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Ask HN: What benefits does the blockchain provide?

• cocktailpeanuts 9y ago
  It tackles the issue of "trust". All of us at many points in our lives have to trust people or companies that we can't (and should't) trust, for example we give credit card numbers to some random websites on the web. In theory, blockchains are supposed to get rid of that need, because instead of a single entity owning everything, everything is decentralized. This means people don't have to put trust on entities they shouldn't have to trust. This will probably get rid of a lot of inefficiencies in the world.
  • alextheparrot 9y ago
    How does it actually tackle the practical issue of trust, though? If I buy something in a block chain based currency and I don’t get it, doesn’t that mean I’m just SOL? On the other hand, with a credit card I can just do a chargeback.
    • nemild 9y ago
      A more simple example is a crypto contract. Imagine a bank on Ethereum that accepts deposits and allows withdrawals (first example here: https://learnxinyminutes.com/docs/solidity/ https://learnxinyminutes.com/docs/solidity/ ) Anyone can deposit and withdraw, and no central party has the right to control the funds, if the contract is designed that way. As such, there is no custodial risk that the funds are stolen - and perhaps even no need to regulate the bank itself. (obviously, someone can steal if they get your private key, just not through the bank itself) Lots of other examples. Bitcoin lets us set a credible limit of 21 MM, but in the real world you'd have to trust a central bank's word for the same. Or the Lightning network allows peer to peer payments through counterparties. But none of these counterparties are able to steal the money midway through. This is akin to having 20 random people help you move a payment across the world, without any of them being able to steal the money. Finance is full of these examples where we have to trust other parties, and crypto may have a huge impact there. Also, by reducing regulations and capital requirements, may make the space more ripe for startups to attack finance.
      • alextheparrot 9y ago
        Sorry for my continued confusion, but can you clarify how any of this stuff helps me have the same protections as when using a credit card? I just want to buy things safely when I’m not physically present - it seems like with cryto I’d send them the money and then I have to trust they’ll send me the thing, whereas with a credit card if they don’t send me the thing I just ask my issuer to reverse the transaction.
        • gt_ 9y ago
          You got it right. It’s no good for that. No crypto system can close trust beyond the network and it’s nodes. Some other dependency is required for that. Crypto might be shown to allow for some new kinds of dependency to step in at that point but I don’t know of anything like that myself.
          • deleted 9y ago
            [deleted]
    • gomox 9y ago
      Blockchain based currencies like Bitcoin protect you from your bank freezing or stealing your assets, or suddenly refusing to do business with you. They don't protect you from a third party not shipping your products that you bought on eBay. If you have ever dealt with companies like PayPal as a merchant, you know why this is important.
      • tehlike 9y ago
        In theory, this is true, but in practice the burden is huge, and people would still trust some centralized bank (like they do today with coinbase).
        • gomox 9y ago
          The main difference is that you actually get the choice of doing one or the other, whereas in the conventional banking system, you can't choose to be your own bank. Depending on what you are financing, this might be an essential feature.
      • alextheparrot 9y ago
        Just to clarify - as a consumer I lose utility when using crypto compared to the current status-quo?
        • gomox 9y ago
          I don't know of any cryptocurrencies that allow you do to do a chargeback, so in that specific dimension, yes.
    • Kpourdeilami 9y ago
      I don’t think it actually tackles the issue of trust but rather it removes it all together. Originally it was made for irreversible micro transactions where the existence of a trusted middleman made it too expensive for them to be practical. Trusted middlemen usually serve a useful function in the system but for some use cases (i.e. irreversible micro transactions), they’re too expensive.
      • alextheparrot 9y ago
        From your explanation, I’d argue it doesn’t remove trust, it just makes it so that you don’t particularly worry about trusting anyone (If I buy something for 50 cents who cares if you scam me). Is that a fair representation of your point?
        • Kpourdeilami 9y ago
          Yes, that’s exactly what I meant. Thanks for clarifying it
    • cocktailpeanuts 9y ago
      This is a different type of trust than what I was talking about. Here's a quick picture: Alice wants to buy something from Bob. But the only way to do so is through Eve. Then Alice and Bob both need to trust that Eve won't steal their credit card or money transfer in between. Your question is regarding whether Alice can trust Bob (Not whether Alice and Bob can trust Eve the Middleman) There isn't currently a mainstream app that does this yet. One notable example is OpenBazaar, where they created a protocol to carry this out in a trustless manner, but they're just getting started.
