5 ms·

Show me a few practical reasons you’d ever need a smart contract for this, instead of just some code and an actual agreement between parties to place nicely tog

by ttul 8y ago

Show me a few practical reasons you’d ever need a smart contract for this, instead of just some code and an actual agreement between parties to place nicely together?

antidesitter 8y ago
> an actual agreement between parties to place nicely together What does this mean?
- dEnigma 8y ago
  That's just a typo. They most likely meant to write "play nicely together".
  - ttul 8y ago
    Correct. Sorry.
derefr 8y ago
Assume you have a two-sided markets of interacting agents who each only interact once, like buyers and sellers. Without any middleman, this doesn't work, because the parties are in a prisoner's dilemma, rather than an iterated prisoner's dilemma—nobody can effectively punish the other party in a future transaction, so there's no incentive to not screw the other party over. Without smart contracts, what you need here is a "marketplace owner"—a legal agent where both sides have a legal agreement with them. This changes the situation so both sides are playing an iterated prisoner's dilemma with the marketplace owner, who can punish a user on either side for what they did to a user on the other side in a previous one-off transaction. But this marketplace-owner role is also known as a "middle man." Their role in punishing defection is valuable enough that the market doesn't disappear if they extract rent from both sides—and so they usually do. Ideally, we would have an alternative where everything still works out, but where rent cannot be extracted. With smart contracts, the marketplace-owner role is performed by, essentially, the buyers and sellers all automatically voting on whether a given transaction was legitimate. The smart contract is just the specification both sides have agreed to, in a given case, for judging the legitimacy of a transaction; and the blockchain is just a database which all parties doing this auditing synchronize amongst themselves, containing copies of both 1. those specifications, and 2. all the data required to validate any new transaction against them (which, in the case of a ledger-like transaction, is usually "all the valid transactions executed so far"). There still needs to be a human-level legal recourse for disputes—but those disputes would only ever be disputes about the specification of transactional legitimacy being wrongly specified, which are much rarer than disputes of the form of "he defected!"/"no I didn't!", to the point that the service of arbitrating such disputes would not be seen, at a human level, as valuable enough to justify rent-extraction.
- landryraccoon 8y ago
  > Assume you have a two-sided markets of interacting agents who each only interact once, like buyers and sellers. Don’t we already have this? Street markets and retail shops and one off websites and millions of other agents making up modern markets? It seems to work fine.
  - derefr 8y ago
    > Street markets and retail shops In cities with police forces. Purchases at street-markets don't devolve into robbery because police forces disincentivize that. The municipality taxes you for that service, and so is effectively a middleman and rent extractor for these transactions. Also, in cases where you've decided to trade using cash rather than to barter, you're being protected from your counterparty paying with counterfeit currency, by the state coming down rather harshly on counterfeiters, keeping counterfeit currency out of the market. That's a service they provide in exchange for state-level taxes. So, another middleman and rent extractor in your transaction. > one off websites When this works, it's because the payment processor (Stripe, PayPal) is acting as the middleman and rent-extractor. Even without a payment processor, you can usually seek redress from your credit card company (another middleman and rent-extractor.) Also, a search engine probably acted as a matchmaking agent to lead you to reputable services (and so is also acting as a rent-extractor in a round-about way, with sponsored ads and such.) Without these parties in play, the Internet is not a safe place to transact. 99.99% of credit card input forms on the internet (by volume) are those of phishing domains. That's what a non-iterated prisoner's dilemma looks like.
    - ItsMe000001 8y ago
      Do I read this right - and this is a genuine question, not a rhetorical one - "smart contracts" as tool to not have to rely on the state? Because to me it seems tools like these are exactly the ones that need a strong state (or a strong mafia - when there is no state those with power create one for themselves). I admit I have a hard time understanding what your point actually is.

by ttul 8y ago

Show me a few practical reasons you’d ever need a smart contract for this, instead of just some code and an actual agreement between parties to place nicely together?

antidesitter 8y ago

> an actual agreement between parties to place nicely together What does this mean?

dEnigma 8y ago
That's just a typo. They most likely meant to write "play nicely together".
- ttul 8y ago
  Correct. Sorry.

derefr 8y ago

Assume you have a two-sided markets of interacting agents who each only interact once, like buyers and sellers. Without any middleman, this doesn't work, because the parties are in a prisoner's dilemma, rather than an iterated prisoner's dilemma—nobody can effectively punish the other party in a future transaction, so there's no incentive to not screw the other party over. Without smart contracts, what you need here is a "marketplace owner"—a legal agent where both sides have a legal agreement with them. This changes the situation so both sides are playing an iterated prisoner's dilemma with the marketplace owner, who can punish a user on either side for what they did to a user on the other side in a previous one-off transaction. But this marketplace-owner role is also known as a "middle man." Their role in punishing defection is valuable enough that the market doesn't disappear if they extract rent from both sides—and so they usually do. Ideally, we would have an alternative where everything still works out, but where rent cannot be extracted. With smart contracts, the marketplace-owner role is performed by, essentially, the buyers and sellers all automatically voting on whether a given transaction was legitimate. The smart contract is just the specification both sides have agreed to, in a given case, for judging the legitimacy of a transaction; and the blockchain is just a database which all parties doing this auditing synchronize amongst themselves, containing copies of both 1. those specifications, and 2. all the data required to validate any new transaction against them (which, in the case of a ledger-like transaction, is usually "all the valid transactions executed so far"). There still needs to be a human-level legal recourse for disputes—but those disputes would only ever be disputes about the specification of transactional legitimacy being wrongly specified, which are much rarer than disputes of the form of "he defected!"/"no I didn't!", to the point that the service of arbitrating such disputes would not be seen, at a human level, as valuable enough to justify rent-extraction.

landryraccoon 8y ago
> Assume you have a two-sided markets of interacting agents who each only interact once, like buyers and sellers. Don’t we already have this? Street markets and retail shops and one off websites and millions of other agents making up modern markets? It seems to work fine.
- derefr 8y ago
  > Street markets and retail shops In cities with police forces. Purchases at street-markets don't devolve into robbery because police forces disincentivize that. The municipality taxes you for that service, and so is effectively a middleman and rent extractor for these transactions. Also, in cases where you've decided to trade using cash rather than to barter, you're being protected from your counterparty paying with counterfeit currency, by the state coming down rather harshly on counterfeiters, keeping counterfeit currency out of the market. That's a service they provide in exchange for state-level taxes. So, another middleman and rent extractor in your transaction. > one off websites When this works, it's because the payment processor (Stripe, PayPal) is acting as the middleman and rent-extractor. Even without a payment processor, you can usually seek redress from your credit card company (another middleman and rent-extractor.) Also, a search engine probably acted as a matchmaking agent to lead you to reputable services (and so is also acting as a rent-extractor in a round-about way, with sponsored ads and such.) Without these parties in play, the Internet is not a safe place to transact. 99.99% of credit card input forms on the internet (by volume) are those of phishing domains. That's what a non-iterated prisoner's dilemma looks like.
  - ItsMe000001 8y ago
    Do I read this right - and this is a genuine question, not a rhetorical one - "smart contracts" as tool to not have to rely on the state? Because to me it seems tools like these are exactly the ones that need a strong state (or a strong mafia - when there is no state those with power create one for themselves). I admit I have a hard time understanding what your point actually is.