHA.


Trusted third party owned by the banks, or providing audited services to the banks. Banks trust the third party because contracts are enforced by law as well as federal and industry regulations.

Ain't no judge gonna throw up is hands and go "well, the smart contract says so, my hands are tied!". Blockchain doesn't solve anything where there is a functioning legal framework.

You can't use technology to solve a problem that isn't a technology problem.


Agreed. I phrase this as "technology does not solve civil problems" (https://news.ycombinator.com/item?id=17809559).


It doesn’t solve anything if there isn’t a functioning legal framework either.

You still have to trust the other party will abide by the results of the smart contract.

If there is no legal framework they could just shoot you and have done with it, if they didn’t like the result.

Smart contracts and blockchains are still laws, just laws for people who don’t like some of the existing ones. Numerical rather than societal.

If there’s no rule of law, then blockchain laws can’t exist either.


>Which bank owns the database?

Central bank?

> Why should the other bank trust that database?

Because if that database fails, it is likely that the failure is one of the smaller problems of the bank?


It is a trust based system. How long do you think a bank or any business can operate if it routinely defrauds its peers or customers.

Goodwill is an asset that companies care about.


> And who enforces the contract? [...] Blockchain provides satisfactory answers to all those problems.

No, it doesn't, not if the contract touches on anything outside the blockchain. At the very least this includes anything physical (physical objects or physical services) and currencies not based on that particalur blockchain.


Moreover, blockchain isn't even allowed to be a satisfactory answer to all those problems, except when you're operating in an extra-legal environment.

Because, if a court decides that a transaction was illegal and orders you to reverse it, answering, "But the blockchain. . . !" is a great way to land yourself in jail.

Which, granted, plenty of anarchists and criminals have moral or practical reasons why they would rather operate in an extra-legal environment. But here we come to the reason why skipping the "as a..." line in your user stories is such an anti-practice: Those are two very specific user profiles. Most the rest of us would like to see QuadrigaCX's clients get their money back.


In some respects this is particularly useful in a criminal setting due to the US legal systems doctrine of un-clean hands. You can't sue your drug dealer for failing to deliver as agreed, for instance. As such, the blockchain is effectively the stand-in as you can't get sued by your counterparty over illegal transactions anyways, and the judge won't order you to reverse them.


But if you are dealing drugs, and the judge says to hand over the funds, you better believe that no amount of "blockchain" will keep those funds under your control.


Hahaha agreed


> Blockchain provides satisfactory answers to all those problems.

Sort of:

> who owns the database?

Whoever has the most computational resources, in most implementations.

> who enforces the contract?

Depends on the contract. If I sell my house via a blockchain contract, a computer isn't going to come and evict me. If I sell you some heroin, or an action figure, or a rare in-game skin, it's still not going to help.

> who owns the actual data?

Nobody, and that's a problem when data needs to be removed.


To be fair, I think most people who have given blockchain an honest 30 minutes of brainstorming aren't arguing for real world assets connected to a chain.

I would argue that there is potentially a use case when it comes to things that can be completely represented digitally e.g. money.


> To be fair, I think most people who have given blockchain an honest 30 minutes of brainstorming aren't arguing for real world assets connected to a chain

You say that, and then look at the number of companies selling blockchain based services promising exactly that, and enterprises paying for projects...

It's understandable why as well. Pure "digital world" businesses that blockchain can deliver like provably actuarially fair gambling exist, but they're pretty niche.

I'd question whether money can be completely represented without recourse to the outside world - what gives money relatively stable value is the real world enforcement of contracts, debt obligations and taxes. Take those away and whilst your blockchain can validate the integrity of some numbers you hold, you can't guarantee anyone actually exchanges it for anything actually useful in future.


No doubt that there are a lot of people selling those services, but I think they are capitalizing off the fact that a lot of people don't know/spend the time to understand where blockchain actually improves things - and it's no fault of those people.

From my understanding, blockchain is essentially "cheap trust" . You can pay the system a fee to trust math rather than a human. Once I learned that, I realized there are very few scenarios where cheap trust is needed.

So perhaps I should adjust my first statement with "people who understand blockchain" - although even that's not necessarily fair as it assumes that I "understand" it.

I suppose what I'm getting at is that I think it's unfair to look at the number of scammers/people selling "blockchain" services and make an assumption on the industry as a whole. Most of the developers in the space that I know completely write off those people and don't even consider them in the industry.

On whether money can be completely represented without recourse to the outside world -> Agreed, I should again amend my statement to say "value". There is no doubt that 1 Bitcoin represents a certain amount of "value" right now and that value has so far proven to be un-censorable. Whether it will be successful money is a different question.


>To be fair, I think most people who have given blockchain an honest 30 minutes of brainstorming aren't arguing for real world assets connected to a chain.

The comment above says that the blockchain provides a satisfactory answer to enforcement of contracts. People really do seem to think that contracts made on the blockchain will magically enforce themselves in the real world.


Slightly ridiculous. Blockchains enforce the contract on the blockchain.

The contracts don't, and can't, concern themselves with anything that is off the blockchain. Once the ether is in your account, the contract is complete.


They enforce the contract on the blockchain, but that's pretty much irrelevant, since breaking a contract usually doesn't involve anything a blockchain solution would control.

As an example, fradulent fish is a huge problem in the fisheries and food industry. At every step of the supply chain, there is temptation to substitute expensive for cheap fish. Most Chilean sea bass you buy isn't actually Chilean sea bass, for example.

A lot of people are hyping blockchain as a solution to this serious problem, not appreciating the fact that the technology cannot actually tell different types of whitefish apart. I really would like a solid counterexample where blockchain actually would help, but I've never heard one.


That I agree with. I've seen some pretty interesting proposals for on-chain games.

But it still adds new problems. Electricity use, the irrecoverability of data/auth if you lose a key, the inability to erase problematic data.


I'm not sure I'd necessarily call those problems - it's a weird definition I know, but perhaps tradeoffs?

1. On Electricity - It needs to be expensive to try to cheat or steal from the system. Currently with gold you would need to hire a private army to steal from and break into vaults - that's so expensive and crazy that I don't think most people are willing to undertake that risk. Currently I think electricity is the best way to make digital native things expensive. I'm not sold on anything else yet (definitely open to new solutions, but I'm not convinced think PoS is a viable one).

2-3. I think this is an interesting tradeoff. The way I look at it you pick 1 of 2. Either you trust someone or some people to return lost funds/remove "problematic" data or you trust the system in which case those things can never be recovered/removed.

I think calling those "problems" might be premature as they could actually be "benefits" depending on how you look at them.


Re 1: So why again are we wasting an entire country worth of electricity to secure some numbers? Because we haven't found a good replacement yet doesn't cut it. It's like saying why am I dumping dioxin in the rain gutters? Oh, well, I haven't figured out a better plan so back off, socialist :P

Re 2-3: Tell that to customers of Quadriga and MtGox and the countless scammed, those who paid ransom to kidnappers. Everyone who lost their keys. It's a problem, let's face some reality here.


I frequently see commercials that must have cost millions of dollars to create and place that make the opposite argument. If what you're saying is true, the whole industry is just selling snake-oil, and (I think?) people are buying it. The more likely scenario, it seems to me, is that lots of these people actually believe in good faith that this is actually useful technology. If you assume that's the case, it makes sense for people to continue pointing out why that may not be true.


> The whole industry is just selling snake-oil, and (I think?) people are buying it.

No, not people in the sense of end user customers. The industry is selling snake oil and some investors have bought into it and subsequently promote it.

10 years down the road and they're still trying to find a mainstream use case, but they won't find it because in the end using a blockchain makes everything harder if you are a legal enterprise.


Just because a lot of people do something doesn't make it a good idea.


> If I sell you [...] a rare in-game skin

So what you're saying is, blockchains can't determine whether or not you really have skin in the game?

:-)


> who owns the database?

A trusted authority with legal obligations of honesty.

> And who enforces the contract?

The court system.

> And who owns the actual data?

Ownership of data is a very ill-defined concept and not well-specified by a blockchain system either.


>A trusted authority with legal obligations of honesty.

It doesn't even need to be that trusted. You can stipulate in the contract that they must stream the log to you and then scream bloody murder if they try to monkey with anything. A blockchain is just a trendy write-ahead-log.

You could do this on pretty much any database I know of, but it's a kind of dumb idea.