      • alextheparrot 9y ago
        From reading the OpenBazaar blog (I searched for a whitepaper first), it seems like they aren’t trustless - they seem to have a concept of a moderator [0] who you need to trust (Sounds a lot like Eve)? I’m really not sure how this is technically possible, especially when dealing with physical goods. [0] Under scam mitigation - https://www.openbazaar.org/blog/openbazaar-development-updates-december-20-2017/ https://www.openbazaar.org/blog/openbazaar-development-updat...
    • nartz 9y ago
      'Trust' is sort of mangled here: what it means is that you 'trust' a single company on the other side of the transaction that makes up their rules/regulations and has their own customer service department, etc, i.e. VISA or MASTERCARD, that you have to deal with, as well as middlemen (i.e. the company that maybe issues the card to you like a bank or otherwise). They have the power to change their rules, raise your rates, close your account, etc. With the distributed system, essentially we are trying to hardcode all of the rules, so there isn't any wiggle room for fraud, or a single person changing the rules on you, etc. The downside to this, is that it means that it essentially becomes goverened by the software devs (or controlling body) of the altcoin. However, it sort of protects the consumer a little more by making it harder for a single governing body to make singular changes, because they'll want everyone who runs a type of exchange for the coin to participate as well so as not to alienate the coin and userbase...
      • ellius 9y ago
        Additionally, it is governed by the structures of code. Technical tools like programs operate in very precise deterministic fashions which do not map cleanly to the world of human contracts and other agreements. So it’s sort of a tough problem to have automatically executing programs that can be exploited by people who have a more sufficiently sophisticated technical understanding of a “smart contract” where there is no superior entity to resolve disputes of understanding.
    • hw 9y ago
      Instead of having to deal with chargebacks (on both your side, and from the business's side), the funds could hypothetically be kept in an escrow all within a smart contract on a blockchain, and only released when delivery is confirmed. The confirmation of delivery could also be tracked via blockchain, say by the delivery person scanning the package on a device at your door which then signs the transaction with your key and that gets put on the blockchain, which then gets verified and funds are released from the escrow. I do think we're still a ways off before the blockchain actually gets mass adoption in terms of real world usage (instead of it being a speculative, get rich quick scheme that it is now to a lot of people)
      • alextheparrot 9y ago
        I think the problem is there’s no good way of adding out of network data to the blockchain. Instead of not sending the package, they could just send me a package of rocks and the delivery guy is none the wiser.
    • colordrops 9y ago
      It tackles a very specific problem, which is trust in the accuracy and of a ledger without third party interference or censorship. It's not meant to tackle problems outside of that. Expecting fulfillment to be handled by the blockchain is not much different from expecting the shipped product quality to be handled by the blockchain.
      • alextheparrot 9y ago
        I was responding to a comment proposing that the blockchain allows for trust, including in cases where credit card numbers would be currently exchanged. Based on the subsequent commentary, it seems blockchain based currency (Not all blockchain uses) currently provide me, as a consumer, less protection from fraud but more freedom to transact (Censorship and interference resistance, as you mentioned). The above distinction, I believe, is important - I’m not objectively better off using one or the other, it depends completely on which scenario I’m more worried about.
  • kypro 9y ago
    Thanks. Given the example of Bitcoin I think I understand how this works, but could you explain how the blockchain solves the issue of trust in your example? Specifically how with the blockchain could I give a company my credit card information without me having to trust they don't misuse that information?
    • gomox 9y ago
      In practice by using Bitcoin you just send the company the funds, you never give them your credit card number at all.
      • kypro 9y ago
        So like wiring money directly basically? Plus, I actually already protect myself from this by using a separate card for online transactions which I top-up as I require. Why does the blockchain do this better than than traditional banks / solutions? I understand a couple of disadvantages here would be the general inefficiency of the blockchain, and zero protection in cases of fraud. Do you feel the benefits of the blockchain would outweighs the negatives here?
        • gomox 9y ago
          Like wiring money directly, except it works across national borders and transactions are actually settled (and not reversible within 48 hours because the tech was invented ages ago). The general (electrical) inefficiency is a specific characteristic of Bitcoin and PoW systems. It's not an inherent thing about Blockchains. Other cryptocurrencies don't have that problem. I don't know about zero protection. Bitcoin-like currencies protect you from many things. One thing they don't protect you from is eBay sellers that scam you. Alternatives exist for this problem (namely money escrows). Re: your last question, I think using a credit card is better today for buying stuff on eBay. But Bitcoin like systems solve a more fundamental issue which is that they let you and you alone control your own money. That is not essential for buying on eBay. But it is essential for other things that I would argue are more important. See my higher lever comment about Wikileaks funding, for example.
