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Couple of questions: - Assume paypal implements a smart contract system. Users have an option to keep their contracts public or encrypt them with their passwor

Couple of questions: - Assume paypal implements a smart contract system. Users have an option to keep their contracts public or encrypt them with their password/random secret key. Defining a contract is like specifying a template. Deploying the contract locks up the requisite sum from the concerned parties. The contract distributes this sum according to its logic, when triggered. Since we don't have mining/redundant copies of data, paypal can afford to charge lower transaction fees overall. The system is altogether more efficient and user privacy is ensured via encrypting the contract to ensure nobody except the owner sees them. Apart from decentralization, what else does ethereum offer over and above this combination? - Despite trying pretty hard, I have been unable to understand the valuations of cryptocurrencies. According to my understanding, bitcoin is a commodity rather than a currency. Like gold, its value resides in how much value people put on it (unlike currencies, which have to be accepted all across their native country). However, unlike gold, bitcoin has no intrinsic value i.e the amount of money somebody would give to just hold onto it for eternity. So the value of bitcoin should be estimated from [value of transactions that happen on the network / number of bitcoins in circulation]. However, most of the transactions happening on the blockchain (IMO) are transactions between cryptocurrencies (eth->bitcoin->eth..). The few that happen in the real world (buying goods/services) are hindered by the continuously changing market value of bitcoin/eth. In this catch-22 (speculation hinders transactions, which makes it tougher to do fair valuation, which encourages speculation), how do we reach a consensus on the value of bitcoin?

isubkhankulov 9y ago
bitcoin's primary value generator since 2011 when Silk Road 1 launched has been uncensored money, or a payment network outside of any single entities control. Afaik, it was not designed with the black market in mind. Since then, people have started buying it because of its scarcity.
Jabanga 9y ago
>Apart from decentralization, what else does ethereum offer over and above this combination? Reliability. PayPal can change its mind and remove the feature. An immutable blockchain won't.
- lambdadmitry 9y ago
  PayPal is way more reliable than Ethereum at this point. What stops your counterparty from ditching the "smart contract"? You might say that the contract may lock some of their ETH, but ETH:USD fluctuates wildly so you can't guarantee that the value of the contract for your counterparty won't become less than the value of ditching it in a few hours. Moreover, if you lock funds in the contract, you suddenly create a nontrivial cost for your counterparty, reducing their willingness to enter that contract.
  - Jabanga 9y ago
    Your counterparty could ditch the smart contract if it's on PayPal too. The actual terms of the contract are less likely to be changed if it's on Ethereum. Insofar as you need USD in your contract, you're right that the blockchain's advantages are diminished, since you need a trusted third party to guarantee the USD even if you use a contract on the blockchain .
    - lambdadmitry 9y ago
      If it's on PayPal and it exists in the standard legal framework, the guarantor is the government with all its power. You can go to court over the violated contract and the counterparty will be fined/jailed if found guilty. It's not about "verifiability", it's about enforcement. And for that you need a capability to inflict violence. So unless people really want ETH-paid militias/sheriffs, blockchain doesn't bring much to the table.
      - Jabanga 9y ago
        A blockchain's guarantee that the smart contract will remain in force is much more powerful than a government's. This is because a smart contract on a blockchain is much less likely to be removed or have its terms changed than a smart contract on PayPal, even if the latter is in the "standard legal framework" (which is a new condition you're adding which wasn't part of the original premise, where we were comparing smart contracts enforced by an automated protocol, not contracts in general). This in turn is because political forces can change the standard legal framework much more easily than they can change a blockchain's smart contract terms. You're certainly right that standard contracts, backed by government, can do things smart contracts can't, but there are things that smart contracts can do just as well as standard contracts (like enforce a contract where both parties pledge collateral), and they will be more faithfully executed on a blockchain than on PayPal. You asked what advantage a blockchain provides over PayPal as a platform for smart contracts. I gave you an answer.

isubkhankulov 9y ago

bitcoin's primary value generator since 2011 when Silk Road 1 launched has been uncensored money, or a payment network outside of any single entities control. Afaik, it was not designed with the black market in mind. Since then, people have started buying it because of its scarcity.

Jabanga 9y ago

>Apart from decentralization, what else does ethereum offer over and above this combination? Reliability. PayPal can change its mind and remove the feature. An immutable blockchain won't.

lambdadmitry 9y ago
PayPal is way more reliable than Ethereum at this point. What stops your counterparty from ditching the "smart contract"? You might say that the contract may lock some of their ETH, but ETH:USD fluctuates wildly so you can't guarantee that the value of the contract for your counterparty won't become less than the value of ditching it in a few hours. Moreover, if you lock funds in the contract, you suddenly create a nontrivial cost for your counterparty, reducing their willingness to enter that contract.
- Jabanga 9y ago
  Your counterparty could ditch the smart contract if it's on PayPal too. The actual terms of the contract are less likely to be changed if it's on Ethereum. Insofar as you need USD in your contract, you're right that the blockchain's advantages are diminished, since you need a trusted third party to guarantee the USD even if you use a contract on the blockchain .
  - lambdadmitry 9y ago
    If it's on PayPal and it exists in the standard legal framework, the guarantor is the government with all its power. You can go to court over the violated contract and the counterparty will be fined/jailed if found guilty. It's not about "verifiability", it's about enforcement. And for that you need a capability to inflict violence. So unless people really want ETH-paid militias/sheriffs, blockchain doesn't bring much to the table.
    - Jabanga 9y ago
      A blockchain's guarantee that the smart contract will remain in force is much more powerful than a government's. This is because a smart contract on a blockchain is much less likely to be removed or have its terms changed than a smart contract on PayPal, even if the latter is in the "standard legal framework" (which is a new condition you're adding which wasn't part of the original premise, where we were comparing smart contracts enforced by an automated protocol, not contracts in general). This in turn is because political forces can change the standard legal framework much more easily than they can change a blockchain's smart contract terms. You're certainly right that standard contracts, backed by government, can do things smart contracts can't, but there are things that smart contracts can do just as well as standard contracts (like enforce a contract where both parties pledge collateral), and they will be more faithfully executed on a blockchain than on PayPal. You asked what advantage a blockchain provides over PayPal as a platform for smart contracts. I gave you an answer.