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I've said this several times before on this site but will keep repeating it: there's exactly one use case where the blockchain is a superior (and, in fact, the

I've said this several times before on this site but will keep repeating it: there's exactly one use case where the blockchain is a superior (and, in fact, the only) solution: when you can't use contracts and the legal system to ensure trust between the parties. In other words, anything illegal. For any other conceivable use case, a database and a contract between parties are a superior solution. Edit: To clarify what I mean by "a database and a contract": I mean the way the world does business, and as been for as long as society exists. There's trust between parties, and there's a multi-layered system in place to resolve disputes, starting from the customer support call center, reviews, bad publicity, and going all the way to the courts. Guys, this works. It's literally how the world works.

rhacker 8y ago
> Guys, this works. It's literally how the world works. That's a fairly generalized statement. So just because the world works in a certain way we shouldn't change it? Have you or anyone else noticed that the way the world works is massively in favor of anyone that has money? How many tenants got cheated out of $1000 deposit and didn't have legal knowledge or a support system to get the landlord to court? How many people got fees from Wells Fargo, Sprint, Comcast, PG&E, fuck even Etsy because they had power to pull from their accounts at any time? How many of them got everything back due to them? Fairly and morally? How many people that DON'T have a massive blogger platform, podcast and wherewithal to start an _effective_ campaign against a multi-national because they simply are not well spoken. They are still cheated by the big guy but no one cares because it's not retweeted by Ariana Grande. AKA your main point might hold up to 5 to 10% of disputes but hardly supports the notion that it "works". I think your statement should rather be "That's how the world currently operates" and that by no means rules out creating additional ways to operate in the world.
majani 8y ago
Funny thing is, there tends to be immense trust in the underworld because the consequence of betrayal is your life or limb.
spurgu 8y ago
> there's exactly one use case where the blockchain is a superior [- illegal transactions] To start off, the reason cryptocurrencies have survived this long is probably due to the fact that the dark web thrives on it. That said it's certainly not a reason to outlaw it. What about the situations where the legal system is questionable? Off hand I've read stories about a lot of poker players who've gotten cash confiscated when flying. What about [insert stories here]? How about a means to store (and transfer) value, where you can be certain - given your measures of security is sound - that no one but you (or multisig) can access it? If I store cash at home I can get robbed. If I own property it can be destroyed (loopholes in insurance policies, betrayal of other forms, military state). I remember the feeling I had a few years back when I had my own bitcoin in a paper "wallet" (actually a master seed with my personally devised cipher), protected by the (mental) measures of my choosing, it was mine. Yes, that caters well to illegal activities but likewise also empowers individual privacy, as well as removing any political, governmental or other influences. Power to the individual. It's not the monetary system's role to regulate how people behave in society, merely to facilitate transfer of value. If that transfer method can't be trusted alternatives will spring up. On that note if there are better people on the planet the methods of value transfer matters less. If there was more trust in financial institutions there would be less need for cryptocurrencies. On HN people advocate having backups of backups, but how do you backup your money in the bank? You're trusting them. Yes, drug lords exist and have existed in the past thanks to anonymous transactions, but... there is corruption in banking systems (offshore accounts) and whatever systems and we should/could question why there are drug lords in the world in the first place. They wouldn't have a place here if things were better organized. Either by more happy people (having less want/need for stimulants, given a bleak outlook on humanity), by giving the people the freedom to explore their minds more freely (psychedelics) or simply (as a step on the way) give the state the power to regulate as opposed to making everything illegal. I would expect more of HN than to have this as a top comment. Let's just ban cash altogether because the only thing it's useful for is enabling illegal transactions. Sigh. Quite a naive way of looking at things. What you're suggesting is doing what they're doing in China (and US and other countries as well) with the credit ratings of everyone without any chance of living a normal life unless you're subscribed to the system in place. Add hyper surveillance à la mega corps and no one can escape. Please keep the beacon lit for at least some of the measures in place to insure personal freedom.
AlunAlun 8y ago
You can repeat it all the times you want, but it it is still a shortsighted view. “A database and a contract”... but who owns the database? And who enforces the contract? And who owns the actual data? Blockchain provides satisfactory answers to all those problems. I agree 100% with the article in that blockchain is being ‘applied’ to a whole bunch of places that don’t need it. That doesn’t mean that it can’t work well in many other (legal!) scenarios.
- pavel_lishin 8y ago
  > Blockchain provides satisfactory answers to all those problems. Sort of: > who owns the database? Whoever has the most computational resources, in most implementations. > who enforces the contract? Depends on the contract. If I sell my house via a blockchain contract, a computer isn't going to come and evict me. If I sell you some heroin, or an action figure, or a rare in-game skin, it's still not going to help. > who owns the actual data? Nobody, and that's a problem when data needs to be removed.
  - skilgarriff 8y ago
    To be fair, I think most people who have given blockchain an honest 30 minutes of brainstorming aren't arguing for real world assets connected to a chain. I would argue that there is potentially a use case when it comes to things that can be completely represented digitally e.g. money.
    - pavel_lishin 8y ago
      That I agree with. I've seen some pretty interesting proposals for on-chain games. But it still adds new problems. Electricity use, the irrecoverability of data/auth if you lose a key, the inability to erase problematic data.
      - skilgarriff 8y ago
        I'm not sure I'd necessarily call those problems - it's a weird definition I know, but perhaps tradeoffs? 1. On Electricity - It needs to be expensive to try to cheat or steal from the system. Currently with gold you would need to hire a private army to steal from and break into vaults - that's so expensive and crazy that I don't think most people are willing to undertake that risk. Currently I think electricity is the best way to make digital native things expensive. I'm not sold on anything else yet (definitely open to new solutions, but I'm not convinced think PoS is a viable one). 2-3. I think this is an interesting tradeoff. The way I look at it you pick 1 of 2. Either you trust someone or some people to return lost funds/remove "problematic" data or you trust the system in which case those things can never be recovered/removed. I think calling those "problems" might be premature as they could actually be "benefits" depending on how you look at them.
anovikov 8y ago
well the original idea was exactly that: subvert the government by making legal enforcement of (some) contracts redundant.
SilasX 8y ago
Really? You (seriously plan to resort to) go(ing) to court over every contractual dispute? Even $5? HN Bandwagon, Monday: "Don't you understand that courts exist to make it so no one can break a contract without penalty?" HN Bandwagon, Tuesday: "Lol don't go to court over $5, that's stupid."
- nsxwolf 8y ago
  Credit card companies have a good system for handling $5 disputes. They write them off.
  - gammateam 8y ago
    So you mean a system could exist to lower costs for some parties?
    - gregschlom 8y ago
      While at the same time increasing the collective cost for everybody else? (ie: wasting energy).
      - skilgarriff 8y ago
        Is it wasting though? Do you consider vaults a waste? Do you consider 2-3% CC fees a waste? We already have costs built into the current system (e.g. cc fees to make up for fraud, security systems around protecting gold + cash). Electricity is just the cost of that specific system - I think calling it a waste is not necessarily justified.
        Slartie 8y ago
        2-3% CC fees are a waste. But you don't need blockchains to fix that. You need someone to legislatively force the CC companies to stop playing the cashback bullshit game, which is the real cost driver (much more than fraud) as it funnels money from cash and debit card users to high-reward CC users, while burning a lot of it on the way for managing all of that overhead that is of no help at all when it comes to making financial transactions. It happens to be that the EU is such a "someone". In EU countries, CC interchange fees are limited to 0,3%, debit fees to 0,2%, effectively resulting in much cheaper rates to be paid by merchants (whether big or small) for card acceptance. Thoughtful legislation and an effective, fair and trusted executive branch, both with the necessary checks and balances, trump any blockchain, at least as long as we are talking about legal transactions.
skilgarriff 8y ago
Not necessarily for or against "blockchain" in any one specific use case, but I'm curious why you would define anything that can't use contracts and the legal system as "illegal". I can imagine that for many non-first world countries where people wouldn't trust things to the legal system or contracts - I wouldn't necessarily define those things as illegal.
- dnautics 8y ago
  Or even in the first world, where you don't want the expense, paperwork, time, of having to deal with the legal system.
  - deleted 8y ago
    [deleted]
kolinko 8y ago
There are other legit reasons for not being able to use regular contracts and legal systems. For example, when you are dealing with multiple small transactions where a potential for fraud on the buyer side is significant. Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system. Or managing electronic assets (stocks etc) - blockchain significantly lowered a barrier for entry in those cases.
- LiquidSky 8y ago
  >For example, when you are dealing with multiple small transactions where a potential for fraud on the buyer side is significant. We already have systems that handle this issue well and have for decades. Why involve the blockchain? >Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system. >Or managing electronic assets (stocks etc) - blockchain significantly lowered a barrier for entry in those cases. But the barrier for entry is high in those use cases precisely to prevent exactly the kinds of abuse and problems we've seen in the crypto space. And the blockchain doesn't magically alleviate the obligation to obey laws and regulations. You could try to design a system that circumvents them, but then you're back to the parent's point about illegality.
- sammycdubs 8y ago
  > Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system. There are a lot of good reasons why there's a high barrier of entry to set up shop in the financial system. Trying to sidestep financial regulations through using cryptocurrency/blockchain is at least trying to actively exploit loopholes in the law, if not actually illegal.
thih9 8y ago
> In other words, anything illegal. It seems to me this could mean both: 1. Allowing illegal activity. (Eg when legal system can’t be used because the action in question is illegal). 2. Preventing illegal activity (Eg when legal system can’t be used because of difficulties to verify and/or execute).
MusaTheRedGuard 8y ago
First of all, no. Global, trustless coordination is a hard problem and is not necessarily illegal. Second, legality is subjective around the world. It is currently illegal in the US to gamble online, for some reason, even though casinos and lotteries are a thing. It is illegal in many countries to transfer a certain amount of money out of the country, for some reason. Certain sexualities are illegal in quite a few countries. Illegal != bad
- gregschlom 8y ago
  I'm not saying: you don't need the blockchain because you shouldn't be doing bad things. I'm saying: you need the blockchain if and only if you are doing things that are illegal in your country. It's a decision criteria for when you need the blockchain. I'm making no moral judgement. And there are very good reasons to want to do things that your government deems illegal (for example, donating to a political organization that has been blacklisted)
  - skilgarriff 8y ago
    I can send 1 bitcoin from myself living in Minnesota to my friend living in Japan for the equivalent of $0.46. That's an improvement over the existing system. I don't have to trust anyone in between to get my money to him. How would that be as possible and as "trustless" without blockchain?
    - gregschlom 8y ago
      1. Regarding the fees: $0.46 is (I presume) only the transaction fees. To make an accurate comparison, you'd have to include the exchange fees to convert from USD to BTC and then from BTC to JPY. Right now Coinbase is charging me $59 to buy 1 BTC, and I don't know how much more it would be to sell exchange that back to JPY. You can send $4000 (about 1 BTC) to someone in Japan for $30.14 with TransferWise. And guess what? Last time I had to send money to my family in Europe, that's exactly what I did. 2. Regarding trust: > don't have to trust anyone in between to get my money to him. Yes you do. Both your friend and you need to trust your Bitcoin exchange. Which sometimes, cannot be trusted. Remember Mt Gox?
golergka 8y ago
That's exactly what I've been writing under every blockchain thread on HN for the last two years: the only real need that blockchain solves is buying drugs. It hasn't taken over US and Europe yet (I presume because of progress by the legalization movement), but in Russia and CIS, there are no drug dealers that you meet anymore: anything you buy, you buy anonymously, through Tor and Bitcoin, without ever meeting any real person. That's the only industry blockhain could disrupt, and it completely disrupted it. (I'm not sure about money laundering as I've never really know much about it).
- pjc50 8y ago
  That's interesting to know, I would have thought there was more physical organizaed crime there.
  - golergka 8y ago
    There's none, police runs all of it.
ddebernardy 8y ago
Potentially legit use-case: electronic voting. In this scenario, you need to offer a number of guarantees. Chiefly: 1. Is my vote anonymous? (If not perfectly, owing to low level timestamps or transaction ids that can get cross-referenced with other data sources, at least for all practical intents?) 2. Can I be sure my vote got tallied the way I voted? 3. If I'd like to verify the result, is there a tamper-proof electronic paper trail that I can use to verify the result? It's a surprisingly hard problem in practice, and to the best my knowledge the most promising venue to guarantee 2 and 3 without compromising 1 might be a blockchain-like distributed ledger. (You can solve 2 and 3 by using a git-like hash tree and letting the voter know their commit hash. But in doing so you're basically dropping 1 and inviting vote selling.)
- lmm 8y ago
  Electronic voting wants an append-only/log-structured distributed database, but the certifiers can't be anonymous (otherwise anyone can just run a "polling station" and submit whatever "votes" they want). You'd want votes to be signed according to some centralised PKI infrastructure. And at that point there's no need for "mining" and what you have isn't blockchain.
- greglindahl 8y ago
  You don't "need" to offer these guarantees. Personally, I'm happy with paper ballots.
  - ddebernardy 8y ago
    Me too. In large part because paper ballots offer these guarantees. But there's a swath of elections and voting going on (in universities, within political parties or unions, etc., but also official elections in parts of the US or in Estonia) that that use e-voting to cut costs or improve participation. They currently lack these guarantees yet those elected end up in charge of millions in budget.
    - pbhjpbhj 8y ago
      Picking on one point here: In your electoral system is there a way to verify your vote was counted. Like a stamped voting slip? I've thought that a good way in an electronic system would be to give you a vote code (maybe a single letter), and a verification code. You'd enter the verification code, the screen would show all candidates/voting options with a "vote code" and you'd verify by finding your vote code matched. The vote code prevents coercion. Such system doesn't show your vote is included in the result, but shows the system has record of the vote you cast.
aboodman 8y ago
> a database and a contract between parties are a superior solution. Do you believe that this is a permanent state, or a temporary one? Is there a potential blockchain-like thing that could exist which would be better than a database and a contract? Because to me, the current system leaves room for improvement: - resolving conflicts across jurisdictions is extremely expensive - resolving conflicts even within one jurisdiction is more expensive than many transactions are worth Current blockchains are expensive and slow, but I think that we will see improvements over time which will eventually make blockchains (or something blockchain-like) look like appealing solutions.
- pjc50 8y ago
  The blockchain doesn't resolve disputes, it rules them out of scope. The response from blockchain advocates to vendor fraud is "caveat emptor". The dispute is still there.
  - aboodman 8y ago
    I'm not sure I completely follow you, but there's nothing preventing a party from making use of the legal system or contracts or whatever in addition to a blockchain. I still think that making some common classes of dispute impossible is highly valuable.
    - pjc50 8y ago
      Which classes of dispute does blockchain make impossible? It can attest that a key signed a particular transaction, but that doesn't necessarily mean it was done by or intended by the owner. General purpose computer security just isn't quite good enough for that, that's why smartcards and secure enclaves exists.
      - deleted 8y ago
        [deleted]
- SpicyLemonZest 8y ago
  If I say "you owe me $1000", and my Brazilian client says "no I don't", the current system offers a very speedy and cost-free resolution to that. We just have to do nothing, and the dispute will be resolved by default in favor of the client. I can imagine a blockchain-like thing that would be able to shift the default action, so that I get $1000 or maybe each of us gets $500. I can't imagine a blockchain-like thing that could, without an oracle both of us trust, actually reach into the real world and arbitrate the dispute. (If there is an oracle both of us trust, there's no need for a blockchain; the $1000 can just go directly into escrow with that oracle before I start working.)
BjoernKW 8y ago
> For any other conceivable use case, a database and a contract between parties are a superior solution. Only if that contract is reasonably enforceable and all parties involved trust the party that controls the database - if there's such a single party controlling the database at all. The most compelling use case in terms of supply chain management doesn't necessarily involve storing data from sensors or other IoT devices. It's doing away with the paperwork (customs documents, bills of lading, for example) involved in shipping physical goods and the friction it causes: https://www.maersk.com/en/news/2018/06/29/maersk-and-ibm-introduce-tradelens-blockchain-shipping-solution https://www.maersk.com/en/news/2018/06/29/maersk-and-ibm-int... I'm not sure if this is still the case but some time ago I read about an example where the paperwork involved in shipping a 20 ft container from Shanghai to Rotterdam was more expensive than the actual physical shipment of the container. A blockchain solution could potentially help with reducing that cost. A simpler, database-based solution of course could do, too. However, there are numerous parties involved in the process not all of whom necessarily trust each other. A blockchain-based infrastructure could provide a common protocol everyone can agree on.
yahyaheee 8y ago
Yep, you could go as far as to argue that criminalization of drugs is a major contributor to global warming.
shepardrtc 8y ago
> For any other conceivable use case, a database and a contract between parties are a superior solution. Except when banks are transferring money across borders. In order to have trust, they currently need what's called nostro and vostro accounts. Meaning, Bank A parks money in Bank B, and Bank B parks money in Bank A. So that if a transfer is fraudulent, there will be money to cover it. How is that better than blockchain?
- twic 8y ago
  It's better because you just described the entire mechanism in forty-four words.
josaka 8y ago
My sense is the set of scenarios where "you can't use contracts and the legal system to ensure trust between the parties" is broader than just illegal agreements. Contract often fail when the damages for breach are too small, diffuse, and heterogeneous, making class action unsuitable. And many contract provisions are often not honored in bankruptcy. Litigation is an unwieldy tool and preferably avoided where possible.
- dragontamer 8y ago
  But that's where small-claims court comes in. It mostly only costs you your time, you aren't really allowed to bring in a lawyer to argue on your behalf, etc. etc. Depending on your location, the MAXIMUM damages for small-claims court is $5000 to $10,000. The whole system is designed so that smaller issues can be resolved quickly. > And many contract provisions are often not honored in bankruptcy That's literally the point of bankruptcy. The courts say "X has paid enough to its debtors and no longer needs to pay any more". You can't squeeze blood out of a stone. If the defendant doesn't have any money left, it doesn't make sense to sue them. > Litigation is an unwieldy tool and preferably avoided where possible. How does Blockchain stop litigation? * If your Ethereum smart-contract says you owe your Car (or House) to somebody, but you don't give it to them... they'll be forced to go through the court system anyway to force you to give them the promised goods. * If you fraudulently reported to the smart-contract the temperature of goods or... otherwise tricked the sensors on "smart contract temperature sensors", you have to be taken to court. * If you put 20 BTC into an exchange (in promise for 550 ETH or whatever), but the exchange goes bankrupt... you lose both your BTC and your ETH. You have to go through the courts to try to get your money back.