  • gomox 9y ago
    This is the fundamental point of blockchains. Operating without large, trusted (for the time being) third parties. Here's a specific example: Blockchain-powered systems are an alternative to the censor-prone nature of the current networks (Internet, but also financial networks). Governments and large corporations hold significant leverage over the omnipresent communication mechanisms that are available today. This wasn't an issue when the Internet was invented. If a government disagrees with the existence of Wikileaks, Wikileaks can be excommunicated or financially strangled to death by applying pressure to third parties (banks or internet service providers) that allow it to function. Blockchains and P2P networks provide an alternative to this.
    • myaso 9y ago
      Blockchains solve one piece of a puzzle I can trust the transaction to go through but I can't trust the ecosystem that it operates in -- I'll leave the definition of trust purposely ambiguous. Despite all their flaws the systems already in place are designed with the ideal to prevent anti-social malfeasance. No sane business will adopt a blockchain for a problem that already can be solved using cheaper methods -- you don't need to embed certain controls in technology, you can simply catch stuff using manual human powered processes at a much lower cost which are much more flexible than a program. Cryptocurrencies make it easy to pay any address I know exists and they also let someone purchase illegal goods easily.
      • gomox 9y ago
        I'm not sure I follow your point here. Are you adding to what I said or do you disagree in some way?
        • myaso 9y ago
          Both, and yes I quite disagree with you in some fundamental way. They have a specific niche while being severely over hyped.
          • gomox 9y ago
  • liamzebedee 9y ago
    To further explain, I know it can sound confusing just saying we've done away with all trust, when in fact we're just replacing it with something different. Blockchains allow parties to achieve consensus without trusting any other member. The innovation being that any social system that relies on trust brings with it the problems and implications of the trusted. Common examples include being more costly (overhead/greed), socially exclusionary / corrupt in some circumstances (eg banning protesters). It also facilitates new innovations such as cryptocurrency. In public blockchains, trust is instead put into the security of the network in terms of its proof-of-work, its developers who maintain the software, the community at large (especially in the case of forks) and so on... Not mentioned often however is why corporations also are loving the idea of private blockchains (IBM Hyperledger, R3, etc). Private blockchains involve trusting only a couple participants to join the network. A set of banks can define a mutual settlement protocol in a standard smart contract for example - in using a blockchain, they mitigate the risk of other banks affecting their system. A better example of where a private blockchain would do wonders is in BGP routing. You hear almost every year of a news story where an Indian ISP accidentally broadcasts they forward for Google's IP subnet, and subsequently disrupts all of India's Google access until they manually fix it. A private blockchain among BGP hosts would vastly improve these situations if everyone could agree on which routes they were routing, and globally optimise in the case of failure. I think the key to achieving anything with the blockchain approach is to not try replace something with a blockchain (ie Facebook) for the sake of removing trust, but pinpointing specific pains that derive from having to trust other parties and then focussing there.
    • kypro 9y ago
      > Not mentioned often however is why corporations also are loving the idea of private blockchains (IBM Hyperledger, R3, etc). Private blockchains involve trusting only a couple participants to join the network. A set of banks can define a mutual settlement protocol in a standard smart contract for example - in using a blockchain, they mitigate the risk of other banks affecting their system. Yes, this is what really interests me. I'm trying to understand why companies like IBM and FB want to develop their own blockchains, but I'm struggling to get it. Do you think you could give me some more details about how this would work? Do you have a real world example of how banks could use a private blockchain?
  • thisisit 9y ago
    Well, that is great example. How does it solve breaking of this "trust"? In the same way that I shouldn't give credit card numbers to random website, I pay some coins to a random website which promptly runs away with those coins. While for credit cards we have entities which can solve this problem for me, how does blockchain solve this problem? Because if this goes mainstream we will have people getting scammed a lot. Or even people who get hacked due to the recent Intel bugs: https://news.ycombinator.com/item?id=16076575 https://news.ycombinator.com/item?id=16076575
    • deleted 9y ago
      [deleted]
• gesman 9y ago
  Getting rid of parasitic middlemen
  • dukeflukem 9y ago
    The parasite merely changes. The hodler with 10k btc gets to live it large at everyone's expense if btc becomes main street. Sure they were smart ... but they were lucky and now their place in the crypto aristocracy is made and this will be passed to their kids etc. And we are back to the old money situation. Proof of stake seals the deal. Forks and airdrops is the foam on top.