"Blockchain provides satisfactory answers to all those problems." - mostly by hand waving. The blockchain model works in the case of cryptocurrencies - because it is subsidized massively by the block rewards. It is very elegant solution - every party can join the system and leave when it wants, no need for any contracts. It is also very surprising that this can be done and that ignited the imagination, but none of the non-currency blockchain projects that I have heard about want to use that model - because of the enormous cost. They want something called 'private blockchains' with no PoW or any other mechanism relying on coin minting - but if the blockchain maintenance is not subsidized by new coins - then you need contracts for that. And it gets much less elegant. Blockchains are also very complex systems with huge attack surfaces, because they are build around complex incentives structures. Private blockchains don't have the elegance of the public, free to access for everyone blockchains, but they still have the complexity.


>but who owns the database? And who enforces the contract? And who owns the actual data?

The answer is the same to all three questions: the Chinese government.


The database owner owns the database.

Lawyers and judges enforce the contracts.

Data ownership is stipulated by statute or contract.


To go off topic:

Why do you (and others) call the technology itself 'blockchain', singular? The Bitcoin blockchain and the Ethereum blockchain are fully separate so to describe a set containing both I'd say 'blockchains'. If someone asked my what technology they used, I'd say 'a blockchain'. But my usage is not what I see from advocates.


Exactly. Not every issue where you have a fuzzy notion of trust is a legal one.


>Guys, this works. It's literally how the world works.

How about corporate stock?

You know how many third parties are involved with the markets and the added costs of those third parties? Even with a corporation with a stock ledger, stock trusts who own them, banks/brokers who handle all the buying/selling of stock...things don’t work.

Take the Dole case where the corporation had almost double the number of stock issued as actually existed.

Whereas every corporation could memorialize their stock on the Blockchain and each sale of stock would be completed via smart contract. Instant settlement, no stock trusts, no banks, no brokers...a peer to peer market. Stocks are a particular use case because unlike the authors examples of “real world counter parts” (supply chain, authorship, land registry) shares in a company can be represented entirely digitally allowing the peer to peer and trustless system (at least for purposes of transaction settlement).


The problem with Dole was that there was not one single central ledger of stock transactions that was being kept updated in real time.

Would blockchain have solved that? It's centralized in that there is one ledger. But natively resolving and publishing transactions at high speed is not a feature of blockchains yet. A centrally managed ledger without distributed calculations would be way faster.

Also worth noting that Dole was a weird enough case to be news-worthy, and that it was ultimately resolved. I think it takes more than a few edge cases to justify completely rebuilding the entire basis for a major part of the global financial ecosystem.


>A centrally managed ledger without distributed calculations would be way faster.

Right which will never occur in the current system because each middleman needs to justify their place to keep their piece of the pie.

Like I said it’s a system with tons of middlemen (who don’t add value) who could be ripped out and replaced with Blockchain.

Dole was “ultimately resolved” only after complex class action litigation that costs millions of dollars and resulted in the party who took dole private having to pay an extra ~$2.50 x ~36.8M shares. It’s clear from any public company that goes private this is a serious issue...Dole is not an edge case.


If we can imagine "ripping out" the middlemen and replacing them with blockchain, then we can also imagine ripping out the middlemen and replacing them with any other centralized ledger.


Umm...can we? If you rip out the existing middlemen where does the “centralized ledger” come from but another middle man.


Anyone treating a blockchain as a database is already off to a bad start. It's at best a prunable transaction log. Sure, you can use a blockchain to construct a database, but even the Nakamoto whitepaper talks about discarding old transactions.

There exist many cases in which something is not illegal but is inefficient, unjust, lacks sufficient trust to reach a contract or lacks sufficient incentives to comply with a contract. There exist many other cases in which people cannot afford to hire a lawyer to enforce a contract, or cannot afford to hire as many lawyers of as high a calibre as the other party.

So presenting blockchains as a) databases that are b) only good for illegal activity is doubly incorrect.

There are also many bad and unnecessary uses of databases and contracts...


You're making the mistake of thinking that blockchains are databases. Also of imagining that blockchain applications require smart contracts (you can run applications on a distributed network simply by affixing data to transactions, check out Saito for an example of how this is done).

The blockchain is a self-sustaining PKI network. It eliminates MITM attacks and facilitates the use of PKI technology by making it trivial for nodes to read/write/verify information that is sent over the network. On the economic layer, the fact that it pays its own way eliminates the ability for network operators to create information-layer monopolies (i.e. App Store).

If you think about blockchain as a database, you'll be stuck thinking about the use cases that involve a database. If you think about blockchain as smart contracts, you'll be stuck comparing them to real world contracts. Start thinking of decentralized app stores (which cannot impose constraints on the revenue models of their hosted apps) or advertising networks which let users put advertisements on any webpage. There are tons of reasons to pay a small fee to send information across a secure and tamper-proof network.


First of all, no. Global, trustless coordination is a hard problem and is not necessarily illegal.

Second, legality is subjective around the world. It is currently illegal in the US to gamble online, for some reason, even though casinos and lotteries are a thing.

It is illegal in many countries to transfer a certain amount of money out of the country, for some reason.

Certain sexualities are illegal in quite a few countries.

Illegal != bad


I'm not saying: you don't need the blockchain because you shouldn't be doing bad things.

I'm saying: you need the blockchain if and only if you are doing things that are illegal in your country. It's a decision criteria for when you need the blockchain.

I'm making no moral judgement. And there are very good reasons to want to do things that your government deems illegal (for example, donating to a political organization that has been blacklisted)


I can send 1 bitcoin from myself living in Minnesota to my friend living in Japan for the equivalent of $0.46.

That's an improvement over the existing system. I don't have to trust anyone in between to get my money to him.

How would that be as possible and as "trustless" without blockchain?


1. Regarding the fees: $0.46 is (I presume) only the transaction fees. To make an accurate comparison, you'd have to include the exchange fees to convert from USD to BTC and then from BTC to JPY.

Right now Coinbase is charging me $59 to buy 1 BTC, and I don't know how much more it would be to sell exchange that back to JPY.

You can send $4000 (about 1 BTC) to someone in Japan for $30.14 with TransferWise.

And guess what? Last time I had to send money to my family in Europe, that's exactly what I did.

2. Regarding trust:

> don't have to trust anyone in between to get my money to him.

Yes you do. Both your friend and you need to trust your Bitcoin exchange. Which sometimes, cannot be trusted. Remember Mt Gox?


1. First these are totally different points.

a. If you do not currently own Bitcoin and want to own it there are many ways you can get it. They range from fast (generally more expensive) to slow (generally less expensive). Sure, if you want to buy Bitcoin on Coinbase you can do that and you will pay them a fee for that service - which I've done. You can also mine it - which I've done, be paid it in - also done, etc.

b. Secondly you are assuming that my friend can't pay for services in Bitcoin. We have both had lunch together at a restaurant in which we paid for the entire meal in BTC.

So it's an unfair statement to say my transferring of BTC to my friend costs me these fees. If you want to make the statement of "transferring USD to BTC to my friend to JPY" then sure, your statement about fees is relevant. I'm not sure suggesting that a pure BTC transfer is not an "accurate comparison" is fair.

2. See the above point. There is no trust beyond math when it come to a pure Bitcoin to Bitcoin transfer. There are plenty of things that you can buy using pure Bitcoin which I, and many of my friends, have done.


1a. Mining is absolutely inefficient as an individual and barely economical if you're Bitmain. That's a complete red-herring.

1b. Effectively nobody accepts bitcoin. It's something like 3 major merchants and around a couple thousand total, world-wide. So yes, you will be buying BTC for real money and exchanging it for real money on the other side. Pretending we live in a land of hyperbitcoinization isn't helpful.

Further, you incur huge forex risk in between the time it takes to buy, transfer and re-sell. Do it at the wrong time and you could lose tens of percentage points. The parent post understates the cost as a result.

2. Drugs.


>You can send $4000 (about 1 BTC) to someone in Japan for $30.14 with TransferWise.

Doesn't TransferWise rely on MasterCard? In other words, if MasterCard bans you then you wouldn't be able to send it.


The real cost is much higher than that, because you are not paid in bitcoin in the US, and your friend in Japan cannot spend bitcoin to buy food or pay rent. You also have to trust multiple entities along the way.

You can send money to Japan using moneygram, or transferwise, or a number of other services for a lower all in cost.


In fact I am paid in Bitcoin -> On my weekends I accept code bounties for small amounts of Bitcoin for fun. I've used that Bitcoin to buy coffee at my local coffee shop and have lunch with my friend in Japan at restaurants that accept Bitcoin (which is actually what got me into it in the first place).


The $0.46 figure is deceiving though; at the moment the cost of running the blockchain is being paid for by the 4% inflation rate. That cost is being masked by the high volatility and speculative forces controlling the bitcoin price, so you aren't really paying it.