  - Swenrekcah 8y ago
    Unfortunately not every country has a small claims system. Also, I’m not entirely sure how etherum contracts work but if using them means money is transferred automatically upon objectivly measured completion, then I would very much like that even if I did have access to a small claims court.
    - 8y ago
sonnyblarney 8y ago
It is good to remind people of the nature of legal enforcement which will essentially be required in such cases, but 'illegal stuff' is definitely not the only use case. For example - banks could feasibly use blockchain for clearing trades. Right now there is a 'single point of trust' for such things which even financial institutions want to break out of. Blockchain could theoretically enable distributed exchanges. The 'rule of law' is still essential in that context, but blockchain could work there. This is only one example of 'regular real world use'. FYI / caveat: the 'hardest part' about getting these more distributed systems going is getting large financial entities to agree on the nature of the exchange, and hammering out of the real world details. At that point, blockchain becomes a secondary and not necessarily essential component.
yarrel 8y ago
Anyone treating a blockchain as a database is already off to a bad start. It's at best a prunable transaction log. Sure, you can use a blockchain to construct a database, but even the Nakamoto whitepaper talks about discarding old transactions. There exist many cases in which something is not illegal but is inefficient, unjust, lacks sufficient trust to reach a contract or lacks sufficient incentives to comply with a contract. There exist many other cases in which people cannot afford to hire a lawyer to enforce a contract, or cannot afford to hire as many lawyers of as high a calibre as the other party. So presenting blockchains as a) databases that are b) only good for illegal activity is doubly incorrect. There are also many bad and unnecessary uses of databases and contracts...
vpmpaul 8y ago
> It's literally how the world works. So the world works perfectly in your opinion? The good thing about blockchain is it lowers the cost bar for crazy expensive business legalize. It of course needs more work but a proper smart contract setup placed in front of a judge leaves little need for a dozen lawyers and business consultants to see the intent of the contract. The main issue is that the current very expensive and inefficient setup benefits middle men that produce very little value. Transitioning away from that will eventually happen and that will be the reason blockchain and smart contracts explode in value and usefulness.
- oarabbus_ 8y ago
  >lowers the cost bar for crazy expensive business legalize Just an FYI, from the context of the next sentence I believe you mean "legalese". "Legalese" is convoluted legal jargon; "legalize" is a verb meaning to make something legal.
- greglindahl 8y ago
  How do I get the concept of "I'm buying stuff and it has to be fit for purpose" into a smart contract?
- notahacker 8y ago
  Except, of course, that as the article points out, the courts provide virtually all the value in preventing clients from cheating the auditing systems, or ensuring that a correctly delivered package actually has contents fit for purpose. And if your contract is only the code, you've got a big problem in making your case that tampering with the oracle or sending an empty box is an act of bad faith on the other party's part, and much more expensive lawyers to interpret it...
arisAlexis 8y ago
your vision is extremely short-sighted bordering resistance to change. With Ethereum you can build systems that are intra-national and connect for example all the real-estate records globally which cannot be done with a MySQL system. There are hundreds other examples
- dmitriid 8y ago
  Mythical examples, of course. There’s no system built in Ethereum that provides what you cite as an example. And all of the world’s real edtate records would probably easily fit into a non-optimized MySQL database (I’m not even talking about more powerful databases). Because there are at most a few hundred million such records. Even if there’s a billion, it’s nothing for a modern database (and would cripple any blockchain solution).
  - arisAlexis 8y ago
    of course there is not. and there was no HN when the internet started. Scalability is not the issue, verifiable secure immutable records are where no admin from a third world participating country can alter records as an example. If you forget the bias for a bit you may start to love the possibilities.
    - dmitriid 8y ago
      > of course there is not And yet you bring it up as an example of how well Ethereum might work. And claim “there are hundreds of other examples”. So what you claimed is false, and there are no other examples. And the avility of Ethereum to provide what you claim is yet to be proven (it was nearly crippled by a friggin kitties game which could fit in its entirety on a low-powered laptop eas it not for Ethereum/blockchain). > If you forget bias There’s no bias in calling out a lie
      - arisAlexis 8y ago
        there is nothing in the world that there are no examples of what are you talking about. examples are theorhetical.
AnthonyMouse 8y ago
> In other words, anything illegal. Not exactly. It's anything for which the legal system is not effective. For example, you can have a perfectly legal contract, but the other party is in a corrupt foreign jurisdiction that would never find in your favor in the event of a breach. Then you can't contract with them because they have no incentive not to breach, without an alternative method of ensuring compliance that doesn't rely on their corrupt government. You may also have jurisdictions (like the US) where the process may be more fair, but it's unreasonably expensive, so if you're transacting with parties with a high probability of getting into disputes, something that can resolve them programmatically without litigation is an advantage. Then there are the false positives. You're not a criminal, but you have bad credit or are from a disreputable country etc., so you're treated as one by the government or the rules targeting actual criminals cause companies to not want to do business with you, and you thereby need some alternative way to engage in your legitimate activities. What you're arguing is that a perfect system of government removes the need for any alternative. But we haven't got a perfect system of government.
- sharemywin 8y ago
  Or a system where you can't trust a central entity not to twist the rules slightly over time in their favor. Oh wait, that turns out to be most systems. Will blockchain fix it? doubt it. but a lot of people are trying.
- hn_throwaway_99 8y ago
  Still though, in this scenario, (and which is why I think smart contracts themselves are waaaaaaay oversold) is that most real-world contracts deal with real-world things: e.g. you will deliver a set of goods, at a specified level of quality, at a set time. But as the author points out so well (I really like his "Blockchain is not IOT" mantra) once you're dealing with real-world objects, you are relying on an oracle that you must trust.
  - AnthonyMouse 8y ago
    There is no question that there is excessive hype. But not being good for everything isn't the same as being good for nothing.
oarabbus_ 8y ago
>Guys, this works. It's literally how the world works. There were people saying the same thing as you before the wheel was invented, and in 1550, and 1800, and 1900, and 1910 (guys, horses shit on the streets and you occasionally contract dysentary. But overwhelmingly you can get from point A to B. Guys, horse-drawn carriages work. It's how the world works!) and 1950 and 1990 and... "This is how the world works" is not a valid rejection against using a _new_ technology.
- the_gastropod 8y ago
  Do you think 10 years after the wheel's invention, people were still unconvinced by it? Bitcoin has been out since 2008. Over a decade later, the only thing it's been useful for is for masking illegal activity, and speculating wildly. Just because something is new does not mean it's revolutionary. The Segway was in all likelihood a more revolutionary invention than blockchain will ever be.
  - oarabbus_ 8y ago
    The computer was invented in the 30s, and the internet in the 80s. People remained "pretty unconvinced" by those technologies for quite a bit longer than 10 years.
    - the_gastropod 8y ago
      Don't conflate "unconvinced" with "couldn't afford".
basch 8y ago
This seems like gatekeeping. I think blockchains will make great accounting systems for firms working together. Construction is a prime example. You can have 10 companies working together to maintain one book for a large project, and then eliminate the need to be audited. The technology can replace manual processes that happen after the data is placed in the database, to verify the data should have been entered. And just like many email clients and many email servers work together, in the future, companies accounting systems will work together, and create a single-triple transaction, instead of a double entry at EACH company. You can swap out accounting systems at any time, and still participate in the standardized distributed database. Blockchains can be used to reduce redundancy in accounting. Not all blockchains need proof-of-work and fault tolerance turned up to 100%. Sometimes you can have parties that sort-of trust each other, but none of them want one of the others owning the whole system.
- raiyu 8y ago
  Don't see how this happens. How do you verify the work? It works in a purely electric fashion which is what Bitcoin is but you still need someone to verify things in the real world. Audits exist so that third parties can verify the books. Literally in a blockchain you just put in whatever you want how did you verify that that is what happened in the real world?
  - basch 8y ago
    https://azure.microsoft.com/en-us/blog/announcing-microsoft-s-coco-framework-for-enterprise-blockchain-networks/ https://azure.microsoft.com/en-us/blog/announcing-microsoft-... the participants audit each other real time, one party cant cook its books, if youre all writing one shared book. both parties agreeing to work being done and pressing "this work was done" or a camera watching for the work being done, would be a prerequisite for the task being marked as complete in the system. things like enron/toshiba happen when companies are maintaining multiple sets of books, one they present to the public, and others hidden in private.
    - raiyu 8y ago
deleted 8y ago
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hash872 8y ago
Eh. While I basically agree with this in the context of rule of law, 1st world countries- I'm increasingly coming around to the idea that blockchain-based solutions could be better for developing countries where the legal system is vastly inferior. And I'm a longtime crypto skeptic. >can't use contracts and the legal system to ensure trust between the parties I.e. where the majority of the world's population resides, developing countries where (sorry) Corruption Rules Everything Around Me. Or there's an appeals system where cases drag out for decades (hello Brazil!) Or where the judges are simply not sophisticated enough to adjudicate complex financial contracts. I don't think crypto/blockchain solutions have a ton to offer the developed world, but there's an awful lot of humanity outside of those institutions. 'Our existing financial world is working just fine, thank you' is a very 1st world perspective. Kind of hilariously, a lot off the issues that crypto enthusiasts rail against (inflation, political central banks, etc.) are basically untrue for their own countries, but are true for others. I think a stablecoin pegged to the US dollar that's super-intuitive to use on mobile could achieve hockey stick growth in Latin America, Africa, parts of Asia, etc.