• ENGNR 9y ago
  It's just a database, but it's distributed, with integrity maintained through public keys Coins, inventory, cars, loans, art, crypto kitties, sensor logs, records.. anything you'd put in a database, you could instead put into the distributed ledger and forget about it (at a price, the amount of data has to be very small but you can also buy hosting separately). Others can then have assurances about the integrity of that ledger without having to trust you either The cherry on top is being able to write transform functions (ie programs) that all of the nodes simultaneously run so the ledger state can intelligently change based on conditions
  • kypro 9y ago
    Thanks, but what you're describing is already possible with traditional technologies. What specific advantage does the blockchain provide here, given decentralisation is less efficient than the centralised cloud solutions already available from providers like AWS?
    • aakilfernandes 9y ago
      Assuming you mean public blockchains, the main advantage is censorship resistance (you cannot have an administrator delete entries or restrict access).
      • kypro 9y ago
        But where is this useful? I can already set up databases with restricted access to certain users. In what situations am I going to want to create a database in which not even I under any circumstances can delete things or change access rights?
        • thomasrognon 9y ago
          You are thinking of operations within a centrally controlled, trusted entity. This is useful for things that happen between entities that don't necessarily trust each other and don't have control of each other's data. Data interoperability, dealing with sketchy vendors, and chain of ownership through many companies, nations, or even departments within large organizations are huge problems that an insane amount of money is thrown at. There is a lot of value in a database of facts that no-one controls and everyone can trust.
• yanilkr 9y ago
  Watch this video. https://www.youtube.com/watch?v=k53LUZxUF50 https://www.youtube.com/watch?v=k53LUZxUF50 It does a good job of explaining how trust evolved in the world and now that we are comfortable using computers to organize our lives, it makes sense to have a global ledger to keep track of "karma" we owe each other.
• proofofanalysis 9y ago
  The blockchain's (current) prime use case: triple entry accounting. In double entry accounting, a ledger only contains debits and credits. With the blockchain, the blockchain's attestation of the validity of the debit and credits is the third entry. This removes the need to trust whether the credits and debits were correct in the first place. Were financial systems to be based on blockchain design, an Enron situation would not be able to occur. It might even prevent the likes of Madoff. This technology is only getting started. While there is hype, this hype is necessary for the market to test out many ideas and applications, until those that make sense remain standing.
  • tehlike 9y ago
    you are also assuming all of the accounting is on a public ledger. It's not necessarily the case, is it?
  • KasianFranks 9y ago
    Well said.
  • kypro 9y ago
    I think I understand the advantages in this specific example and I can see how it's a great solution, even if I don't believe it's the future of banking/currency. However, I was really asking for the benefits of blockchains more generally. I've been hearing a lot of smart people say it's the future, and I've seen news articles about numerous companies looking into building their own blockchains, but I don't really see what the general use case is for it. The only example that's ever made much sense to me is the example of cryptocurrency.
    • bdamm 9y ago
      I’ve seen some pretty useful models for delegation of authorization come up. For example, a contract deploys trust to a root node in the chain (somewhere in the chain), then the chain allows public distributed rules regarding that trust encoded in the contract via transaction. Effectively, the holder of the trust “pays” the currency of privileges to the receiver. The advantage here is the ability to transmit privileges is entirely autonomous.
• rhizome 9y ago
  I was wondering today if it would enable new and exciting forms of MLM (Amway, Nutrisystem, P90X, etc.) as the downline can be encoded directly.
• jmarchello 9y ago
  Blockchain’s potential goes far beyond currency and investing. At it’s core it’s a way to protect and validate information in a decentralized way. That can be used for ANY information. In theory a blockchain could serve as the source of truth for birth records, health records, property records, favorite cat videos, etc... The possibilities are endless
• kypro 9y ago
  I want to give a little context to why am asking this question... Recently I've been seeing a number of really smart people and established companies claiming blockchain is going to be ubiquitous and revolutionise a large number of different industries. However, outside the case of cryptocurrencies I'm not sure what applications the blockchain has or why myself as a developer would want to start using this revolutionary technology. I understand why in the example of cryptocurrency the blockchain is used. However why companies like Facebook or Microsoft would want to use blockchains for things is beyond me. It also confuses me why if the blockchain is as revolutionary as people say that it's only just started to get attention. Bitcoin has been around for quite a while, and has been well known in tech circles for a long time now. If my comments here seem critical it's not because I have any opposition to using the blockchain, but simply that I'm confused and desperately trying to understand what I'm missing here. I genuinely don't understand why or how this technology is going to become ubiquitous or revolutionise much of anything - which concerns me given the track record of some of its advocates.
  • thisisit 9y ago
    I had some criticism about the whole established companies going for blockchain: https://news.ycombinator.com/item?id=16017754 https://news.ycombinator.com/item?id=16017754
  • thomasrognon 9y ago
    Supply chain logistics and proof of ownership is a non-currency use case of blockchain technology.
