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The blockchain allows two strangers to interact without needing to trust eachother, and without needing to bring in a trusted third party. That is an incredibly

by Taek 8y ago

The blockchain allows two strangers to interact without needing to trust eachother, and without needing to bring in a trusted third party. That is an incredibly valuable service, and one that adds a lot of consumer protection to services that are able to leverage it well. For example, using blockchain based contracts, we are able to empower consumers and enterprises to store data on foreign machines, without needing to know much about those machines besides their IP address. Using the blockchain's native currency, we can ensure that all payments are guaranteed, that no unfair chargebacks can happen, and further that the storage providers on our network cannot make money unless they actually keep the files for the duration of the contract. No fraud, no chargebacks, no payment for unfulfilled services, with lawyers or courts or claims processes required. We can protect our users much more easily and cheaply than traditional services or marketplaces, and this is made possible through a blockchain.

empath75 8y ago
Is there a huge amount of fraud in the online storage industry now? You can put as much as you want on s3 or whatever for almost nothing right now.
Pyxl101 8y ago
> That is an incredibly valuable service, and one that adds a lot of consumer protection to services that are able to leverage it well. From my perspective, the blockchain significantly reduces consumer protection. If I buy a product online, to be shipped to my house, how does the blockchain provide consumer protection? It doesn't. If the seller absconds with my money, and fails to ship the product or ships a counterfeit product, then there's absolutely nothing that I can do about it. With a credit card, I can report that fraud to the credit card bureau, who will reverse the transaction by default, then investigate and require the merchant to provide proof that the transaction was authorized and legitimate. I can take a photo of an obviously counterfeit product and send that to the credit card company as evidence of the fraud. Or if the product never arrived, it's on the merchant to prove that they shipped something to my address, and they'll need to provide a tracking number. As a consumer, this is a significant protection for me, and it's a significant fraud deterrent. Merchants who are bad actors and engage in fraud will be cut off from the network. Furthermore, buyers who are bad actors and issue an unreasonable number of chargebacks will also be cut off. There is no similar oversight of blockchains. If my credit card is stolen and used by a thief, then that's no problem for me. All of the fraudulent transactions are reversed, and the only real inconvenience is waiting for the replacement card to arrive. That's another important consumer protection: my money can't be stolen. With blockchain technology, thieves can steal anyone's money in an irreversible way if they get access to it. Chargebacks are one of the most valuable and most important consumer protection capabilities of the traditional banking system. Removing chargebacks significantly reduces consumer protection. Blockchain-based payment systems that do not involve a trusted central party will have worse consumer protection, not better. The only circumstance in which they'll be better is if the entire transaction, and delivery of goods and services, can be validated by a smart contract. That will only be possible for a small number of real-world transactions. It will not apply to the majority of day-to-day commerce. I am not claiming that the blockchain has no redeeming qualities. It has a bunch of valuable characteristics and benefits that I'm not mentioning here. However, consumer protection is not one of them.
- wellboy 8y ago
  Regarding charge backs, why can validation node not simply make a transaction back from the fraudulent vendor to the consumer. Obviously, there would need to be adequate proof that the nodes then review, but once that is given, what's the problem. Furthermore, the fraudulent vendor would be investigated for fraud and facing a fine or jailtime. This could be a dapp on the blockchain. I don't see why this can't be done by a team of trained lawyers and judges that review these fraudulent transactions.
- tfha 8y ago
  The service we provide is not a physical one that gets shipped, it's a digital one where we can use the blockchain to escrow payments until there is a cryptographic proof that the digital service has been provided according to the contract created between the consumer and the storage provider. Blockchains are most powerful when dealing with purely digital transactions, such as data hosting, information trading, prediction markets, digital currency exchange, non-fungible tokens, digital gambling, micropayments for digital services (like CDNs, viewing web articles, etc.).
  - vkou 8y ago
    How can I cryptographically prove that the seller shipped me a brick, instead of an iPhone?
    - tfha 8y ago
      You can't, but that doesn't mean you can't do the same for fully digital services like cloud storage.
    - sparkie 8y ago
      This can't be proven in a traditional market either. The reverse is also true: as a seller, you can't prove they shipped the iPhone and not the brick the user claimed to receive (or that it wasn't tampered with by someone in between). The big difference in the existing marketplaces is that the marketplace is usually both the service provider and the escrow, where Bitcoin allows these two services to be separated. In the case of Paypal, they will side with the buyer in most disputes, which puts you at a big disadvantage as a merchant. You're basically relying on the majority to be honest, and take into account that small scale fraud is not going to be a major risk to your business. There's also the disaster that is buying digital goods with Paypal, where the seller has virtually no comeback in the case of fraud, and is one of the means people use to empty hacked accounts, since it leaves no physical trail. The seller of the digital service almost always takes the hit. This is the real biggest use-case for Bitcoin, as cryptography can be used to prove the sale of the digital goods.
bambax 8y ago
> The blockchain allows two strangers to interact without needing to trust eachother This is false. It would only be true if said strangers were very skilled programmers having the time and know-how to audit smart contracts. In practice, cryptocurrencies rely on users trusting the operators and intermediaries and ultimately the state to prevent or at least strongly punish fraud.
- DennisP 8y ago
  Blockchains don't so much remove trust as distribute it. Instead of trusting one entity that holds my money, I can trust open source code, multiple independent auditors, a bug bounty process, a contract's history of successful use by lots of people, etc. It takes relatively little skill to check for the existence of these things. (It just occurred to me that we probably need independent rating services that do these checks for popular contracts. That could have warned people away from Parity's multisig wallet.)
  - notahacker 8y ago
    The theory of blockchains might entail a distribution of trust amongst well-audited third parties. In practice, crypto rely so heavily on centralised intermediaries of dubious quality that at one point 70% of BTC trades went through MtGox, a closed-source platform with well-documented problems with security, payment processors and regulators even before it lost 7% of all Bitcoins.
    - Taek 8y ago
      That's a function of an early industry, and increasingly the trend has been towards decentralization. There are more large exchanges, more small exchanges, and increasingly large parts of the cryptocurrency stack are being further decentralized and open-sourced (a great example is the BTCPay project, which replaced a closed source SAAS API with an open source wrapper around the open source bitcoin client).
      - notahacker 8y ago
tzs 8y ago
> The blockchain allows two strangers to interact without needing to trust eachother[sic], and without needing to bring in a trusted third party ... > For example [...] Using the blockchain's native currency, we can ensure that all payments are guaranteed, that no unfair chargebacks can happen How do you do that while still ensuring that fair chargebacks do happen, without bringing in trusted third parties?
- DennisP 8y ago
  One method is to transfer the money if any two of three people agree: buyer, seller, and trusted third party. If there's no dispute, buyer and seller agree and they have a nice cheap transfer just between themselves, without paying a percentage to the third party. If buyer and seller disagree, then you bring in the third party, who makes a decision and takes a percentage. I don't think there's any way to have fair chargebacks without bringing in third parties at all, but you can at least restrict their role to the transactions where they're actually needed. (This means they'll charge more for those transactions, but that's arguably more fair than charging buyers who've used reputable sellers, and/or sellers who've treated their customers well.)
- Taek 8y ago
  For digital services like cloud storage, you can use cryptography. Have the storage provider give a cryptograpic proof that they are still in possession of the data that is under contract, and you don't need a third party. Either they are online and can build the proof, or they are going to get hit with a penalty for dropping their end of the contract.
mcguire 8y ago
In theory, theory and practice are the same thing. In practice, not so much. http://money.cnn.com/2018/01/29/technology/coincheck-cryptocurrency-exchange-hack-japan/index.html http://money.cnn.com/2018/01/29/technology/coincheck-cryptoc... https://en.wikipedia.org/wiki/Mt._Gox?wprov=sfla1 https://en.wikipedia.org/wiki/Mt._Gox?wprov=sfla1