duxup 8y ago
The volume of business drops when you consider the use cases and the lack of trust between folks that blockchain represents ... they're just not likely gonna do legit business if the only thing to trust is blockchain.
14 8y ago
well if I had bitcoin and my government decided to declare our money or the current dollar in fashion worthless my bitcoin could still retain its value despite what the dollar is doing. To say the only use is something illegal is short sited in my opinion.
- pjc50 8y ago
  On the other hand, the worth of bitcoin in terms of actual goods and services fluctuates wildly for no reason at all. (The collapse of the dollar is the least likely financial crisis to worry about in the present day.)
naasking 8y ago
> Guys, this works. It's literally how the world works. There's no question that it works. The question that blockchain-like solutions seek to explore, is whether it works better than a technological solution which can eliminate most of the layers you describe. The world is deeply complex, more complex than any single human can understand. If operating in the world can be simplified to the point of being understandable by individuals, or if the size of the foundations you have to trust or rely on can be made significantly smaller, that could be worth it.
- Barrin92 8y ago
  But you're not making anything simpler. There is a reason we have lawyers and courts and insurers and whatever middle men are supposed to be cut out, and that is because contracts, and insurance and law are hard, and nobody wants to write 200 smart contracts a day where one mistake empties your wallet in unrecoverable ways. These institutions exist because division of labour and trusted institutions are a way to handle complexity and to pool risk. If my lawyer screws up or the court screws up there's an institution I can go to. If I make an error in my smart contract because I work eight hours a day and know nothing about contracts then I'm just royally screwed. You're not making things simpler by eliminating the institutions whose professional job it is to manage risk and trust and handing it back to everyone. That is why all systems are centralised to some degree, because it's how we manage complexity. That's also why not everyone forks the entire blockchain and piece by piece crypto transactions move onto managed exchanges, and it's why we all work in companies where people have property rights and hierarchies rather than just run around as individuals sub-contracting each other 50 times per day.
  - naasking 8y ago
    You assume too much. Our current systems evolved over millennia. Cryptocurrency is less than 10 years old. Nobody thinks the current state of the tech is what everyone will end up using, where you have to write your own smart contracts using an inscrutable smart contract programming language. Nevertheless, having an impartial, inherently trusted computing base is a promising foundation. What you then need on top is various forms of static analysis that make smart contracts scrutable by mere humans (and preferably writable by mere humans). That's how you collapse the complexities and largely eliminate the need for centralizing risk and analysis. Edit: it's like you're expecting people to do word processing using punch cards. That's where cryptocurrency tech is right now, and the more mature programming and UI/UX of today is where we should expect it to be in 10-20 years.
will_brown 8y ago
>Guys, this works. It's literally how the world works. How about corporate stock? You know how many third parties are involved with the markets and the added costs of those third parties? Even with a corporation with a stock ledger, stock trusts who own them, banks/brokers who handle all the buying/selling of stock...things don’t work. Take the Dole case where the corporation had almost double the number of stock issued as actually existed. Whereas every corporation could memorialize their stock on the Blockchain and each sale of stock would be completed via smart contract. Instant settlement, no stock trusts, no banks, no brokers...a peer to peer market. Stocks are a particular use case because unlike the authors examples of “real world counter parts” (supply chain, authorship, land registry) shares in a company can be represented entirely digitally allowing the peer to peer and trustless system (at least for purposes of transaction settlement).
- snowwrestler 8y ago
  The problem with Dole was that there was not one single central ledger of stock transactions that was being kept updated in real time. Would blockchain have solved that? It's centralized in that there is one ledger. But natively resolving and publishing transactions at high speed is not a feature of blockchains yet. A centrally managed ledger without distributed calculations would be way faster. Also worth noting that Dole was a weird enough case to be news-worthy, and that it was ultimately resolved. I think it takes more than a few edge cases to justify completely rebuilding the entire basis for a major part of the global financial ecosystem.
  - will_brown 8y ago
    >A centrally managed ledger without distributed calculations would be way faster. Right which will never occur in the current system because each middleman needs to justify their place to keep their piece of the pie. Like I said it’s a system with tons of middlemen (who don’t add value) who could be ripped out and replaced with Blockchain. Dole was “ultimately resolved” only after complex class action litigation that costs millions of dollars and resulted in the party who took dole private having to pay an extra ~$2.50 x ~36.8M shares. It’s clear from any public company that goes private this is a serious issue...Dole is not an edge case.
vackosar 8y ago
Recently two govs in South America traded via Bitcoin avoiding gold and international payment systems.
narrator 8y ago
There's one other situation, when there is a business where nobody trusts the brokers. The diamond industry is a good example. Where does a diamond come from? Sellers don't want to know when buying from shady brokers and obfuscating or altering the origin is extremely valuable and hard to detect, so brokers have huge incentives to cheat and thus the database can't be centralized.
- pnw_hazor 8y ago
  The international diamond market is run by opaque cartels and criminal governments that prop up a false market. Perfect for blockchain.
scoopitywoop 8y ago
> when you can't use contracts and the legal system to ensure trust between the parties what about transmitting value over the internet without relying on an external system? You know, like digital cash (but actually cash, not airline points that require a central actor to approve the transaction).
- pjc50 8y ago
  But to get to and from Actual Money, you have to go through a small number of non-trustworthy external systems.
ThomPete 8y ago
Or anything that's too expensive to involve the legal system which is an even bigger area of opportunity. As an example. 2nd-hand digital assets.
tchaffee 8y ago
Bitcoin is a good backup currency for travel. I tend to use my regular bank card, but I've been in situations where none of my bank cards work at the local ATM. I know the article is about blockchain in general. But I think it's worth pointing out a legal and good use case that might not be obvious to people who don't travel.
- jfk13 8y ago
  And how often do you find, when your cards don't work, that the local coffee shop, hotel, or train station accepts bitcoin?
  - tchaffee 8y ago
    All you need is one place willing to accept it and give you local cash. I also usually bring USD because there is usually someone in every country who wants that. But securing physical cash is a hassle and if Bitcoin became more widespread I'd stop bringing USD.
  - reidjs 8y ago
    There’s a bunch of bitcoin atms that have been popping up recently. The exchange rate is awful, though, I personally would never use one unless I absolutely had to.
black-tea 8y ago
If the government could be trust then a lot of our problems would be easier. Read the history of Zimbabwe (for example) and then consider again whether "a database and a contract" is a superior solution.
deleted 8y ago
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trevelyan 8y ago
You're making the mistake of thinking that blockchains are databases. Also of imagining that blockchain applications require smart contracts (you can run applications on a distributed network simply by affixing data to transactions, check out Saito for an example of how this is done). The blockchain is a self-sustaining PKI network. It eliminates MITM attacks and facilitates the use of PKI technology by making it trivial for nodes to read/write/verify information that is sent over the network. On the economic layer, the fact that it pays its own way eliminates the ability for network operators to create information-layer monopolies (i.e. App Store). If you think about blockchain as a database, you'll be stuck thinking about the use cases that involve a database. If you think about blockchain as smart contracts, you'll be stuck comparing them to real world contracts. Start thinking of decentralized app stores (which cannot impose constraints on the revenue models of their hosted apps) or advertising networks which let users put advertisements on any webpage. There are tons of reasons to pay a small fee to send information across a secure and tamper-proof network.
shrimpx 8y ago
That's not true. Pretty much everything you own is "yours" subject to various machinery that can be tampered with by the parties who control it. Blockchain can make ownership records unequivocal.
kabacha 8y ago
> In other words, anything illegal You're missing the point where blockchains are much more efficient and trustworthy than a court or government institution would be. It's pure math versus interpreted law and it's brilliant.
- deleted 8y ago
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kbumsik 8y ago
Mostly I agree with you but maybe you need to rephrase "illegal" as "out-of-legal".
Lucadg 8y ago
In theory disputes, customer care and all the work intensive tasks could be managed by the network itself: instead of paying an employee's you pay users to perform these tasks. There's a few projects proposing this. Not sure whether it will be efficient but it's certainly interesting.
fandango 8y ago
I'm not a blind supporter of blockchains, but your view is a gross simplification. Let's replace your words "the blockchain" with "privacy": "I've said this several times before on this site but will keep repeating it: there's exactly one use case where privacy is a superior (and, in fact, the only) solution: when you can't use contracts and the legal system to ensure trust between the parties. In other words, anything illegal". I like to be able to buy stuff from people anonymously. Not because it's an illegal transaction, but because it's nobody's fucking business what I buy. In this age of marketing and surveillance data mining, it's better to be safe than sorry. Also, what's legal now might become illegal in a future administration. Note that bitcoin or blockchains in general are not fully anonymous perse. Some are pseudo-anonymous (because addresses can still be linked to persons), some are almost 100% anonymous, such as Monero. See it as cash over the internet. Permissionless, tamperproof and private.