At some point, miners aren't going to be paying for themselves by inflating the monetary supply, and then the cost of what they are doing is going to rise to be more than a centralised database tracking everything. Because the mining process for bitcoin is so expensive relative to updating a database controlled by trusted entities, ie, banks. And that will manifest in transaction fees.


I don't disagree with you at all -> In fact most people who I read about in the space actually want high transaction fees.

I think that's what makes Lightning Network very exciting. I've used it a few times, and it's a very pleasant experience although definitely still early - only has a capacity of about 3 million at the moment.


What are you trading the 1 bitcoin for? Given that the typical use case is to purchase some product or service (rather than just transferring bitcoin for fun), how do you secure that aspect of the transaction?


The same way that I secure my transaction when I pay the waiter for my meal in cash by giving it to them when I'm done eating.

I've paid for a lot of services in Bitcoin and been paid in Bitcoin. It's generally been a very smooth and enjoyable process.


A successful transaction is when one party pays and the other party delivers the good/service. If one party delivers but the other fails to hold up their end, blockchain technology doesn’t help and the solution is to seek recourse via the courts. You can mitigate this via escrow but that’s no different than non-blockchain transactions.


And I'm saying illegality is not the only usecase, though it is definitely a valuable and useful one.

In case it wasn't clear, the usecases i mentioned above (gambling, getting around capital controls) exist and are live in crypto right now.


>I'm saying: you need the blockchain if and only if you are doing things that are illegal in your country. It's a decision criteria for when you need the blockchain.

This is, at face value, simply false.

I want to send $5 to a poor African family. I'll even relax my criteria - I'm willing to wait _up to 3 business days_ for this African family to receive my $5. I live in California.

Could you please point me towards the non-blockchain way to do this?


Western Union can send $5 to Ghana. They'll charge you a dollar. I can't speak to the actual speed, but they claim minutes, and the recipient gets to pick up their money in cash from their nearest affiliated agent. WU has a pretty extensive network.

https://www.westernunion.com/us/en/send-money/app/start?SrcC...

If not WU, there's probably some other remittance company operating in their area. The fees might be pretty exorbitant though, especially for small amounts.


You want to send five DOLLARS to a poor African family. Here's a few questions.

(1) Since the African nation in question doesn't accept either dollars or bitcoin, you're going to have to convert the currency one way or another. Buying BTC is not cheap, you pay ~1%+ to Coinbase, so that's 5 cents right there. Transaction fees on Bitcoin are $0.36 right now. Then you're going to have to convert it to something they can spend in their local country, and good luck to you. That second transaction is going to cost them another $0.36, and so is any other transaction they may be wanting to spend the BTC in. If they're making purchases of just $1, thats a THIRTY SIX PERCENT transaction fee.

(2) Does this poor African family have a phone, laptop or computer, and access to get to their nearest BTC exchange/ATM? Are there any in your country in question?

(3) WU is $1. Other services exist and are priced competitively. Have you looked into M-PESA?


Transferwise is both faster and cheaper than sending Bitcoin. And it doesn't require your poor African family to sign up for a probably poorly run poor African Bitcoin exchange.


You are assuming they can't pay for services in Bitcoin - which they can. There are a number of things that currently accept Bitcoin, and that number is only growing imo.


>> number is only growing IMO

Please cite sources to justify your opinion because every graph I've seen has accepance going down.


I don't have any graphs as like I said it's just my opinion. I'm really only basing it off of 4 things.

1. The general excitement around Lightning Network on Twitter with Jack and tippin.me, as well as this website: https://lightningnetworkstores.com/

2. Coinbase's reported 48,000 merchants/partners reported here: https://www.coinbase.com/clients?locale=en-US

3. I frequent similar places everyday - 2 out of the 3 places that I frequent almost everyday are now accepting btc within the past 3 months - My coffee shop and bar.

4. Musing about Venezuela from crypto podcasts, and articles.

I'll admit I'm biased as I do think it's a good invention, and tend to support Bitcoin. Despite that, I am open minded and would happily check out any information that would propose things are tending in the opposite direction.


1. LN won’t serve the worlds needs it will take 35 years to open a channel for everyone on earth and another 35 years to close it again, assuming the population doesn’t grow.

2. Coinbase merchants take out fiat like bitpay merchants because their suppliers take real money, and so does the tax man. Holding crypto exposes them to unbelievable forex risk. If they took bitcoin and held it over the last year how on earth would they pay their tax bills? Taxes are due on the face value of the crypto at acquisition.

3. That’s an anecdote.

4. Venezuela is zero sum unless you can trade bolivars for bitcoin with outsiders in which case that’d be better off with dollars by any measure. If you’re buying locally you’re moving the bags around. Real mining equipnent just gets nationalized. It’s not a solution for Venezuela or any other developing nation because you haven’t solved the initial distribution problem.


1. I have to admit, if you are going to be so vehemently angry against anyone who even talks about Bitcoin as being potentially useful, I'd suggest you do at least 5 minutes of googling. Channel Factories -> https://www.tik.ee.ethz.ch/file/a20a865ce40d40c8f942cf206a7c... Cool stuff, I doubt you'll actually read it, but there's the link anyway.

2. Whoa look at that -> You can pay your taxes in Ohio in Bitcoin. So apparently "how on earth would they pay their tax bills" means send them BTC if they live in Ohio :). Suggesting that because you can't pay taxes or pay suppliers right now with Bitcoin, and therefore it will never be useful or capable of those things is such a silly argument. I certainly don't believe we live in a world where you can buy anything with BTC right now, but like I said my statement was about us trending in that way (Still waiting on all those graphs showing the opposite by the way).

3. Damn, I forgot I can't use anecdotes to influence my opinion. Thanks for reminding me.

4. Don't ask me -> ask the data. https://coin.dance/volume/localbitcoins/VES/BTC "35,000 Bitcoin (worth around $127 million at today's prices) was traded for bolívar on the LocalBitcoins crypto exchange over the entire course of last year." Maybe they would be better off with dollars, but Bitcoin is much easier to transfer across borders, and much easier to hold on your person without signaling that you are carrying thousands of dollars.

I'm happy to talk more about crypto with you, although I'm not sure you are open to actually talk honestly about it - seeing as how you took the time to negatively respond to every post I made on this subject. If there is something that has made you so angry about Bitcoin, I'd be happy to learn it to see if I'm supporting something that I shouldn't.

I'm certainly not arguing that Bitcoin is the perfect solution, nor that it's super helpful or accessible today. But, I don't think absolutely denying any use is a smart strategy, and I'd rather have you make legitimate counter arguments where you've actually spent the time to learn things rather than the lax effort you've put in so far.


I’m not angry at bitcoin or at you. I’m frustrated seeing intelligent people throw themselves at something that appears to be a pyramid scheme built on an ancap view of the world where we should all just rely on ourselves and the magic of the blockchain to save us all from the tyrany of... everything, I guess? And everyone who knows about it now will be rich! Bolstered by a lack of understanding of how finance works, they go out there and shill systems that are actively user hostile and rife with manipulation. Scammers on every doorstep and transactions are always final. A vote for Bitcoin is a vote for the scammers, the manipulators, the shady exchanges. The uncensorable, decentralized (excluding China of course) deregulated payment network functioning as designed. It’s a beautiful theory that just doesn’t fit the real world.

1. I spend a lot of time learning and reading about Bitcoin and the blockchain -- that's why I don't like it. The technology is fine, it's just a database with hashes. Proof of work dates back to 1997 (22 years ago) with HashCash. Bitcoin is over a decade old. In all that time, nobody has found a good use for blockchain -- at least one that isn't better solved otherwise. Think of what else has happened in 10 years to technology that adds actual value. Remember the iPhone 1 (2007)?

I didn't have to get half way through the abstract to find the problem, and it's the same exact one I pointed out. You still need an on-chain transaction to open a channel ("Instead of one blockchain transaction per channel, each user only needs one transaction to enter a group of nodes") or in this case join a group. Each person needs to do this. There are 7,000,000,000 of us and if we dedicated the entire blockchain (7tx/sec) to opening channels that would take 34 years just to open a channel (or here, join a group) for everyone on earth. The paper you linked references a paper explaining it for you, as #9 in the references [1].

The paper cites being able to reduce on-chain transactions 96% for a group of 20 people with 100 channels between them -- I'm saying we can't even get to 1 person with 1 channel to 1 other person.

2. Big difference between paying your taxes with bitcoin and paying taxes denominated in bitcoin. If you received 1BTC ($19,000) renumeration for your services January 2018 then went to pay your taxes "with Bitcoin" in Ohio April 2019, expect to pay approximately 2BTC ($7600 / 40%) in taxes. That's a 200% tax rate. If you could pay your taxes denominated in Bitcoin you'd be paying 0.4BTC ($1300) -- or 40% of unit of account, 6.8% of value. Make no mistake you're paying in US dollars, they're just providing a convenient forum for exchange. I'd image they'd do the same with a goat exchange if people decided to be equally backwards and everyone wanted to start using goats as payment.