by Taek 8y ago

empath75 8y ago

Is there a huge amount of fraud in the online storage industry now? You can put as much as you want on s3 or whatever for almost nothing right now.

Pyxl101 8y ago

> That is an incredibly valuable service, and one that adds a lot of consumer protection to services that are able to leverage it well. From my perspective, the blockchain significantly reduces consumer protection. If I buy a product online, to be shipped to my house, how does the blockchain provide consumer protection? It doesn't. If the seller absconds with my money, and fails to ship the product or ships a counterfeit product, then there's absolutely nothing that I can do about it. With a credit card, I can report that fraud to the credit card bureau, who will reverse the transaction by default, then investigate and require the merchant to provide proof that the transaction was authorized and legitimate. I can take a photo of an obviously counterfeit product and send that to the credit card company as evidence of the fraud. Or if the product never arrived, it's on the merchant to prove that they shipped something to my address, and they'll need to provide a tracking number. As a consumer, this is a significant protection for me, and it's a significant fraud deterrent. Merchants who are bad actors and engage in fraud will be cut off from the network. Furthermore, buyers who are bad actors and issue an unreasonable number of chargebacks will also be cut off. There is no similar oversight of blockchains. If my credit card is stolen and used by a thief, then that's no problem for me. All of the fraudulent transactions are reversed, and the only real inconvenience is waiting for the replacement card to arrive. That's another important consumer protection: my money can't be stolen. With blockchain technology, thieves can steal anyone's money in an irreversible way if they get access to it. Chargebacks are one of the most valuable and most important consumer protection capabilities of the traditional banking system. Removing chargebacks significantly reduces consumer protection. Blockchain-based payment systems that do not involve a trusted central party will have worse consumer protection, not better. The only circumstance in which they'll be better is if the entire transaction, and delivery of goods and services, can be validated by a smart contract. That will only be possible for a small number of real-world transactions. It will not apply to the majority of day-to-day commerce. I am not claiming that the blockchain has no redeeming qualities. It has a bunch of valuable characteristics and benefits that I'm not mentioning here. However, consumer protection is not one of them.