rhacker 8y ago

> Guys, this works. It's literally how the world works. That's a fairly generalized statement. So just because the world works in a certain way we shouldn't change it? Have you or anyone else noticed that the way the world works is massively in favor of anyone that has money? How many tenants got cheated out of $1000 deposit and didn't have legal knowledge or a support system to get the landlord to court? How many people got fees from Wells Fargo, Sprint, Comcast, PG&E, fuck even Etsy because they had power to pull from their accounts at any time? How many of them got everything back due to them? Fairly and morally? How many people that DON'T have a massive blogger platform, podcast and wherewithal to start an _effective_ campaign against a multi-national because they simply are not well spoken. They are still cheated by the big guy but no one cares because it's not retweeted by Ariana Grande. AKA your main point might hold up to 5 to 10% of disputes but hardly supports the notion that it "works". I think your statement should rather be "That's how the world currently operates" and that by no means rules out creating additional ways to operate in the world.

majani 8y ago

Funny thing is, there tends to be immense trust in the underworld because the consequence of betrayal is your life or limb.

spurgu 8y ago

> there's exactly one use case where the blockchain is a superior [- illegal transactions] To start off, the reason cryptocurrencies have survived this long is probably due to the fact that the dark web thrives on it. That said it's certainly not a reason to outlaw it. What about the situations where the legal system is questionable? Off hand I've read stories about a lot of poker players who've gotten cash confiscated when flying. What about [insert stories here]? How about a means to store (and transfer) value, where you can be certain - given your measures of security is sound - that no one but you (or multisig) can access it? If I store cash at home I can get robbed. If I own property it can be destroyed (loopholes in insurance policies, betrayal of other forms, military state). I remember the feeling I had a few years back when I had my own bitcoin in a paper "wallet" (actually a master seed with my personally devised cipher), protected by the (mental) measures of my choosing, it was mine. Yes, that caters well to illegal activities but likewise also empowers individual privacy, as well as removing any political, governmental or other influences. Power to the individual. It's not the monetary system's role to regulate how people behave in society, merely to facilitate transfer of value. If that transfer method can't be trusted alternatives will spring up. On that note if there are better people on the planet the methods of value transfer matters less. If there was more trust in financial institutions there would be less need for cryptocurrencies. On HN people advocate having backups of backups, but how do you backup your money in the bank? You're trusting them. Yes, drug lords exist and have existed in the past thanks to anonymous transactions, but... there is corruption in banking systems (offshore accounts) and whatever systems and we should/could question why there are drug lords in the world in the first place. They wouldn't have a place here if things were better organized. Either by more happy people (having less want/need for stimulants, given a bleak outlook on humanity), by giving the people the freedom to explore their minds more freely (psychedelics) or simply (as a step on the way) give the state the power to regulate as opposed to making everything illegal. I would expect more of HN than to have this as a top comment. Let's just ban cash altogether because the only thing it's useful for is enabling illegal transactions. Sigh. Quite a naive way of looking at things. What you're suggesting is doing what they're doing in China (and US and other countries as well) with the credit ratings of everyone without any chance of living a normal life unless you're subscribed to the system in place. Add hyper surveillance à la mega corps and no one can escape. Please keep the beacon lit for at least some of the measures in place to insure personal freedom.

AlunAlun 8y ago

You can repeat it all the times you want, but it it is still a shortsighted view. “A database and a contract”... but who owns the database? And who enforces the contract? And who owns the actual data? Blockchain provides satisfactory answers to all those problems. I agree 100% with the article in that blockchain is being ‘applied’ to a whole bunch of places that don’t need it. That doesn’t mean that it can’t work well in many other (legal!) scenarios.

pavel_lishin 8y ago
> Blockchain provides satisfactory answers to all those problems. Sort of: > who owns the database? Whoever has the most computational resources, in most implementations. > who enforces the contract? Depends on the contract. If I sell my house via a blockchain contract, a computer isn't going to come and evict me. If I sell you some heroin, or an action figure, or a rare in-game skin, it's still not going to help. > who owns the actual data? Nobody, and that's a problem when data needs to be removed.
- skilgarriff 8y ago
  To be fair, I think most people who have given blockchain an honest 30 minutes of brainstorming aren't arguing for real world assets connected to a chain. I would argue that there is potentially a use case when it comes to things that can be completely represented digitally e.g. money.
  - pavel_lishin 8y ago
    That I agree with. I've seen some pretty interesting proposals for on-chain games. But it still adds new problems. Electricity use, the irrecoverability of data/auth if you lose a key, the inability to erase problematic data.
    - skilgarriff 8y ago
      I'm not sure I'd necessarily call those problems - it's a weird definition I know, but perhaps tradeoffs? 1. On Electricity - It needs to be expensive to try to cheat or steal from the system. Currently with gold you would need to hire a private army to steal from and break into vaults - that's so expensive and crazy that I don't think most people are willing to undertake that risk. Currently I think electricity is the best way to make digital native things expensive. I'm not sold on anything else yet (definitely open to new solutions, but I'm not convinced think PoS is a viable one). 2-3. I think this is an interesting tradeoff. The way I look at it you pick 1 of 2. Either you trust someone or some people to return lost funds/remove "problematic" data or you trust the system in which case those things can never be recovered/removed. I think calling those "problems" might be premature as they could actually be "benefits" depending on how you look at them.

anovikov 8y ago

well the original idea was exactly that: subvert the government by making legal enforcement of (some) contracts redundant.

SilasX 8y ago

Really? You (seriously plan to resort to) go(ing) to court over every contractual dispute? Even $5? HN Bandwagon, Monday: "Don't you understand that courts exist to make it so no one can break a contract without penalty?" HN Bandwagon, Tuesday: "Lol don't go to court over $5, that's stupid."

nsxwolf 8y ago
Credit card companies have a good system for handling $5 disputes. They write them off.
- gammateam 8y ago
  So you mean a system could exist to lower costs for some parties?
  - gregschlom 8y ago
    While at the same time increasing the collective cost for everybody else? (ie: wasting energy).
    - skilgarriff 8y ago
      Is it wasting though? Do you consider vaults a waste? Do you consider 2-3% CC fees a waste? We already have costs built into the current system (e.g. cc fees to make up for fraud, security systems around protecting gold + cash). Electricity is just the cost of that specific system - I think calling it a waste is not necessarily justified.
      - Slartie 8y ago
        2-3% CC fees are a waste. But you don't need blockchains to fix that. You need someone to legislatively force the CC companies to stop playing the cashback bullshit game, which is the real cost driver (much more than fraud) as it funnels money from cash and debit card users to high-reward CC users, while burning a lot of it on the way for managing all of that overhead that is of no help at all when it comes to making financial transactions. It happens to be that the EU is such a "someone". In EU countries, CC interchange fees are limited to 0,3%, debit fees to 0,2%, effectively resulting in much cheaper rates to be paid by merchants (whether big or small) for card acceptance. Thoughtful legislation and an effective, fair and trusted executive branch, both with the necessary checks and balances, trump any blockchain, at least as long as we are talking about legal transactions.

skilgarriff 8y ago

Not necessarily for or against "blockchain" in any one specific use case, but I'm curious why you would define anything that can't use contracts and the legal system as "illegal". I can imagine that for many non-first world countries where people wouldn't trust things to the legal system or contracts - I wouldn't necessarily define those things as illegal.

dnautics 8y ago
Or even in the first world, where you don't want the expense, paperwork, time, of having to deal with the legal system.
- deleted 8y ago
  [deleted]

kolinko 8y ago

There are other legit reasons for not being able to use regular contracts and legal systems. For example, when you are dealing with multiple small transactions where a potential for fraud on the buyer side is significant. Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system. Or managing electronic assets (stocks etc) - blockchain significantly lowered a barrier for entry in those cases.

LiquidSky 8y ago
>For example, when you are dealing with multiple small transactions where a potential for fraud on the buyer side is significant. We already have systems that handle this issue well and have for decades. Why involve the blockchain? >Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system. >Or managing electronic assets (stocks etc) - blockchain significantly lowered a barrier for entry in those cases. But the barrier for entry is high in those use cases precisely to prevent exactly the kinds of abuse and problems we've seen in the crypto space. And the blockchain doesn't magically alleviate the obligation to obey laws and regulations. You could try to design a system that circumvents them, but then you're back to the parent's point about illegality.
sammycdubs 8y ago
> Also, if you want to build automated systems for money management, the barrier of entry will be significant in the legacy banking system. There are a lot of good reasons why there's a high barrier of entry to set up shop in the financial system. Trying to sidestep financial regulations through using cryptocurrency/blockchain is at least trying to actively exploit loopholes in the law, if not actually illegal.

thih9 8y ago

> In other words, anything illegal. It seems to me this could mean both: 1. Allowing illegal activity. (Eg when legal system can’t be used because the action in question is illegal). 2. Preventing illegal activity (Eg when legal system can’t be used because of difficulties to verify and/or execute).