3. Anecdotes aren't really worth much. It's just as irrelevant as my telling you 100% of the places I frequent don't take bitcoin. I don't hold that up though, I look for studies.

4. Re: LocalBitcoins and the bolivars, if they were traded with foreigners, they'd be unequivocally better off with a USD denominated account and a debit card. They'd have saved (up to) 80% of their net worth relative to what they did. But who on earth would take their bolivars? Zero sum.

If they traded it with each other the same amount of net worth was lost because the total number of BTC in Venezuela and the total number of bolivars remained unchanged, all that changed was who had them. No problems were solved by Bitcoin here.

[1] http://diyhpl.us/wiki/transcripts/scalingbitcoin/hong-kong/o...


Btw that VES/BTC chart isn’t adjusted for the 10,000,000% (by next year) inflation rate, so in constant dollar terms I’d wager that BTC/VES volume went down over the period highlighted.


Western Union will do it in minutes, and I've actually used it to send myself money in Africa in lieu of better options when having bankcard issues (turnaround time <1 hour including finding the agent, fee ~5%). Admittedly the transaction fee on a transaction as small as $5 is pretty steep (20%!), but they're getting spendable cash for it, and I doubt the average family in Africa is getting a better deal when asking the local computer expert if he'll give local banknotes in exchange for their satoshis...


If you live in a medium sized city, probably within the hour and within walking distance of your house, an African person walked into a store covered in colorful signs advertising phone cards, cheap plane fares and bus tickets, and sent half of their week's paycheck to their family somewhere in Africa.

This is not only not a mystery, but common, and individual remittances from emigrant relatives are a major consideration in the economies of some underdeveloped countries.


The blockchain way doesn't send them $5, it sends them a token which is surprisingly hard to redeem for $5.


In Kenya, you can use M-PESA. Money is transferred digitally and quickly.


The concept at question isn't really illegality as much as alegality (which is not a word that exists). Which is to say, the use case where no legal jurisdiction exists or is ineffectual. I suppose anarchy would be the proper term.


Or a jurisdiction which has rules that you can't or choose not to comply with


That's exactly what I've been writing under every blockchain thread on HN for the last two years: the only real need that blockchain solves is buying drugs. It hasn't taken over US and Europe yet (I presume because of progress by the legalization movement), but in Russia and CIS, there are no drug dealers that you meet anymore: anything you buy, you buy anonymously, through Tor and Bitcoin, without ever meeting any real person.

That's the only industry blockhain could disrupt, and it completely disrupted it. (I'm not sure about money laundering as I've never really know much about it).


That's interesting to know, I would have thought there was more physical organizaed crime there.


There's none, police runs all of it.


> It's literally how the world works.

So the world works perfectly in your opinion?

The good thing about blockchain is it lowers the cost bar for crazy expensive business legalize. It of course needs more work but a proper smart contract setup placed in front of a judge leaves little need for a dozen lawyers and business consultants to see the intent of the contract.

The main issue is that the current very expensive and inefficient setup benefits middle men that produce very little value. Transitioning away from that will eventually happen and that will be the reason blockchain and smart contracts explode in value and usefulness.


Except, of course, that as the article points out, the courts provide virtually all the value in preventing clients from cheating the auditing systems, or ensuring that a correctly delivered package actually has contents fit for purpose.

And if your contract is only the code, you've got a big problem in making your case that tampering with the oracle or sending an empty box is an act of bad faith on the other party's part, and much more expensive lawyers to interpret it...


>lowers the cost bar for crazy expensive business legalize

Just an FYI, from the context of the next sentence I believe you mean "legalese". "Legalese" is convoluted legal jargon; "legalize" is a verb meaning to make something legal.


How do I get the concept of "I'm buying stuff and it has to be fit for purpose" into a smart contract?


> a database and a contract between parties are a superior solution.

Do you believe that this is a permanent state, or a temporary one? Is there a potential blockchain-like thing that could exist which would be better than a database and a contract?

Because to me, the current system leaves room for improvement:

- resolving conflicts across jurisdictions is extremely expensive

- resolving conflicts even within one jurisdiction is more expensive than many transactions are worth

Current blockchains are expensive and slow, but I think that we will see improvements over time which will eventually make blockchains (or something blockchain-like) look like appealing solutions.


The blockchain doesn't resolve disputes, it rules them out of scope. The response from blockchain advocates to vendor fraud is "caveat emptor". The dispute is still there.


I'm not sure I completely follow you, but there's nothing preventing a party from making use of the legal system or contracts or whatever in addition to a blockchain.

I still think that making some common classes of dispute impossible is highly valuable.


Which classes of dispute does blockchain make impossible? It can attest that a key signed a particular transaction, but that doesn't necessarily mean it was done by or intended by the owner. General purpose computer security just isn't quite good enough for that, that's why smartcards and secure enclaves exists.


If I say "you owe me $1000", and my Brazilian client says "no I don't", the current system offers a very speedy and cost-free resolution to that. We just have to do nothing, and the dispute will be resolved by default in favor of the client.

I can imagine a blockchain-like thing that would be able to shift the default action, so that I get $1000 or maybe each of us gets $500. I can't imagine a blockchain-like thing that could, without an oracle both of us trust, actually reach into the real world and arbitrate the dispute. (If there is an oracle both of us trust, there's no need for a blockchain; the $1000 can just go directly into escrow with that oracle before I start working.)


> Guys, this works. It's literally how the world works.

There's no question that it works. The question that blockchain-like solutions seek to explore, is whether it works better than a technological solution which can eliminate most of the layers you describe.

The world is deeply complex, more complex than any single human can understand. If operating in the world can be simplified to the point of being understandable by individuals, or if the size of the foundations you have to trust or rely on can be made significantly smaller, that could be worth it.


But you're not making anything simpler. There is a reason we have lawyers and courts and insurers and whatever middle men are supposed to be cut out, and that is because contracts, and insurance and law are hard, and nobody wants to write 200 smart contracts a day where one mistake empties your wallet in unrecoverable ways.

These institutions exist because division of labour and trusted institutions are a way to handle complexity and to pool risk. If my lawyer screws up or the court screws up there's an institution I can go to. If I make an error in my smart contract because I work eight hours a day and know nothing about contracts then I'm just royally screwed.

You're not making things simpler by eliminating the institutions whose professional job it is to manage risk and trust and handing it back to everyone.

That is why all systems are centralised to some degree, because it's how we manage complexity. That's also why not everyone forks the entire blockchain and piece by piece crypto transactions move onto managed exchanges, and it's why we all work in companies where people have property rights and hierarchies rather than just run around as individuals sub-contracting each other 50 times per day.


Also if you get forced at gun point to sign a smart contract giving your money away (or say a company which takes longer to transfer), what would be your recourse in a trustless world?

There's no recourse for deliberate fraud, sure you could read a contract before signing it and know exactly what it does, but you can hide surprising behaviors in innocent looking code. The Underhanded C Challenge (http://www.underhanded-c.org/) proves this.


That's why smart contract languages should be simple and analyzable by third-party tools and provide statically verifiable guarantees that are readable by ordinary humans.

That's also why current smart contract languages are largely failures.


Complicated deals (hell even simple deals) require complicated concise language. If you use simple language. You will still have to go to court to argue about what 'what' means in the context of your deal.

Legal documents are complicated because we live in a complicated world. And, humans are terrible communicators who have no idea what they want but they somehow "know" what the otherside meant when they agreed to the deal. Even though there are unforeseen circumstances, mistakes, course of conduct that is inconsistent with the contract, and so on.

If it was easy to do, it would be easy to do. Note, legalese is a bad thing, and modern American lawyering is trying to get away from it, but it still doesn't make things simple to understand, just less gobblygook filler language.


> Complicated deals (hell even simple deals) require complicated concise language. If you use simple language. You will still have to go to court to argue about what 'what' means in the context of your deal.

The lambda calculus, the SK combinator calculus and Turing machines are all very "simple" languages, but suffice to describe any computable function. There is also no ambiguity in their execution. Lack of ambiguity is exactly one of the benefits of smart contracts.

> Legal documents are complicated because we live in a complicated world.

Legal documents are complicated mostly because natural language is ambiguous, thus requiring considerable verbosity. Programming languages, and specifically smart contract languages, can be designed to be unambiguous, and thus avoid one significant complicating factor.

> If it was easy to do, it would be easy to do.

First, no one said it was easy.