wellboy 8y ago
Regarding charge backs, why can validation node not simply make a transaction back from the fraudulent vendor to the consumer. Obviously, there would need to be adequate proof that the nodes then review, but once that is given, what's the problem. Furthermore, the fraudulent vendor would be investigated for fraud and facing a fine or jailtime. This could be a dapp on the blockchain. I don't see why this can't be done by a team of trained lawyers and judges that review these fraudulent transactions.
tfha 8y ago
The service we provide is not a physical one that gets shipped, it's a digital one where we can use the blockchain to escrow payments until there is a cryptographic proof that the digital service has been provided according to the contract created between the consumer and the storage provider. Blockchains are most powerful when dealing with purely digital transactions, such as data hosting, information trading, prediction markets, digital currency exchange, non-fungible tokens, digital gambling, micropayments for digital services (like CDNs, viewing web articles, etc.).
- vkou 8y ago
  How can I cryptographically prove that the seller shipped me a brick, instead of an iPhone?
  - tfha 8y ago
    You can't, but that doesn't mean you can't do the same for fully digital services like cloud storage.
  - sparkie 8y ago
    This can't be proven in a traditional market either. The reverse is also true: as a seller, you can't prove they shipped the iPhone and not the brick the user claimed to receive (or that it wasn't tampered with by someone in between). The big difference in the existing marketplaces is that the marketplace is usually both the service provider and the escrow, where Bitcoin allows these two services to be separated. In the case of Paypal, they will side with the buyer in most disputes, which puts you at a big disadvantage as a merchant. You're basically relying on the majority to be honest, and take into account that small scale fraud is not going to be a major risk to your business. There's also the disaster that is buying digital goods with Paypal, where the seller has virtually no comeback in the case of fraud, and is one of the means people use to empty hacked accounts, since it leaves no physical trail. The seller of the digital service almost always takes the hit. This is the real biggest use-case for Bitcoin, as cryptography can be used to prove the sale of the digital goods.

bambax 8y ago

> The blockchain allows two strangers to interact without needing to trust eachother This is false. It would only be true if said strangers were very skilled programmers having the time and know-how to audit smart contracts. In practice, cryptocurrencies rely on users trusting the operators and intermediaries and ultimately the state to prevent or at least strongly punish fraud.

DennisP 8y ago
Blockchains don't so much remove trust as distribute it. Instead of trusting one entity that holds my money, I can trust open source code, multiple independent auditors, a bug bounty process, a contract's history of successful use by lots of people, etc. It takes relatively little skill to check for the existence of these things. (It just occurred to me that we probably need independent rating services that do these checks for popular contracts. That could have warned people away from Parity's multisig wallet.)
- notahacker 8y ago
  The theory of blockchains might entail a distribution of trust amongst well-audited third parties. In practice, crypto rely so heavily on centralised intermediaries of dubious quality that at one point 70% of BTC trades went through MtGox, a closed-source platform with well-documented problems with security, payment processors and regulators even before it lost 7% of all Bitcoins.
  - Taek 8y ago
    That's a function of an early industry, and increasingly the trend has been towards decentralization. There are more large exchanges, more small exchanges, and increasingly large parts of the cryptocurrency stack are being further decentralized and open-sourced (a great example is the BTCPay project, which replaced a closed source SAAS API with an open source wrapper around the open source bitcoin client).
    - notahacker 8y ago

tzs 8y ago

> The blockchain allows two strangers to interact without needing to trust eachother[sic], and without needing to bring in a trusted third party ... > For example [...] Using the blockchain's native currency, we can ensure that all payments are guaranteed, that no unfair chargebacks can happen How do you do that while still ensuring that fair chargebacks do happen, without bringing in trusted third parties?

DennisP 8y ago
One method is to transfer the money if any two of three people agree: buyer, seller, and trusted third party. If there's no dispute, buyer and seller agree and they have a nice cheap transfer just between themselves, without paying a percentage to the third party. If buyer and seller disagree, then you bring in the third party, who makes a decision and takes a percentage. I don't think there's any way to have fair chargebacks without bringing in third parties at all, but you can at least restrict their role to the transactions where they're actually needed. (This means they'll charge more for those transactions, but that's arguably more fair than charging buyers who've used reputable sellers, and/or sellers who've treated their customers well.)
Taek 8y ago
For digital services like cloud storage, you can use cryptography. Have the storage provider give a cryptograpic proof that they are still in possession of the data that is under contract, and you don't need a third party. Either they are online and can build the proof, or they are going to get hit with a penalty for dropping their end of the contract.

mcguire 8y ago

In theory, theory and practice are the same thing. In practice, not so much. http://money.cnn.com/2018/01/29/technology/coincheck-cryptocurrency-exchange-hack-japan/index.html http://money.cnn.com/2018/01/29/technology/coincheck-cryptoc... https://en.wikipedia.org/wiki/Mt._Gox?wprov=sfla1 https://en.wikipedia.org/wiki/Mt._Gox?wprov=sfla1