MusaTheRedGuard 8y ago

First of all, no. Global, trustless coordination is a hard problem and is not necessarily illegal. Second, legality is subjective around the world. It is currently illegal in the US to gamble online, for some reason, even though casinos and lotteries are a thing. It is illegal in many countries to transfer a certain amount of money out of the country, for some reason. Certain sexualities are illegal in quite a few countries. Illegal != bad

gregschlom 8y ago
I'm not saying: you don't need the blockchain because you shouldn't be doing bad things. I'm saying: you need the blockchain if and only if you are doing things that are illegal in your country. It's a decision criteria for when you need the blockchain. I'm making no moral judgement. And there are very good reasons to want to do things that your government deems illegal (for example, donating to a political organization that has been blacklisted)
- skilgarriff 8y ago
  I can send 1 bitcoin from myself living in Minnesota to my friend living in Japan for the equivalent of $0.46. That's an improvement over the existing system. I don't have to trust anyone in between to get my money to him. How would that be as possible and as "trustless" without blockchain?
  - gregschlom 8y ago
    1. Regarding the fees: $0.46 is (I presume) only the transaction fees. To make an accurate comparison, you'd have to include the exchange fees to convert from USD to BTC and then from BTC to JPY. Right now Coinbase is charging me $59 to buy 1 BTC, and I don't know how much more it would be to sell exchange that back to JPY. You can send $4000 (about 1 BTC) to someone in Japan for $30.14 with TransferWise. And guess what? Last time I had to send money to my family in Europe, that's exactly what I did. 2. Regarding trust: > don't have to trust anyone in between to get my money to him. Yes you do. Both your friend and you need to trust your Bitcoin exchange. Which sometimes, cannot be trusted. Remember Mt Gox?

golergka 8y ago

That's exactly what I've been writing under every blockchain thread on HN for the last two years: the only real need that blockchain solves is buying drugs. It hasn't taken over US and Europe yet (I presume because of progress by the legalization movement), but in Russia and CIS, there are no drug dealers that you meet anymore: anything you buy, you buy anonymously, through Tor and Bitcoin, without ever meeting any real person. That's the only industry blockhain could disrupt, and it completely disrupted it. (I'm not sure about money laundering as I've never really know much about it).

pjc50 8y ago
That's interesting to know, I would have thought there was more physical organizaed crime there.
- golergka 8y ago
  There's none, police runs all of it.

ddebernardy 8y ago

Potentially legit use-case: electronic voting. In this scenario, you need to offer a number of guarantees. Chiefly: 1. Is my vote anonymous? (If not perfectly, owing to low level timestamps or transaction ids that can get cross-referenced with other data sources, at least for all practical intents?) 2. Can I be sure my vote got tallied the way I voted? 3. If I'd like to verify the result, is there a tamper-proof electronic paper trail that I can use to verify the result? It's a surprisingly hard problem in practice, and to the best my knowledge the most promising venue to guarantee 2 and 3 without compromising 1 might be a blockchain-like distributed ledger. (You can solve 2 and 3 by using a git-like hash tree and letting the voter know their commit hash. But in doing so you're basically dropping 1 and inviting vote selling.)

lmm 8y ago
Electronic voting wants an append-only/log-structured distributed database, but the certifiers can't be anonymous (otherwise anyone can just run a "polling station" and submit whatever "votes" they want). You'd want votes to be signed according to some centralised PKI infrastructure. And at that point there's no need for "mining" and what you have isn't blockchain.
greglindahl 8y ago
You don't "need" to offer these guarantees. Personally, I'm happy with paper ballots.
- ddebernardy 8y ago
  Me too. In large part because paper ballots offer these guarantees. But there's a swath of elections and voting going on (in universities, within political parties or unions, etc., but also official elections in parts of the US or in Estonia) that that use e-voting to cut costs or improve participation. They currently lack these guarantees yet those elected end up in charge of millions in budget.
  - pbhjpbhj 8y ago
    Picking on one point here: In your electoral system is there a way to verify your vote was counted. Like a stamped voting slip? I've thought that a good way in an electronic system would be to give you a vote code (maybe a single letter), and a verification code. You'd enter the verification code, the screen would show all candidates/voting options with a "vote code" and you'd verify by finding your vote code matched. The vote code prevents coercion. Such system doesn't show your vote is included in the result, but shows the system has record of the vote you cast.

aboodman 8y ago

> a database and a contract between parties are a superior solution. Do you believe that this is a permanent state, or a temporary one? Is there a potential blockchain-like thing that could exist which would be better than a database and a contract? Because to me, the current system leaves room for improvement: - resolving conflicts across jurisdictions is extremely expensive - resolving conflicts even within one jurisdiction is more expensive than many transactions are worth Current blockchains are expensive and slow, but I think that we will see improvements over time which will eventually make blockchains (or something blockchain-like) look like appealing solutions.

pjc50 8y ago
The blockchain doesn't resolve disputes, it rules them out of scope. The response from blockchain advocates to vendor fraud is "caveat emptor". The dispute is still there.
- aboodman 8y ago
  I'm not sure I completely follow you, but there's nothing preventing a party from making use of the legal system or contracts or whatever in addition to a blockchain. I still think that making some common classes of dispute impossible is highly valuable.
  - pjc50 8y ago
    Which classes of dispute does blockchain make impossible? It can attest that a key signed a particular transaction, but that doesn't necessarily mean it was done by or intended by the owner. General purpose computer security just isn't quite good enough for that, that's why smartcards and secure enclaves exists.
    - deleted 8y ago
      [deleted]
SpicyLemonZest 8y ago
If I say "you owe me $1000", and my Brazilian client says "no I don't", the current system offers a very speedy and cost-free resolution to that. We just have to do nothing, and the dispute will be resolved by default in favor of the client. I can imagine a blockchain-like thing that would be able to shift the default action, so that I get $1000 or maybe each of us gets $500. I can't imagine a blockchain-like thing that could, without an oracle both of us trust, actually reach into the real world and arbitrate the dispute. (If there is an oracle both of us trust, there's no need for a blockchain; the $1000 can just go directly into escrow with that oracle before I start working.)

BjoernKW 8y ago

> For any other conceivable use case, a database and a contract between parties are a superior solution. Only if that contract is reasonably enforceable and all parties involved trust the party that controls the database - if there's such a single party controlling the database at all. The most compelling use case in terms of supply chain management doesn't necessarily involve storing data from sensors or other IoT devices. It's doing away with the paperwork (customs documents, bills of lading, for example) involved in shipping physical goods and the friction it causes: https://www.maersk.com/en/news/2018/06/29/maersk-and-ibm-introduce-tradelens-blockchain-shipping-solution https://www.maersk.com/en/news/2018/06/29/maersk-and-ibm-int... I'm not sure if this is still the case but some time ago I read about an example where the paperwork involved in shipping a 20 ft container from Shanghai to Rotterdam was more expensive than the actual physical shipment of the container. A blockchain solution could potentially help with reducing that cost. A simpler, database-based solution of course could do, too. However, there are numerous parties involved in the process not all of whom necessarily trust each other. A blockchain-based infrastructure could provide a common protocol everyone can agree on.

yahyaheee 8y ago

Yep, you could go as far as to argue that criminalization of drugs is a major contributor to global warming.

shepardrtc 8y ago

> For any other conceivable use case, a database and a contract between parties are a superior solution. Except when banks are transferring money across borders. In order to have trust, they currently need what's called nostro and vostro accounts. Meaning, Bank A parks money in Bank B, and Bank B parks money in Bank A. So that if a transfer is fraudulent, there will be money to cover it. How is that better than blockchain?

twic 8y ago
It's better because you just described the entire mechanism in forty-four words.

josaka 8y ago

My sense is the set of scenarios where "you can't use contracts and the legal system to ensure trust between the parties" is broader than just illegal agreements. Contract often fail when the damages for breach are too small, diffuse, and heterogeneous, making class action unsuitable. And many contract provisions are often not honored in bankruptcy. Litigation is an unwieldy tool and preferably avoided where possible.