Second, computers haven't even been around for a century. The earliest conceptions of smart contracts were in the mid to late 90s IIRC. That's barely 20 years. Are you advancing the argument that if we haven't solved a problem in 20 years which took millennia to solve via social institutions, then it's unsolvable?


You are always going to have disagreements about what the words mean in the context of particular a case.

I can see smart contract tools continuing to evolve to help draft or validate contract language. There are some enterprise contract management systems that do some this already. But, if things go sideways, IRL facts have to be interpreted in view of the contract you will still need lawyers and courts.

Also, not sure how equitable grounds for breach could be accounted for. A person can have the law (contract, statutes, etc.) squarely on her side and still lose a case because of equitable reasons that are not anticipated by the contract or statutes at play.

2 + 2 doesn't always equal 4 in a court of law.

And, if such systems become available, it seems unlikely that contracts will more understandable to layman. Instead of trusting their lawyers or legalese, people will have to trust the code/proofs.

edit: typos 2x


And how do you trust those third-party tools? How do you know they are not colluding with one smart-contract writer to steal your money?


Three points:

1. Smaller trusted computing base. That's the whole reason I'm suggesting crypo might provide a more reliable foundation than a layered social structure.

2. Open source tools will exist.

3. Verification is more feasible now than ever. The more money that's involved, the more people will want formal guarantees. The Ether "thefts" of the past few years have highlighted exactly the deficiencies that I've been pointing out in these past few comments. Already some new contract languages have been proposed that are formally verified, simpler and provide meaningful static guarantees, with little meaningful loss in expressiveness. This situation will only improve in the coming years.


You assume too much. Our current systems evolved over millennia. Cryptocurrency is less than 10 years old. Nobody thinks the current state of the tech is what everyone will end up using, where you have to write your own smart contracts using an inscrutable smart contract programming language.

Nevertheless, having an impartial, inherently trusted computing base is a promising foundation. What you then need on top is various forms of static analysis that make smart contracts scrutable by mere humans (and preferably writable by mere humans). That's how you collapse the complexities and largely eliminate the need for centralizing risk and analysis.

Edit: it's like you're expecting people to do word processing using punch cards. That's where cryptocurrency tech is right now, and the more mature programming and UI/UX of today is where we should expect it to be in 10-20 years.


Potentially legit use-case: electronic voting. In this scenario, you need to offer a number of guarantees. Chiefly:

1. Is my vote anonymous? (If not perfectly, owing to low level timestamps or transaction ids that can get cross-referenced with other data sources, at least for all practical intents?)

2. Can I be sure my vote got tallied the way I voted?

3. If I'd like to verify the result, is there a tamper-proof electronic paper trail that I can use to verify the result?

It's a surprisingly hard problem in practice, and to the best my knowledge the most promising venue to guarantee 2 and 3 without compromising 1 might be a blockchain-like distributed ledger. (You can solve 2 and 3 by using a git-like hash tree and letting the voter know their commit hash. But in doing so you're basically dropping 1 and inviting vote selling.)


Electronic voting wants an append-only/log-structured distributed database, but the certifiers can't be anonymous (otherwise anyone can just run a "polling station" and submit whatever "votes" they want). You'd want votes to be signed according to some centralised PKI infrastructure. And at that point there's no need for "mining" and what you have isn't blockchain.


> If I'd like to verify the result, is there a tamper-proof electronic paper trail that I can use to verify the result?

This kills the secret ballot. If you can verify how you voted, I can verify how someone else voted. That lets anyone pay for votes and punish people who voted "wrong".


You don't "need" to offer these guarantees. Personally, I'm happy with paper ballots.


Me too. In large part because paper ballots offer these guarantees.

But there's a swath of elections and voting going on (in universities, within political parties or unions, etc., but also official elections in parts of the US or in Estonia) that that use e-voting to cut costs or improve participation. They currently lack these guarantees yet those elected end up in charge of millions in budget.


Picking on one point here:

In your electoral system is there a way to verify your vote was counted. Like a stamped voting slip?

I've thought that a good way in an electronic system would be to give you a vote code (maybe a single letter), and a verification code. You'd enter the verification code, the screen would show all candidates/voting options with a "vote code" and you'd verify by finding your vote code matched. The vote code prevents coercion.

Such system doesn't show your vote is included in the result, but shows the system has record of the vote you cast.


In my electoral system, yes. I'm in Europe and it's a paper ballot. In the US, no in many places. And not being able ask for a recount when there's any degree of suspicion about the outcome is an absolute disgrace IMHO.

As to the other point you raised, you may want to check this video, which outlines research that tears your hopes apart:

https://www.youtube.com/watch?v=iit5WdLYwns

And per my initial comment, if you can access your vote through a code, then your vote or that of others can be bought -- which is an even worse problem.


>if you can access your vote through a code, then your vote or that of others can be bought //

Isn't that the status quo, currently it can be bought but no one can verify; under my system it can be verified by the person in the poll both.

If someone paid you then you give them the "vote code" that corresponded, for you, at the time you voted, they falsely verify and you can still actually verify - in most votes just be remembering one letter. It's two factor with deniability because the second factor is only in your memory.

I'm in UK, but have never come across "proof of counting" in a vote, where are you, how does that work?


"Proof of counting" is part of making a poll auditable:

While you cast your ballot, there are trustworthy observers who keep an eye on the transparent ballot box, and have been doing so from the moment the poll opens until when it closes. They then watch as the box gets opened, and overlook the shoulders of those who count as the votes get tallied. Depending on whether there are enough volunteers around, there can be occasional or systematic spot checks to boot. And when it's all tallied, the ballots are put in a sealed box and stored in the event anyone requests a recount down the road, making the entire process auditable.

This process is meant to avoid things like the box arriving pre-filled with some ballots before the polls open, voters stuffing multiple ballots in the box, the box getting replaced during or after the vote, votes being ignored or misrepresented during the count, etc.

And just for clarity, I've little idea of how it's working where I live, because I'm not entitled to vote there. But this is how it's supposed to be working, and having worked in the sector a bit I'd want electronic voting to offer a similar set of guarantees before accepting it as a viable alternative to paper ballots.


In Estonia you verify your vote if you voted online. You can do so up to 3 times and only within 30 minutes of voting.

E-voting is done on a PC. After you've finished voting a QR code pops up. You can scan that QR code with your voting verification app on your phone and it'll send you the results.

Here's how the system works: https://www.valimised.ee/en/internet-voting/principles-check...


But here's how it's not working:

https://jasonkitcat.com/category/voting/


Did you read TFA?


The volume of business drops when you consider the use cases and the lack of trust between folks that blockchain represents ... they're just not likely gonna do legit business if the only thing to trust is blockchain.


> Guys, this works. It's literally how the world works.

That's a fairly generalized statement. So just because the world works in a certain way we shouldn't change it?

Have you or anyone else noticed that the way the world works is massively in favor of anyone that has money?

How many tenants got cheated out of $1000 deposit and didn't have legal knowledge or a support system to get the landlord to court?

How many people got fees from Wells Fargo, Sprint, Comcast, PG&E, fuck even Etsy because they had power to pull from their accounts at any time? How many of them got everything back due to them? Fairly and morally?

How many people that DON'T have a massive blogger platform, podcast and wherewithal to start an _effective_ campaign against a multi-national because they simply are not well spoken. They are still cheated by the big guy but no one cares because it's not retweeted by Ariana Grande.

AKA your main point might hold up to 5 to 10% of disputes but hardly supports the notion that it "works". I think your statement should rather be "That's how the world currently operates" and that by no means rules out creating additional ways to operate in the world.


Eh. While I basically agree with this in the context of rule of law, 1st world countries- I'm increasingly coming around to the idea that blockchain-based solutions could be better for developing countries where the legal system is vastly inferior. And I'm a longtime crypto skeptic.

>can't use contracts and the legal system to ensure trust between the parties

I.e. where the majority of the world's population resides, developing countries where (sorry) Corruption Rules Everything Around Me. Or there's an appeals system where cases drag out for decades (hello Brazil!) Or where the judges are simply not sophisticated enough to adjudicate complex financial contracts.

I don't think crypto/blockchain solutions have a ton to offer the developed world, but there's an awful lot of humanity outside of those institutions. 'Our existing financial world is working just fine, thank you' is a very 1st world perspective. Kind of hilariously, a lot off the issues that crypto enthusiasts rail against (inflation, political central banks, etc.) are basically untrue for their own countries, but are true for others. I think a stablecoin pegged to the US dollar that's super-intuitive to use on mobile could achieve hockey stick growth in Latin America, Africa, parts of Asia, etc.


>Guys, this works. It's literally how the world works.

