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> To understand why this is the case, let’s work from the practical to the theoretical. For example, let’s consider a widely-proposed use case for blockchain: b
by jmeyer2k 9y ago
> To understand why this is the case, let’s work from the practical to the theoretical. For example, let’s consider a widely-proposed use case for blockchain: buying an e-book with a “smart” contract. The goal of the blockchain is, you don’t trust an e-book vendor and they don’t trust you (because you’re just two individuals on the internet), but, because it’s on blockchain, you’ll be able to trust the transaction.
No. Nobody trusts an exchange because it's on the blockchain. The idea of a smart contract is to decentralize high-friction transactions such as insurance (which is essentially what Amazon or PayPal is providing). The whole point is to not have to trust anybody to ensure a transaction is carried out, which it does accomplish to a reasonable extent.
The author also confuses peer-to-peer trustworthiness such as making a purchase, with trustworthiness that data or transaction executions will not be tampered with. The blockchain backs up the latter with mining, whereas it does not back up the former.
- barbegal 9y agoSmart contracts don't even work for insurance. Smart contracts require the insuring party to tie up capital to make sure they can satisfy the claim in the event that a claim is made. The problem is that each insurance smart contract may pay out large amounts but only rarely. Typical insurance policies often have maximum payouts north of $1 million. If every insurance company had to hold $1 million in smart coins for every insurance smart contract they produce, they'd quickly run out of capital. And if you allow capital to be pooled together where claims are payed out from one large pool for multiple insurance contracts (as is used in insurance today) then you have to trust that the insurer will have enough capital available when you want to make a claim. In this case the smart contract element is pretty useless because it doesn't guarantee you anything.
- mhluongo 9y agoLeverage doesn't make the blockchain aspect useless- in fact, the chain means the consumer can choose their insurance provider based on backing asset characteristics and how leveraged the risk pool is. Similar to what we had before, but with more democratic capital allocation.
- swiley 9y agoThat's not insurance, that's just ridiculous. An insurance smart contract should require the insuring party hold some fraction of the payout based on the expected number of claims.