dragontamer 8y ago
But that's where small-claims court comes in. It mostly only costs you your time, you aren't really allowed to bring in a lawyer to argue on your behalf, etc. etc. Depending on your location, the MAXIMUM damages for small-claims court is $5000 to $10,000. The whole system is designed so that smaller issues can be resolved quickly. > And many contract provisions are often not honored in bankruptcy That's literally the point of bankruptcy. The courts say "X has paid enough to its debtors and no longer needs to pay any more". You can't squeeze blood out of a stone. If the defendant doesn't have any money left, it doesn't make sense to sue them. > Litigation is an unwieldy tool and preferably avoided where possible. How does Blockchain stop litigation? * If your Ethereum smart-contract says you owe your Car (or House) to somebody, but you don't give it to them... they'll be forced to go through the court system anyway to force you to give them the promised goods. * If you fraudulently reported to the smart-contract the temperature of goods or... otherwise tricked the sensors on "smart contract temperature sensors", you have to be taken to court. * If you put 20 BTC into an exchange (in promise for 550 ETH or whatever), but the exchange goes bankrupt... you lose both your BTC and your ETH. You have to go through the courts to try to get your money back.
- Swenrekcah 8y ago
  Unfortunately not every country has a small claims system. Also, I’m not entirely sure how etherum contracts work but if using them means money is transferred automatically upon objectivly measured completion, then I would very much like that even if I did have access to a small claims court.
  - 8y ago

sonnyblarney 8y ago

It is good to remind people of the nature of legal enforcement which will essentially be required in such cases, but 'illegal stuff' is definitely not the only use case. For example - banks could feasibly use blockchain for clearing trades. Right now there is a 'single point of trust' for such things which even financial institutions want to break out of. Blockchain could theoretically enable distributed exchanges. The 'rule of law' is still essential in that context, but blockchain could work there. This is only one example of 'regular real world use'. FYI / caveat: the 'hardest part' about getting these more distributed systems going is getting large financial entities to agree on the nature of the exchange, and hammering out of the real world details. At that point, blockchain becomes a secondary and not necessarily essential component.

yarrel 8y ago

Anyone treating a blockchain as a database is already off to a bad start. It's at best a prunable transaction log. Sure, you can use a blockchain to construct a database, but even the Nakamoto whitepaper talks about discarding old transactions. There exist many cases in which something is not illegal but is inefficient, unjust, lacks sufficient trust to reach a contract or lacks sufficient incentives to comply with a contract. There exist many other cases in which people cannot afford to hire a lawyer to enforce a contract, or cannot afford to hire as many lawyers of as high a calibre as the other party. So presenting blockchains as a) databases that are b) only good for illegal activity is doubly incorrect. There are also many bad and unnecessary uses of databases and contracts...

vpmpaul 8y ago

> It's literally how the world works. So the world works perfectly in your opinion? The good thing about blockchain is it lowers the cost bar for crazy expensive business legalize. It of course needs more work but a proper smart contract setup placed in front of a judge leaves little need for a dozen lawyers and business consultants to see the intent of the contract. The main issue is that the current very expensive and inefficient setup benefits middle men that produce very little value. Transitioning away from that will eventually happen and that will be the reason blockchain and smart contracts explode in value and usefulness.

oarabbus_ 8y ago
>lowers the cost bar for crazy expensive business legalize Just an FYI, from the context of the next sentence I believe you mean "legalese". "Legalese" is convoluted legal jargon; "legalize" is a verb meaning to make something legal.
greglindahl 8y ago
How do I get the concept of "I'm buying stuff and it has to be fit for purpose" into a smart contract?
notahacker 8y ago
Except, of course, that as the article points out, the courts provide virtually all the value in preventing clients from cheating the auditing systems, or ensuring that a correctly delivered package actually has contents fit for purpose. And if your contract is only the code, you've got a big problem in making your case that tampering with the oracle or sending an empty box is an act of bad faith on the other party's part, and much more expensive lawyers to interpret it...

arisAlexis 8y ago

your vision is extremely short-sighted bordering resistance to change. With Ethereum you can build systems that are intra-national and connect for example all the real-estate records globally which cannot be done with a MySQL system. There are hundreds other examples

dmitriid 8y ago
Mythical examples, of course. There’s no system built in Ethereum that provides what you cite as an example. And all of the world’s real edtate records would probably easily fit into a non-optimized MySQL database (I’m not even talking about more powerful databases). Because there are at most a few hundred million such records. Even if there’s a billion, it’s nothing for a modern database (and would cripple any blockchain solution).
- arisAlexis 8y ago
  of course there is not. and there was no HN when the internet started. Scalability is not the issue, verifiable secure immutable records are where no admin from a third world participating country can alter records as an example. If you forget the bias for a bit you may start to love the possibilities.
  - dmitriid 8y ago
    > of course there is not And yet you bring it up as an example of how well Ethereum might work. And claim “there are hundreds of other examples”. So what you claimed is false, and there are no other examples. And the avility of Ethereum to provide what you claim is yet to be proven (it was nearly crippled by a friggin kitties game which could fit in its entirety on a low-powered laptop eas it not for Ethereum/blockchain). > If you forget bias There’s no bias in calling out a lie
    - arisAlexis 8y ago
      there is nothing in the world that there are no examples of what are you talking about. examples are theorhetical.

AnthonyMouse 8y ago

> In other words, anything illegal. Not exactly. It's anything for which the legal system is not effective. For example, you can have a perfectly legal contract, but the other party is in a corrupt foreign jurisdiction that would never find in your favor in the event of a breach. Then you can't contract with them because they have no incentive not to breach, without an alternative method of ensuring compliance that doesn't rely on their corrupt government. You may also have jurisdictions (like the US) where the process may be more fair, but it's unreasonably expensive, so if you're transacting with parties with a high probability of getting into disputes, something that can resolve them programmatically without litigation is an advantage. Then there are the false positives. You're not a criminal, but you have bad credit or are from a disreputable country etc., so you're treated as one by the government or the rules targeting actual criminals cause companies to not want to do business with you, and you thereby need some alternative way to engage in your legitimate activities. What you're arguing is that a perfect system of government removes the need for any alternative. But we haven't got a perfect system of government.

sharemywin 8y ago
Or a system where you can't trust a central entity not to twist the rules slightly over time in their favor. Oh wait, that turns out to be most systems. Will blockchain fix it? doubt it. but a lot of people are trying.
hn_throwaway_99 8y ago
Still though, in this scenario, (and which is why I think smart contracts themselves are waaaaaaay oversold) is that most real-world contracts deal with real-world things: e.g. you will deliver a set of goods, at a specified level of quality, at a set time. But as the author points out so well (I really like his "Blockchain is not IOT" mantra) once you're dealing with real-world objects, you are relying on an oracle that you must trust.
- AnthonyMouse 8y ago
  There is no question that there is excessive hype. But not being good for everything isn't the same as being good for nothing.

oarabbus_ 8y ago

>Guys, this works. It's literally how the world works. There were people saying the same thing as you before the wheel was invented, and in 1550, and 1800, and 1900, and 1910 (guys, horses shit on the streets and you occasionally contract dysentary. But overwhelmingly you can get from point A to B. Guys, horse-drawn carriages work. It's how the world works!) and 1950 and 1990 and... "This is how the world works" is not a valid rejection against using a _new_ technology.

the_gastropod 8y ago
Do you think 10 years after the wheel's invention, people were still unconvinced by it? Bitcoin has been out since 2008. Over a decade later, the only thing it's been useful for is for masking illegal activity, and speculating wildly. Just because something is new does not mean it's revolutionary. The Segway was in all likelihood a more revolutionary invention than blockchain will ever be.
- oarabbus_ 8y ago
  The computer was invented in the 30s, and the internet in the 80s. People remained "pretty unconvinced" by those technologies for quite a bit longer than 10 years.
  - the_gastropod 8y ago
    Don't conflate "unconvinced" with "couldn't afford".

basch 8y ago

This seems like gatekeeping. I think blockchains will make great accounting systems for firms working together. Construction is a prime example. You can have 10 companies working together to maintain one book for a large project, and then eliminate the need to be audited. The technology can replace manual processes that happen after the data is placed in the database, to verify the data should have been entered. And just like many email clients and many email servers work together, in the future, companies accounting systems will work together, and create a single-triple transaction, instead of a double entry at EACH company. You can swap out accounting systems at any time, and still participate in the standardized distributed database. Blockchains can be used to reduce redundancy in accounting. Not all blockchains need proof-of-work and fault tolerance turned up to 100%. Sometimes you can have parties that sort-of trust each other, but none of them want one of the others owning the whole system.

raiyu 8y ago
Don't see how this happens. How do you verify the work? It works in a purely electric fashion which is what Bitcoin is but you still need someone to verify things in the real world. Audits exist so that third parties can verify the books. Literally in a blockchain you just put in whatever you want how did you verify that that is what happened in the real world?
- basch 8y ago
  https://azure.microsoft.com/en-us/blog/announcing-microsoft-s-coco-framework-for-enterprise-blockchain-networks/ https://azure.microsoft.com/en-us/blog/announcing-microsoft-... the participants audit each other real time, one party cant cook its books, if youre all writing one shared book. both parties agreeing to work being done and pressing "this work was done" or a camera watching for the work being done, would be a prerequisite for the task being marked as complete in the system. things like enron/toshiba happen when companies are maintaining multiple sets of books, one they present to the public, and others hidden in private.
  - raiyu 8y ago

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hash872 8y ago

Eh. While I basically agree with this in the context of rule of law, 1st world countries- I'm increasingly coming around to the idea that blockchain-based solutions could be better for developing countries where the legal system is vastly inferior. And I'm a longtime crypto skeptic. >can't use contracts and the legal system to ensure trust between the parties I.e. where the majority of the world's population resides, developing countries where (sorry) Corruption Rules Everything Around Me. Or there's an appeals system where cases drag out for decades (hello Brazil!) Or where the judges are simply not sophisticated enough to adjudicate complex financial contracts. I don't think crypto/blockchain solutions have a ton to offer the developed world, but there's an awful lot of humanity outside of those institutions. 'Our existing financial world is working just fine, thank you' is a very 1st world perspective. Kind of hilariously, a lot off the issues that crypto enthusiasts rail against (inflation, political central banks, etc.) are basically untrue for their own countries, but are true for others. I think a stablecoin pegged to the US dollar that's super-intuitive to use on mobile could achieve hockey stick growth in Latin America, Africa, parts of Asia, etc.

duxup 8y ago

The volume of business drops when you consider the use cases and the lack of trust between folks that blockchain represents ... they're just not likely gonna do legit business if the only thing to trust is blockchain.