    • paulgrimes1 9y ago
      Hey @thomasrognon, you’ve mentioned this twice on this thread from what I can see - care to elaborate?
• anonu 9y ago
  Personally when I hear blockchain I think payments. If we can bypass the banks and the credit card companies and create a payments system that is based on the power of the internet with blockchain as the intermediary, then we have something extremely powerful. We have to remember that the banks and the credit card companies will prevent this from happening with all their resources...
• Iv 9y ago
  Do you want the cynical answer or the idealist answer? The cynical answer is that banking institutions and oligarchs are adopting cryptocurrencies because with the various recent leaks and the (long overdue) political willpower in the West to do something about tax evasion, they need something more reliable than physical tax havens. One of the reasons why I suspect the current BTC rate is not just a bubble is that it matched the recent crackdown on corruption in Saudi Arabia. Hundreds of billions of dollars are at risk of being lost. We have seen similar hikes after Cyprus banking fiasco and, IIRC, after a round of Russian sanctions. Still, when even my step-mom considers investing in BTC, there is clearly a speculation bubble going on over this, but I doubt the crash would bring it to pre-december levels. The idealist answer is that blockchains allow to secure transactions that would normally require a trustable third party. If you want to run a virtual currency you normally need a database somewhere that says "Bob owns 176 dogecoin, Amanda owns 9871 dogecoins". The owner of that database can theoretically suddenly remove or add amounts on accounts in the database without anyone else's authorization. On the blockchain, the database is shared by thousands (millions now I guess?) of nodes constantly checking each other. To make a fraudulent modification and get away with it you need to own 2/3 of the network. Currencies were the first things implemented but now some smart contracts have been added: contracts that are programmatically defined and that the blockchain will ensure execute if some specific conditions are met. E.g: "If the account #25676 contains more than 10 BTC at the first day of a month, split its amount between these two different accounts". This gave rise to the possibility to create enforceable shareholder contracts without having to trust a legal system. The idealists who put that in place are called cryptoanarchists. (Warning: Bias ahead) simply put, these are people who think that big institution will always fail. That corruptable systems will be corrupted and that the people creating crucial infrastructure today are so flawed that the general demise is inevitable. They see a big value in the fact that we don't need to trust an entity to do transaction. I used to think that way too. However, fact is that entities whose business is to be trustworthy tend to do a good job 99.99% of the time. The 0.01% of the time is when you are called Wikileaks or Khodorkovsky. If you are, then you put a lot of value in the lack of third parties, but if you are part of the 99.99% you probably don't. I still like the fact that blockchains are creating competition for other institutions. The speed and low price of transactions (well, now it is getting higher in BTC, hopefully this will be solved) puts the big institutions to shame. Recently a 10 minutes SEPA transfer initiative was started, probably because of this. It is the main transfer system in Europe and it would typically take several days to process. The fact that companies could exist solely on blockchains and be created in a matter of minutes will hopefully put a similar pressure on administrations.
• tim333 9y ago
  In practice it seems mostly just good for cryptocurrencies and equity like cryptos and for exchanging those outside government control. But that in itself could be a big deal - the financial, forex, stock and bond markets and money exchanges are a big part of the global economy and if those move to crypto that's a big change. Outside government control is a mixed blessing - less bureaucratic but more prone to tax evasion, drug dealing and investment scams.
• danieltillett 9y ago
  The function of the blockchain is to suck in and burn the general public to such an extent that there will be universal support to kill any future decentralised monetary system. Does anyone think that those that have control of the current money supply (well at least those that advise them) are going to give away this power to a bunch of nerdy anarchists with a cool idea?
• BjoernKW 9y ago
  For the sake of the intriguing argument I'd go with Scott Adams' AI / singularity idea: http://blog.dilbert.com/2014/04/09/how-the-robots-will-take-over/ http://blog.dilbert.com/2014/04/09/how-the-robots-will-take-... Basically, according to that argument Bitcoin and blockchains are an AI-conceived ploy to stabilise markets and eliminate irrational human behaviour from the equation.
• irickt 9y ago
  This article describes the parameter space of blockchain applications, calling out when a blockchain is useful and when it is pointless. As such it can help organize and compare the statements in a discussion like this. https://medium.com/tezos/a-functional-nomenclature-of-cryptographic-ledgers-e836cb0e6864 https://medium.com/tezos/a-functional-nomenclature-of-crypto...
• borplk 9y ago
  The benefit of blockchain is distributed consensus about a database. When compared to a central regular database, blockchain is a compromise you make so that you can have distributed consensus over the state of the database. Apart from that it doesn't give you magical new benefits.
• miguelrochefort 9y ago
  Consensus.