There were people saying the same thing as you before the wheel was invented, and in 1550, and 1800, and 1900, and 1910 (guys, horses shit on the streets and you occasionally contract dysentary. But overwhelmingly you can get from point A to B. Guys, horse-drawn carriages work. It's how the world works!) and 1950 and 1990 and...

"This is how the world works" is not a valid rejection against using a _new_ technology.


Do you think 10 years after the wheel's invention, people were still unconvinced by it?

Bitcoin has been out since 2008. Over a decade later, the only thing it's been useful for is for masking illegal activity, and speculating wildly.

Just because something is new does not mean it's revolutionary. The Segway was in all likelihood a more revolutionary invention than blockchain will ever be.


The computer was invented in the 30s, and the internet in the 80s. People remained "pretty unconvinced" by those technologies for quite a bit longer than 10 years.


Don't conflate "unconvinced" with "couldn't afford".


I'm not a blind supporter of blockchains, but your view is a gross simplification. Let's replace your words "the blockchain" with "privacy":

"I've said this several times before on this site but will keep repeating it: there's exactly one use case where privacy is a superior (and, in fact, the only) solution: when you can't use contracts and the legal system to ensure trust between the parties. In other words, anything illegal".

I like to be able to buy stuff from people anonymously. Not because it's an illegal transaction, but because it's nobody's fucking business what I buy. In this age of marketing and surveillance data mining, it's better to be safe than sorry. Also, what's legal now might become illegal in a future administration.

Note that bitcoin or blockchains in general are not fully anonymous perse. Some are pseudo-anonymous (because addresses can still be linked to persons), some are almost 100% anonymous, such as Monero. See it as cash over the internet. Permissionless, tamperproof and private.


There are other legit reasons for not being able to use regular contracts and legal systems.

For example, when you are dealing with multiple small transactions where a potential for fraud on the buyer side is significant.

Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system.

Or managing electronic assets (stocks etc) - blockchain significantly lowered a barrier for entry in those cases.


>For example, when you are dealing with multiple small transactions where a potential for fraud on the buyer side is significant.

We already have systems that handle this issue well and have for decades. Why involve the blockchain?

>Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system.

>Or managing electronic assets (stocks etc) - blockchain significantly lowered a barrier for entry in those cases.

But the barrier for entry is high in those use cases precisely to prevent exactly the kinds of abuse and problems we've seen in the crypto space. And the blockchain doesn't magically alleviate the obligation to obey laws and regulations. You could try to design a system that circumvents them, but then you're back to the parent's point about illegality.


> Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system.

There are a lot of good reasons why there's a high barrier of entry to set up shop in the financial system.

Trying to sidestep financial regulations through using cryptocurrency/blockchain is at least trying to actively exploit loopholes in the law, if not actually illegal.


There's one other situation, when there is a business where nobody trusts the brokers. The diamond industry is a good example. Where does a diamond come from? Sellers don't want to know when buying from shady brokers and obfuscating or altering the origin is extremely valuable and hard to detect, so brokers have huge incentives to cheat and thus the database can't be centralized.


The international diamond market is run by opaque cartels and criminal governments that prop up a false market.

Perfect for blockchain.


Not necessarily for or against "blockchain" in any one specific use case, but I'm curious why you would define anything that can't use contracts and the legal system as "illegal".

I can imagine that for many non-first world countries where people wouldn't trust things to the legal system or contracts - I wouldn't necessarily define those things as illegal.


Or even in the first world, where you don't want the expense, paperwork, time, of having to deal with the legal system.


It is good to remind people of the nature of legal enforcement which will essentially be required in such cases, but 'illegal stuff' is definitely not the only use case.

For example - banks could feasibly use blockchain for clearing trades.

Right now there is a 'single point of trust' for such things which even financial institutions want to break out of.

Blockchain could theoretically enable distributed exchanges.

The 'rule of law' is still essential in that context, but blockchain could work there.

This is only one example of 'regular real world use'.

FYI / caveat: the 'hardest part' about getting these more distributed systems going is getting large financial entities to agree on the nature of the exchange, and hammering out of the real world details. At that point, blockchain becomes a secondary and not necessarily essential component.


> when you can't use contracts and the legal system to ensure trust between the parties

what about transmitting value over the internet without relying on an external system? You know, like digital cash (but actually cash, not airline points that require a central actor to approve the transaction).


But to get to and from Actual Money, you have to go through a small number of non-trustworthy external systems.


Recently two govs in South America traded via Bitcoin avoiding gold and international payment systems.


> For any other conceivable use case, a database and a contract between parties are a superior solution.

Except when banks are transferring money across borders. In order to have trust, they currently need what's called nostro and vostro accounts. Meaning, Bank A parks money in Bank B, and Bank B parks money in Bank A. So that if a transfer is fraudulent, there will be money to cover it.

How is that better than blockchain?


It's better because you just described the entire mechanism in forty-four words.


> For any other conceivable use case, a database and a contract between parties are a superior solution.

Only if that contract is reasonably enforceable and all parties involved trust the party that controls the database - if there's such a single party controlling the database at all.

The most compelling use case in terms of supply chain management doesn't necessarily involve storing data from sensors or other IoT devices. It's doing away with the paperwork (customs documents, bills of lading, for example) involved in shipping physical goods and the friction it causes: https://www.maersk.com/en/news/2018/06/29/maersk-and-ibm-int...

I'm not sure if this is still the case but some time ago I read about an example where the paperwork involved in shipping a 20 ft container from Shanghai to Rotterdam was more expensive than the actual physical shipment of the container.

A blockchain solution could potentially help with reducing that cost. A simpler, database-based solution of course could do, too. However, there are numerous parties involved in the process not all of whom necessarily trust each other. A blockchain-based infrastructure could provide a common protocol everyone can agree on.


Bitcoin is a good backup currency for travel. I tend to use my regular bank card, but I've been in situations where none of my bank cards work at the local ATM. I know the article is about blockchain in general. But I think it's worth pointing out a legal and good use case that might not be obvious to people who don't travel.


And how often do you find, when your cards don't work, that the local coffee shop, hotel, or train station accepts bitcoin?


All you need is one place willing to accept it and give you local cash. I also usually bring USD because there is usually someone in every country who wants that. But securing physical cash is a hassle and if Bitcoin became more widespread I'd stop bringing USD.


There’s a bunch of bitcoin atms that have been popping up recently. The exchange rate is awful, though, I personally would never use one unless I absolutely had to.


In theory disputes, customer care and all the work intensive tasks could be managed by the network itself: instead of paying an employee's you pay users to perform these tasks. There's a few projects proposing this. Not sure whether it will be efficient but it's certainly interesting.


This seems like gatekeeping. I think blockchains will make great accounting systems for firms working together. Construction is a prime example. You can have 10 companies working together to maintain one book for a large project, and then eliminate the need to be audited. The technology can replace manual processes that happen after the data is placed in the database, to verify the data should have been entered.

And just like many email clients and many email servers work together, in the future, companies accounting systems will work together, and create a single-triple transaction, instead of a double entry at EACH company. You can swap out accounting systems at any time, and still participate in the standardized distributed database. Blockchains can be used to reduce redundancy in accounting. Not all blockchains need proof-of-work and fault tolerance turned up to 100%. Sometimes you can have parties that sort-of trust each other, but none of them want one of the others owning the whole system.


Don't see how this happens. How do you verify the work? It works in a purely electric fashion which is what Bitcoin is but you still need someone to verify things in the real world. Audits exist so that third parties can verify the books. Literally in a blockchain you just put in whatever you want how did you verify that that is what happened in the real world?


https://azure.microsoft.com/en-us/blog/announcing-microsoft-...

the participants audit each other real time, one party cant cook its books, if youre all writing one shared book. both parties agreeing to work being done and pressing "this work was done" or a camera watching for the work being done, would be a prerequisite for the task being marked as complete in the system.

things like enron/toshiba happen when companies are maintaining multiple sets of books, one they present to the public, and others hidden in private.


Goes against the idea of blockchain. It's for untrusted parties to transact electronically. If you trust someone to review your books and sign off on it then both parties are trusting one another and no need for blockchain.


> In other words, anything illegal.

It seems to me this could mean both:

1. Allowing illegal activity. (Eg when legal system can’t be used because the action in question is illegal).

2. Preventing illegal activity (Eg when legal system can’t be used because of difficulties to verify and/or execute).


That's not true. Pretty much everything you own is "yours" subject to various machinery that can be tampered with by the parties who control it. Blockchain can make ownership records unequivocal.


If the government could be trust then a lot of our problems would be easier. Read the history of Zimbabwe (for example) and then consider again whether "a database and a contract" is a superior solution.


