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How much technological progress can we really squeeze out of blockchain, though? It’s my understanding that it is essential for cryptocurrencies, useful for ce

How much technological progress can we really squeeze out of blockchain, though? It’s my understanding that it is essential for cryptocurrencies, useful for certain niche applications, but otherwise just one tool among many suitable solutions for problems at hand. Honestly, what is something blockchain could unequivocally do better than anything else for a large scale application that isn’t cryptocurrencies?

dragontamer 8y ago
I think there's a lot of potential in "smart contracts", even though that phrase is kind of meaningless now a days. A simple example of what can happen in the cryptocurrency world: a simple combination of Shamir's Secret Sharing [1] and the public/private key model leads to very easy to use escrow services. For example, you can create a new wallet with 3-keys, and require 2-of-3 keys to transfer money out. Alice, Bob, and Escrow get the three keys. Anyone can transfer money INTO the wallet and check its value through the public key. Under normal circumstances, Alice transfers money into the new wallet. Bob then gives Alice a real physical good. Finally, Alice and Bob provide two keys to allow the wallet to transfer money to Bob. Escrow comes in if any disputes come up. Escrow provides a 2nd key to break any disputes. If Escrow sides with Alice, Escrow + Alice can together use the two keys to transfer the money back to Alice. While if Escrow sides with Bob, they together can provide two keys to transfer the money to Bob. [1] https://en.wikipedia.org/wiki/Shamir%27s_Secret_Sharing https://en.wikipedia.org/wiki/Shamir%27s_Secret_Sharing ---------- True, escrow services do exist in the real world. And arguably, a "real" enforcement mechanism backed up by courts, police, and the government... are far more important than a silly crypto-game. But the silly-crypto game is automatic, and way cheaper to invoke compared to a full court case. It should be seen as a way to provide escrow services at a cost far cheaper than one backed by courts and lawyers. For example, "Escrow" can be an automatic email system that gives the 2nd key to Alice after 30 days (encrypted with Alice's public key, of course). Perhaps that's not sufficient for buying a car... but it'd be sufficient Escrow for your typical $20 video game purchase from Steam. As you can see, Bitcoin / Blockchain CAN automate things that used to take courts to invoke. Yes, its of lower quality, but almost any transaction can benefit from an Escrow service (even an Escrow service with default terms) ------------- The main problem with this scheme (and probably why it isn't popular, even if its technologically possible...) is that BTC or Ethereum's price could change dramatically, even in just 30 days. Cryptocoins simply aren't stable enough for this kind of mechanism to be useful.
- Jasper_ 8y ago
  What happens if both Bob and Alice dispute? Bob says Alice received a game, Alice says she didn't? No automatic system can solve that.
  - dragontamer 8y ago
    In this case, if both dispute, then Alice gets the money back after 30 days. As I said earlier: this is insufficient for a serious car purchase. But it IS a sufficient mechanism for Steam Games (if "Bob" is Valve/Steam, then Bob can simply revoke access to that game). Amazon and Ebay also work on this mechanism. Not on Blockchain... but these companies overwhelmingly side with the paying customer (in this case: Alice)... leaving the business owners / service providers at a disadvantage. But Ebay also has a customer-review system attached, so people can tattletale on each other if a particular customer becomes abusive. --------- So in effect, you have a "cheap" default policy (in this case: Alice always gets the money back in 30 days by default) for the Escrow, but then you still have to create a review mechanism to handle the various cases of abuse. If 30-days is insufficient, then 60-day or 180-day return policies exist as well. The point is, anything you can imagine can be the default escrow policy. You can even lock the money away forever by default (IE: FORCE Alice and Bob to work together)... if you really want to go there. Alternatively, the Escrow can have the policy of "We'll only email you the key once you win a court case", if they really want to integrate into the system of law / courts we already have. That wouldn't be fully automated, but it'd be relatively effort from the perspective of the Escrow business.
    - Jasper_ 8y ago
      OK, so what part of that needs a smart contract and blockchain rather than a cron job?
      - dragontamer 8y ago
        Well, for one, Bob can see the BTC or Ethereum in the wallet due to the public blockchain. Bob can be assured that Alice has indeed sent the funds. Furthermore, the Escrow service isn't actually holding any money. If you were to implement Escrow using today's banking technology, you have to give Escrow the money, and then Escrow gives the money to Bob (or Alice) pending the results of the automated service. Ex: You can't implement an escrow service using ACH... not at least... without actually taking the money. But with Bitcoin or Ethereum, you can implement an escrow WITHOUT taking any money at all. Escrow can only give the money to Bob (or give it to Alice), provable through encryption. In effect: Blockchain provides a way to divide the responsibility and prove it through cryptography. The Blockchain Escrow NEVER has access to the funds, throughout the entire transaction. And therefore, it is easier to bootstrap Escrow's reputation. True, we can use well-trusted banks and courts to handle these transactions. Trusted Escrow services do exist. But my point is that Blockchain could make it cheaper and easier to do. ---------- I mean, provided that Bitcoin actually can stabilize, among other things. There are a lot of reasons to not do this with BTC or Ethereum, primarily because of the gross variance in price. But still, its a nifty concept. Its not "change the world" level, but it is certainly a technological advancement in my eyes. Something that could allow new businesses (with lower-trust models) to accomplish things that previously took a lot of trust, and a lot of effort. (IE: Escrow services).