14 8y ago

well if I had bitcoin and my government decided to declare our money or the current dollar in fashion worthless my bitcoin could still retain its value despite what the dollar is doing. To say the only use is something illegal is short sited in my opinion.

pjc50 8y ago
On the other hand, the worth of bitcoin in terms of actual goods and services fluctuates wildly for no reason at all. (The collapse of the dollar is the least likely financial crisis to worry about in the present day.)

naasking 8y ago

> Guys, this works. It's literally how the world works. There's no question that it works. The question that blockchain-like solutions seek to explore, is whether it works better than a technological solution which can eliminate most of the layers you describe. The world is deeply complex, more complex than any single human can understand. If operating in the world can be simplified to the point of being understandable by individuals, or if the size of the foundations you have to trust or rely on can be made significantly smaller, that could be worth it.

Barrin92 8y ago
But you're not making anything simpler. There is a reason we have lawyers and courts and insurers and whatever middle men are supposed to be cut out, and that is because contracts, and insurance and law are hard, and nobody wants to write 200 smart contracts a day where one mistake empties your wallet in unrecoverable ways. These institutions exist because division of labour and trusted institutions are a way to handle complexity and to pool risk. If my lawyer screws up or the court screws up there's an institution I can go to. If I make an error in my smart contract because I work eight hours a day and know nothing about contracts then I'm just royally screwed. You're not making things simpler by eliminating the institutions whose professional job it is to manage risk and trust and handing it back to everyone. That is why all systems are centralised to some degree, because it's how we manage complexity. That's also why not everyone forks the entire blockchain and piece by piece crypto transactions move onto managed exchanges, and it's why we all work in companies where people have property rights and hierarchies rather than just run around as individuals sub-contracting each other 50 times per day.
- naasking 8y ago
  You assume too much. Our current systems evolved over millennia. Cryptocurrency is less than 10 years old. Nobody thinks the current state of the tech is what everyone will end up using, where you have to write your own smart contracts using an inscrutable smart contract programming language. Nevertheless, having an impartial, inherently trusted computing base is a promising foundation. What you then need on top is various forms of static analysis that make smart contracts scrutable by mere humans (and preferably writable by mere humans). That's how you collapse the complexities and largely eliminate the need for centralizing risk and analysis. Edit: it's like you're expecting people to do word processing using punch cards. That's where cryptocurrency tech is right now, and the more mature programming and UI/UX of today is where we should expect it to be in 10-20 years.

will_brown 8y ago

>Guys, this works. It's literally how the world works. How about corporate stock? You know how many third parties are involved with the markets and the added costs of those third parties? Even with a corporation with a stock ledger, stock trusts who own them, banks/brokers who handle all the buying/selling of stock...things don’t work. Take the Dole case where the corporation had almost double the number of stock issued as actually existed. Whereas every corporation could memorialize their stock on the Blockchain and each sale of stock would be completed via smart contract. Instant settlement, no stock trusts, no banks, no brokers...a peer to peer market. Stocks are a particular use case because unlike the authors examples of “real world counter parts” (supply chain, authorship, land registry) shares in a company can be represented entirely digitally allowing the peer to peer and trustless system (at least for purposes of transaction settlement).

snowwrestler 8y ago
The problem with Dole was that there was not one single central ledger of stock transactions that was being kept updated in real time. Would blockchain have solved that? It's centralized in that there is one ledger. But natively resolving and publishing transactions at high speed is not a feature of blockchains yet. A centrally managed ledger without distributed calculations would be way faster. Also worth noting that Dole was a weird enough case to be news-worthy, and that it was ultimately resolved. I think it takes more than a few edge cases to justify completely rebuilding the entire basis for a major part of the global financial ecosystem.
- will_brown 8y ago
  >A centrally managed ledger without distributed calculations would be way faster. Right which will never occur in the current system because each middleman needs to justify their place to keep their piece of the pie. Like I said it’s a system with tons of middlemen (who don’t add value) who could be ripped out and replaced with Blockchain. Dole was “ultimately resolved” only after complex class action litigation that costs millions of dollars and resulted in the party who took dole private having to pay an extra ~$2.50 x ~36.8M shares. It’s clear from any public company that goes private this is a serious issue...Dole is not an edge case.

vackosar 8y ago

Recently two govs in South America traded via Bitcoin avoiding gold and international payment systems.

narrator 8y ago

There's one other situation, when there is a business where nobody trusts the brokers. The diamond industry is a good example. Where does a diamond come from? Sellers don't want to know when buying from shady brokers and obfuscating or altering the origin is extremely valuable and hard to detect, so brokers have huge incentives to cheat and thus the database can't be centralized.

pnw_hazor 8y ago
The international diamond market is run by opaque cartels and criminal governments that prop up a false market. Perfect for blockchain.

scoopitywoop 8y ago

> when you can't use contracts and the legal system to ensure trust between the parties what about transmitting value over the internet without relying on an external system? You know, like digital cash (but actually cash, not airline points that require a central actor to approve the transaction).

pjc50 8y ago
But to get to and from Actual Money, you have to go through a small number of non-trustworthy external systems.

ThomPete 8y ago

Or anything that's too expensive to involve the legal system which is an even bigger area of opportunity. As an example. 2nd-hand digital assets.

tchaffee 8y ago

Bitcoin is a good backup currency for travel. I tend to use my regular bank card, but I've been in situations where none of my bank cards work at the local ATM. I know the article is about blockchain in general. But I think it's worth pointing out a legal and good use case that might not be obvious to people who don't travel.

jfk13 8y ago
And how often do you find, when your cards don't work, that the local coffee shop, hotel, or train station accepts bitcoin?
- tchaffee 8y ago
  All you need is one place willing to accept it and give you local cash. I also usually bring USD because there is usually someone in every country who wants that. But securing physical cash is a hassle and if Bitcoin became more widespread I'd stop bringing USD.
- reidjs 8y ago
  There’s a bunch of bitcoin atms that have been popping up recently. The exchange rate is awful, though, I personally would never use one unless I absolutely had to.

black-tea 8y ago

If the government could be trust then a lot of our problems would be easier. Read the history of Zimbabwe (for example) and then consider again whether "a database and a contract" is a superior solution.

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trevelyan 8y ago

You're making the mistake of thinking that blockchains are databases. Also of imagining that blockchain applications require smart contracts (you can run applications on a distributed network simply by affixing data to transactions, check out Saito for an example of how this is done). The blockchain is a self-sustaining PKI network. It eliminates MITM attacks and facilitates the use of PKI technology by making it trivial for nodes to read/write/verify information that is sent over the network. On the economic layer, the fact that it pays its own way eliminates the ability for network operators to create information-layer monopolies (i.e. App Store). If you think about blockchain as a database, you'll be stuck thinking about the use cases that involve a database. If you think about blockchain as smart contracts, you'll be stuck comparing them to real world contracts. Start thinking of decentralized app stores (which cannot impose constraints on the revenue models of their hosted apps) or advertising networks which let users put advertisements on any webpage. There are tons of reasons to pay a small fee to send information across a secure and tamper-proof network.

shrimpx 8y ago

That's not true. Pretty much everything you own is "yours" subject to various machinery that can be tampered with by the parties who control it. Blockchain can make ownership records unequivocal.

kabacha 8y ago

> In other words, anything illegal You're missing the point where blockchains are much more efficient and trustworthy than a court or government institution would be. It's pure math versus interpreted law and it's brilliant.

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kbumsik 8y ago

Mostly I agree with you but maybe you need to rephrase "illegal" as "out-of-legal".

Lucadg 8y ago

In theory disputes, customer care and all the work intensive tasks could be managed by the network itself: instead of paying an employee's you pay users to perform these tasks. There's a few projects proposing this. Not sure whether it will be efficient but it's certainly interesting.

fandango 8y ago

I'm not a blind supporter of blockchains, but your view is a gross simplification. Let's replace your words "the blockchain" with "privacy": "I've said this several times before on this site but will keep repeating it: there's exactly one use case where privacy is a superior (and, in fact, the only) solution: when you can't use contracts and the legal system to ensure trust between the parties. In other words, anything illegal". I like to be able to buy stuff from people anonymously. Not because it's an illegal transaction, but because it's nobody's fucking business what I buy. In this age of marketing and surveillance data mining, it's better to be safe than sorry. Also, what's legal now might become illegal in a future administration. Note that bitcoin or blockchains in general are not fully anonymous perse. Some are pseudo-anonymous (because addresses can still be linked to persons), some are almost 100% anonymous, such as Monero. See it as cash over the internet. Permissionless, tamperproof and private.