Funny thing is, there tends to be immense trust in the underworld because the consequence of betrayal is your life or limb.


Or anything that's too expensive to involve the legal system which is an even bigger area of opportunity.

As an example. 2nd-hand digital assets.


Mostly I agree with you but maybe you need to rephrase "illegal" as "out-of-legal".


well if I had bitcoin and my government decided to declare our money or the current dollar in fashion worthless my bitcoin could still retain its value despite what the dollar is doing. To say the only use is something illegal is short sited in my opinion.


On the other hand, the worth of bitcoin in terms of actual goods and services fluctuates wildly for no reason at all.

(The collapse of the dollar is the least likely financial crisis to worry about in the present day.)


your vision is extremely short-sighted bordering resistance to change.

With Ethereum you can build systems that are intra-national and connect for example all the real-estate records globally which cannot be done with a MySQL system. There are hundreds other examples


Mythical examples, of course.

There’s no system built in Ethereum that provides what you cite as an example.

And all of the world’s real edtate records would probably easily fit into a non-optimized MySQL database (I’m not even talking about more powerful databases). Because there are at most a few hundred million such records. Even if there’s a billion, it’s nothing for a modern database (and would cripple any blockchain solution).


of course there is not. and there was no HN when the internet started. Scalability is not the issue, verifiable secure immutable records are where no admin from a third world participating country can alter records as an example. If you forget the bias for a bit you may start to love the possibilities.


> of course there is not

And yet you bring it up as an example of how well Ethereum might work. And claim “there are hundreds of other examples”.

So what you claimed is false, and there are no other examples. And the avility of Ethereum to provide what you claim is yet to be proven (it was nearly crippled by a friggin kitties game which could fit in its entirety on a low-powered laptop eas it not for Ethereum/blockchain).

> If you forget bias

There’s no bias in calling out a lie


there is nothing in the world that there are no examples of what are you talking about. examples are theorhetical.


> In other words, anything illegal

You're missing the point where blockchains are much more efficient and trustworthy than a court or government institution would be.

It's pure math versus interpreted law and it's brilliant.


well the original idea was exactly that: subvert the government by making legal enforcement of (some) contracts redundant.


Yep, you could go as far as to argue that criminalization of drugs is a major contributor to global warming.


> there's exactly one use case where the blockchain is a superior [- illegal transactions]

To start off, the reason cryptocurrencies have survived this long is probably due to the fact that the dark web thrives on it. That said it's certainly not a reason to outlaw it.

What about the situations where the legal system is questionable? Off hand I've read stories about a lot of poker players who've gotten cash confiscated when flying. What about [insert stories here]?

How about a means to store (and transfer) value, where you can be certain - given your measures of security is sound - that no one but you (or multisig) can access it? If I store cash at home I can get robbed. If I own property it can be destroyed (loopholes in insurance policies, betrayal of other forms, military state).

I remember the feeling I had a few years back when I had my own bitcoin in a paper "wallet" (actually a master seed with my personally devised cipher), protected by the (mental) measures of my choosing, it was mine. Yes, that caters well to illegal activities but likewise also empowers individual privacy, as well as removing any political, governmental or other influences. Power to the individual.

It's not the monetary system's role to regulate how people behave in society, merely to facilitate transfer of value. If that transfer method can't be trusted alternatives will spring up. On that note if there are better people on the planet the methods of value transfer matters less. If there was more trust in financial institutions there would be less need for cryptocurrencies. On HN people advocate having backups of backups, but how do you backup your money in the bank? You're trusting them.

Yes, drug lords exist and have existed in the past thanks to anonymous transactions, but... there is corruption in banking systems (offshore accounts) and whatever systems and we should/could question why there are drug lords in the world in the first place. They wouldn't have a place here if things were better organized. Either by more happy people (having less want/need for stimulants, given a bleak outlook on humanity), by giving the people the freedom to explore their minds more freely (psychedelics) or simply (as a step on the way) give the state the power to regulate as opposed to making everything illegal.

I would expect more of HN than to have this as a top comment. Let's just ban cash altogether because the only thing it's useful for is enabling illegal transactions. Sigh. Quite a naive way of looking at things. What you're suggesting is doing what they're doing in China (and US and other countries as well) with the credit ratings of everyone without any chance of living a normal life unless you're subscribed to the system in place. Add hyper surveillance à la mega corps and no one can escape. Please keep the beacon lit for at least some of the measures in place to insure personal freedom.


Really? You (seriously plan to resort to) go(ing) to court over every contractual dispute? Even $5?

HN Bandwagon, Monday: "Don't you understand that courts exist to make it so no one can break a contract without penalty?"

HN Bandwagon, Tuesday: "Lol don't go to court over $5, that's stupid."


Credit card companies have a good system for handling $5 disputes. They write them off.


Not quite, they make the merchant write it off. And if someone brings too many disputes, they investigate.

(The small fraud problem is one reason I think micro payments can't happen: you can't investigate sub-cent fraud, but if someone can automate it they can steal a lot.)


Or you have a system with incredible amounts of fraud that still manages to function, like CPC ads


So you mean a system could exist to lower costs for some parties?


While at the same time increasing the collective cost for everybody else? (ie: wasting energy).


Is it wasting though? Do you consider vaults a waste? Do you consider 2-3% CC fees a waste?

We already have costs built into the current system (e.g. cc fees to make up for fraud, security systems around protecting gold + cash). Electricity is just the cost of that specific system - I think calling it a waste is not necessarily justified.


Credit card fees are 2-3% for a reason -- you can get 2% cash back as a customer with a no-annual-fee card for instance. Then there's the fact that credit cards are loans, and there's a cost to lending. Finally, credit cards come with protections (chargebacks), guarantees, additional warranties and all sort of other customer-friendly services that people want. And obviously are willing to pay 2-3% for.

In the EU where people don't want the system to work like that interchange fees were capped in 2015 at 0.2% for debit and 0.3% for credit [1]. If that's what you want, there's a proven model for establishing it. In Australia it's capped at 0.88% for credit and the greater of 16.5c or 0.22% on debit [2].

Did you know Bitcoin alone ALREADY used 0.5% of world electricity at the end of 2018, even though nobody really uses it? [3] It's like we're all paying a 0.5% surcharge on top of everything we do, which is double the price of EU interchange. Just to support some ancap pyramid scheme that people agree solves largely 1 class of problem: payments for illegal goods and services, while pretending to solve all the worlds problems, just poorly.

[1] https://www.adyen.com/blog/all-you-need-to-know-about-the-eu...

[2] https://www.adyen.com/blog/card-processing-in-australia-just...

[3] https://www.sciencedaily.com/releases/2018/05/180516131236.h...


2-3% CC fees are a waste. But you don't need blockchains to fix that. You need someone to legislatively force the CC companies to stop playing the cashback bullshit game, which is the real cost driver (much more than fraud) as it funnels money from cash and debit card users to high-reward CC users, while burning a lot of it on the way for managing all of that overhead that is of no help at all when it comes to making financial transactions.

It happens to be that the EU is such a "someone". In EU countries, CC interchange fees are limited to 0,3%, debit fees to 0,2%, effectively resulting in much cheaper rates to be paid by merchants (whether big or small) for card acceptance.

Thoughtful legislation and an effective, fair and trusted executive branch, both with the necessary checks and balances, trump any blockchain, at least as long as we are talking about legal transactions.


One needs no blockchain to make a guarantee that a cancellation of the payment can’t be performed.


Are you referring to cash transactions or something else? I’m curious what you may have in mind for remote payments, especially internationally


And either the merchant or the company gets stuck with the $5 dispute, while the guilty party enjoys a free $5. Nice system!


That's absolutely not how the chargeback system works. Further, the blockchain system is entirely irreversible so $5 or $500,000 once you get scammed gone is gone and you have zero recourse. Nice system.


From the comment you're replying to:

> there's a multi-layered system in place to resolve disputes, starting from the customer support call center, reviews, bad publicity, and going all the way to the courts.

So no, I don't think the plan is to go to court over every contractual dispute.


Did you see how that part was marked as an edit? It was added after my reply.

Furthermore, it reinforced my original point that it's really not all that reassuring that the (slow-moving) legal system will enforce contracts, because it's an expensive process, and you need other protocols on top of that in order for trade with untrusted parties to work.

As of the edit, the parent seems to agree. So maybe my comment wasn't as stupid as you're implying, and maybe there's a reason that commenters mark the late changes to their posts as edits.


The threat of the legal system is a useful spur for resolving contractual disputes, but most disputes are resolved without engaging the legal system.