dragontamer 8y ago

I think there's a lot of potential in "smart contracts", even though that phrase is kind of meaningless now a days. A simple example of what can happen in the cryptocurrency world: a simple combination of Shamir's Secret Sharing [1] and the public/private key model leads to very easy to use escrow services. For example, you can create a new wallet with 3-keys, and require 2-of-3 keys to transfer money out. Alice, Bob, and Escrow get the three keys. Anyone can transfer money INTO the wallet and check its value through the public key. Under normal circumstances, Alice transfers money into the new wallet. Bob then gives Alice a real physical good. Finally, Alice and Bob provide two keys to allow the wallet to transfer money to Bob. Escrow comes in if any disputes come up. Escrow provides a 2nd key to break any disputes. If Escrow sides with Alice, Escrow + Alice can together use the two keys to transfer the money back to Alice. While if Escrow sides with Bob, they together can provide two keys to transfer the money to Bob. [1] https://en.wikipedia.org/wiki/Shamir%27s_Secret_Sharing https://en.wikipedia.org/wiki/Shamir%27s_Secret_Sharing ---------- True, escrow services do exist in the real world. And arguably, a "real" enforcement mechanism backed up by courts, police, and the government... are far more important than a silly crypto-game. But the silly-crypto game is automatic, and way cheaper to invoke compared to a full court case. It should be seen as a way to provide escrow services at a cost far cheaper than one backed by courts and lawyers. For example, "Escrow" can be an automatic email system that gives the 2nd key to Alice after 30 days (encrypted with Alice's public key, of course). Perhaps that's not sufficient for buying a car... but it'd be sufficient Escrow for your typical $20 video game purchase from Steam. As you can see, Bitcoin / Blockchain CAN automate things that used to take courts to invoke. Yes, its of lower quality, but almost any transaction can benefit from an Escrow service (even an Escrow service with default terms) ------------- The main problem with this scheme (and probably why it isn't popular, even if its technologically possible...) is that BTC or Ethereum's price could change dramatically, even in just 30 days. Cryptocoins simply aren't stable enough for this kind of mechanism to be useful.

Jasper_ 8y ago
What happens if both Bob and Alice dispute? Bob says Alice received a game, Alice says she didn't? No automatic system can solve that.
- dragontamer 8y ago
  In this case, if both dispute, then Alice gets the money back after 30 days. As I said earlier: this is insufficient for a serious car purchase. But it IS a sufficient mechanism for Steam Games (if "Bob" is Valve/Steam, then Bob can simply revoke access to that game). Amazon and Ebay also work on this mechanism. Not on Blockchain... but these companies overwhelmingly side with the paying customer (in this case: Alice)... leaving the business owners / service providers at a disadvantage. But Ebay also has a customer-review system attached, so people can tattletale on each other if a particular customer becomes abusive. --------- So in effect, you have a "cheap" default policy (in this case: Alice always gets the money back in 30 days by default) for the Escrow, but then you still have to create a review mechanism to handle the various cases of abuse. If 30-days is insufficient, then 60-day or 180-day return policies exist as well. The point is, anything you can imagine can be the default escrow policy. You can even lock the money away forever by default (IE: FORCE Alice and Bob to work together)... if you really want to go there. Alternatively, the Escrow can have the policy of "We'll only email you the key once you win a court case", if they really want to integrate into the system of law / courts we already have. That wouldn't be fully automated, but it'd be relatively effort from the perspective of the Escrow business.
  - Jasper_ 8y ago
    OK, so what part of that needs a smart contract and blockchain rather than a cron job?
    - dragontamer 8y ago
      Well, for one, Bob can see the BTC or Ethereum in the wallet due to the public blockchain. Bob can be assured that Alice has indeed sent the funds. Furthermore, the Escrow service isn't actually holding any money. If you were to implement Escrow using today's banking technology, you have to give Escrow the money, and then Escrow gives the money to Bob (or Alice) pending the results of the automated service. Ex: You can't implement an escrow service using ACH... not at least... without actually taking the money. But with Bitcoin or Ethereum, you can implement an escrow WITHOUT taking any money at all. Escrow can only give the money to Bob (or give it to Alice), provable through encryption. In effect: Blockchain provides a way to divide the responsibility and prove it through cryptography. The Blockchain Escrow NEVER has access to the funds, throughout the entire transaction. And therefore, it is easier to bootstrap Escrow's reputation. True, we can use well-trusted banks and courts to handle these transactions. Trusted Escrow services do exist. But my point is that Blockchain could make it cheaper and easier to do. ---------- I mean, provided that Bitcoin actually can stabilize, among other things. There are a lot of reasons to not do this with BTC or Ethereum, primarily because of the gross variance in price. But still, its a nifty concept. Its not "change the world" level, but it is certainly a technological advancement in my eyes. Something that could allow new businesses (with lower-trust models) to accomplish things that previously took a lot of trust, and a lot of effort. (IE: Escrow services).