One of my frustrations with discussions of blockchain is how quickly it diverges from reality. Most financial disputes today are resolved without a lawsuit or a prosecution, which I think you know. And transacting $5 via blockchain today will involve 3rd parties with whom you could develop a dispute, and then you'd be right back where you would be for any other $5 transaction.


That’s why I never said “you have to use bitcoin because courts are too expensive”. That’s an implication you made up out of whole cloth because you never considered that I wrote my comment before the edit.

As it happens — and not that it matters to you — I agree that the small-transaction-with-untrusted-party case is not a good use of blockchain.

I was only objecting to the OP’s implication that courts are sufficient to ward off all contractual violations. As of the edit, the OP clarified s/he didn’t mean that, and so I’m in agreement with him/her, but that apparently doesn’t stop you from lecturing me as if I weren’t.


Mind elaborating a little more on this use case?


It was responding to:

>when you can't use contracts and the legal system to ensure trust between the parties

If a threat to sue over the violation of small amounts is not credible, the court system doesn't help.


Oh no I get that, sorry I guess I was more looking for an example where this would be really useful.

Like a certain business model that currently runs into large issues because of the costs of litigating small transactions, and would be improved through block chain.


I hate the blockchain hype. I think most uses can be solved by a simple database hosted by a trusted authority. Yet, just reading the first two samples, I already disagree with them.

Re the 1st one: it's true only if the transporter doesn't risk anything if the sensor is tampered with. As soon as you introduce strong fines and/or consequences if a validating authority randomly checks your goods and discover some tampering, the system is a bit more likely to be trusted. But of course, in such a case, you might as well just host the temperature log with the validating authority (like it's done for Concrete, or in the Auto industry).

The second one is even more compelling: of course the trust chain stops when the trust chains stops ! But if every luxury Louis Vuitton handbag is tracked and you know precisely whether it's been sold or whether it's supposed to be sitting on a shop shelf somewhere, you have zero risk of double sell (or at least, within the same limits as a bitcoin double-spend).


In the second case, couldn't Louis Vuitton also host the associated records itself?

There are several concepts related to this in other areas: provenance, catalogues raisonnés, serial numbers, title registries, pedigree registries, among others. People who make or who deal in rare or expensive things often adopt some of these mechanisms to help answer questions like: which one is this? is it genuine? who owns it? who used to own it? is it stolen?

(There are lots of different threats, but some of these mechanisms help respond to each. Properly identifying and authenticating an individual object may be the hardest problem of all here—but that's potentially less of a database issue than the others.)


Unsurprisingly, catalogues raisonnes are a hotbed of legal activity and controversy. Many scholars will now not offer opinions on the authenticity of a work for fear of getting sued:

https://www.nytimes.com/2012/06/20/arts/design/art-scholars-...

And works with supposedly excellent provenance still end up being repudiated by authentication committees:

https://www.antiquestradegazette.com/news/2011/double-denied...

Due to the misaligned incentives in the art authentication world, I'm going to go out on a limb and suggest that a blockchain would be a good way of tracking records in the artworld, particularly if artists register works directly on it.


https://shkspr.mobi/blog/2018/06/how-i-became-leonardo-da-vi...

  By putting your artwork on the "BitCoin Blockchain", 
  Verisart will hand wavy magic increase the trust in 
  art dealers and reduce fraud.


  That's a pretty neat idea. A distributed public ledger of 
  who I have sold my art to. And, if they sell it, they have 
  a cryptographically signed certificate proving its 
  provenance. The seller can sign the certificate with their 
  private key to say they've sold it to the new owner of a 
  specific public key. Nifty!


  Except… and I hate to bring the art industry into 
  disrepute… what if I sell a fake and keep the original in 
  my Underground Vault?


  There's no way to permanently attach a digital certificate 
  to a physical work of art.

  Incidentally, this is the problem with all the startups 
  claiming the blockchain will revolutionise the integrity 
  of global logistics markets. Sure, you can slap a QR code 
  on a crate - but nothing stops an unscrupulous middle-man 
  from replacing or adulterating the contents of the crate.

  Let's get back to Verisart's other issue. Proving that I 
  am the creator or owner of a piece of artwork.


  Long story short, I convinced them that I painted the Mona 
  Lisa.


In China there is a lot of issue with fake milk powder. You can now buy powder which contains a barcode in the container sealed at the factory that you can look up online to Ensure it came from the factory and not a 3rd party counterfeit. Blockchain adds exactly 0 value to this.


What if the trusted authority is the Chinese government? would you still keep your same opinion?

At the core of it, it is a transfer of power from larger organizations to the people.


> What if the trusted authority is the Chinese government? would you still keep your same opinion?

It's not about how nice the trusted authority is. It's about the value the trusted authority provides.

If you're doing business in China, although you might not entirely trust the Chinese government, and might not like them, they'll still provide more value than a "trust-less" system. China is not a lawless state after all, and if you want to do business there you'll have to deal with them at some level.

> At the core of it, it is a transfer of power from larger organisations to the people.

It's not though, if there's no actual transfer of real power. It's naive to think that blockchain themselves do this. If people tried to circumvent the Chinese state with blockchains in any meaningful way, China would crack down on it, and they'd be very efficient at it. Because real power is about interfacing with the world in real ways, and a well-functioning state will always maintain that power.

It's possible that, through democracy or other forms of pressure, people could make the government and businesses accept, use or interface with blockchain technology. But if people do have that kind of power over these entities, people by definition have the kind of power that makes the value of blockchain tech vanishingly small.

Blockchains provide value - not when you don't have any party you trust fully - but when you don't have parties that can provide any kind of value through their trust. I.e. failed states and lawless territories basically.


> It's not though, if there's no actual transfer of real power.

Blockchains are hard to modify and as such, can act as a form of checks and balances against those trying to change history. You're kind of saying powerful entity won't allow checks and balances and somehow conclude they are unnecessary. That is ... unfounded.


> What if the trusted authority is the Chinese government? would you still keep your same opinion?

In that case it is likely _mandated_ that I trust this authority regardless of my personal wants.


>As soon as you introduce strong fines and/or consequences

If strong fines were sufficient to prevent tampering then the proposed blockchain solution wouldn't even be necessary; just fine dishonest actors, period.

> if every luxury Louis Vuitton handbag is tracked and you know precisely whether it's been sold

There is no way to accomplish this though. You cannot reliably track a physical object because there is no way that a computer can automatically verify the authenticity of an object.


> I think most uses can be solved by a simple database hosted by a trusted authority

People say this in every blockchain related thing that pops up on HN but it excludes literally the only legitimate use case for a blockchain. That being the scenario where you don't have or don't want to rely on a trusted authority.


This seems clearly true for applications related to censorship resistance and certain properties of money and financial systems (if you explicitly don't want a government to make certain decisions in the systems), but maybe not for many other applications.

For example, is it likely that people don't trust Louis Vuitton to decide whether Louis Vuitton handbags are genuine? Isn't that the definition of a Louis Vuitton handbag being genuine?

In most cases where an institution is empowered to make a decision of some sort, the risk that they will later change their mind arbitrarily doesn't seem to loom very large. (I'd agree that it's great to have mechanisms for detecting this, although regular digital signatures and Merkle trees may suffice.)


People say this because blockchains are currently extremely complex and expensive in exchange for the value prop "don't need to be hosted by a trusted authority". That doesn't mean the value prop doesn't exist - it just means there are better tradeoffs today.

There are tons of cases where groups of entities interact and don't inherently trust each other. That is basically all of trade. In all of these cases, it would be more ideal if no one party had to be a trusted authority.

As soon as it seems simpler and less expensive for blockchains to implement this behavior, they will suddenly become a useful tool for all kinds of applications.


I think _you_ are missing the point. Bitcoin resolves the problem where funds from wallet X are moved into wallet Y. That alone does not solve much. I still have to trust that whatever I paid for will be delivered. And worse, if it isn't I have no way of reversing that transaction.

The moment I go to an authority and file a complaint, I am trusting that authority. I might as well just use their fiat as well.

The point above is that if I cannot trust the authorities (because my transaction is illegal), then there is a use case for bitcoin.


> That being the scenario where you don't have or don't want to rely on a trusted authority.

This doesn't even remotely solve the problem.

If someone can get a 51% attack, you now have a trusted authority. If you have a cabal of developers who are implementing your blockchain (and who the overwhelming majority of users will follow if they decide to fork), you have a trusted authority.


In the case of supply chain management, you need a trusted central authority regardless. Who ensures the sensors are honest? A computer can't do that. It has to be a legal contract between the truck company and a central authority, backed up by the dreaded guys with guns.


If you can't find or mutually organize a trusted authority you have much bigger problems than what technology to choose.


What?


the problem is that people hate with passion a technology that is hyped yes but not useless. it's a very strong bias


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