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There’s literally nothing in this article that you couldn’t replace “token” or “coin” with “contract” or “membership” and have it work exactly the same. The

There’s literally nothing in this article that you couldn’t replace “token” or “coin” with “contract” or “membership” and have it work exactly the same. The idea of selling contracts against future income is interesting but putting the blockchain here is yet another solution in search of a problem.

seibelj 6y ago
It’s protocol-ized finance. Sure you can do it all old school, but that takes a ton of effort and makes your situation a unique snowflake. If you do it the way everyone has agreed on with tokens, all of your tokens plug into the existing infrastructure, is standardized, and makes the cost of capital go down. Why people continually can’t understand this, and keep saying “buh buh buh mysql and lawyer fees! No need for blockchain!” is a failure of imagination.
- bradleyjg 6y ago
  Standardized contracts trade all day every day on exchanges all over the world. That’s how everyone doing legitimate business has agreed to do it. That’s where the existing infrastructure is. That’s where serious capital is. Tokens, on the other hand, are the favorite tool of scammers.
  - natchy 6y ago
    How is a large insurance company refusing to pay on a legitimate claim any less of a scam? I don’t think cryptocurrency is near mature enough to replace traditional contracts, but technology changes a lot in 5-10 years.
- PragmaticPulp 6y ago
  > Sure you can do it all old school, but that takes a ton of effort and makes your situation a unique snowflake. Many of the situations required in this article still require real-world contracts to make them work. The crypto tokens are additive on top of the contracts, but they don't replace contracts. Someone could sell you an NFT that represents 15% of their future earnings over the next 3 years, but the blockchain can't enforce that. Even if we had all payments occurring on the blockchain, the person could simply create a new blockchain wallet and give their new address to future employers, claiming $0 earnings for their original blockchain address. The NFT itself is only valuable if supported by the weight of real contracts in the real world with real enforceability. Crypto tokens only stand alone when the crypto token itself is being traded. Actual value still requires consensus that the token is worth something (Bitcoin, Ethereum) or a real-world contract that stipulates that whoever holds the token has a claim to some actual rights or asset. It's likely that most of the real-world contracts for something of actual value have stipulations that the crypto tokens are null and void if determined to be lost or stolen. The crypto tokens are largely a distraction.
  - athrowaway3z 6y ago
    I think this entire idea is insane, but that's not the argument. >Many of the situations required in this article still require real-world contracts to make them work. The crypto tokens are additive on top of the contracts, but they don't replace contracts. There is no duality of 'real-world contract'/'digital contracts'. The question is if a digital document and signatures are accepted by a judicial system. In 50 years every judicial system will accept some format of digital contracts. The potential upside of 'tokenized' and standardized/automated legal documents are: less ambiguous interpretations, automatic resolution, simpler trading, and easier cross-border contracts ( to some extent ). All of this is possible by human hands, but legal systems are not known for their digital innovation. ( They don't even use standard 'diffs' to negotiate contracts )
    - bradleyjg 6y ago
      > The potential upside of 'tokenized' and standardized/automated legal documents are: less ambiguous interpretations, automatic resolution, simpler trading, and easier cross-border contracts ( to some extent ). This all requires contracts as code capable of ascertaining external facts. As far as I know the only such facts that have been made to work are facts about the prices of other cryptocoins. Furthermore, most of the benefits can already be obtained by registering a contract to be traded over a commodities exchange. There are, for example, weather futures being bought, sold, and adjudicated without any need or use for a blockchain.
      - jkhdigital 6y ago
        > This all requires contracts as code capable of ascertaining external facts Do meatspace contracts ascertain external facts? No, a court of law does. For most things that will likely never change. But if the contract is of a fungible nature, then allowing it to exist on a blockchain means ownership can be traded with no additional infrastructure required. This is why I prefer to call blockchain “market-as-a-service”...
        bradleyjg 6y ago
danans 6y ago
> The idea of selling contracts against future income is interesting Isn't that also basically what any interest bearing loan/mortgage is?
- bradleyjg 6y ago
  No, those are personal debts (in one case secured). There’s been on and off again interest for as long as I can remember about creating personal equity interests (i.e. the payout depends on how much the person earns). Now with blockchain(tm).
  - danans 6y ago
    I agree that there is a difference in the collateral involved, but the collateral mostly functions as a risk adjuster (which is why mortgage rates are on average lower than personal loan rates: if a borrower defaults, the house can be sold to recover part of the principal). At the end of the day, a mortgage is a contract that allows the borrower to purchase a home in exchange for a share of their future income, paid as interest on the loan. Personal loans also already exist today. The primary difference in the scheme in the article is that it is blockchain-based, instead of bank-based, and the trust establishment mechanism between borrower and lender is based on personal marketing, not credit agencies. Perhaps a bigger factor is that if the currency in which such a loan is offered is deflationary in the BTC style, it is a disadvantage to the borrower who will see the cost of their loan escalate over time, so this should be accounted for by lowering the interest rate.
    - bradleyjg 6y ago
      The difference isn’t the collateral, a personal loan like a credit card is unsecured. It’s how you calculate the payment. In a loan it doesn’t matter how much money I make, I owe what I owe. In the proposed equity arrangement I owe a percentage of my income. If I don’t make anything, I don’t owe anything. If I’m the next Musk, I owe billions.
      - danans 6y ago
bsanr2 6y ago
Putting the contract on the blockchain allows it to be traded like, but not as, a security while the SEC et al. drag their feet on classifying crypto-tokens as securities. Something like that.
- joosters 6y ago
  So it's a way to dodge the law? (while ruining the environment, of course)
  - meowkit 6y ago
    No. What law is being dodged here? Again, no. Brute force Nakamoto consensus is bad for the environment, but lumping all crypto into that bucket is ignorant/intellectually dishonest.
    - deleted 6y ago
      [deleted]
    - jkhdigital 6y ago
      Proof of work uses a lot of energy. There are a few steps between that and “bad for the environment”, and you probably also need to explain why any other economic activity which uses a lot of energy is not also bad for the environment. All human production processes use energy, and therefore all economic activity is “bad for the environment” in the exact proportion of its energy use.
  - bsanr2 6y ago
    It's a way to engage in activity that is superficially distinct enough that the law has not yet caught up with it, like driving for Uber or owning an AirBNB. It remains to be seen if the "innovation" in question is tangential to the main purpose (skirting an existing activity whose lawful bounds are already well-defined), or if it isn't, and the tech is instead truly transformative. You may think you know, but nothing really matters until a court, regulatory body, or legislature weighs in. Also Proof of Stake.
tjs8rj 6y ago
I’m usually in total agreement about blockchain just being stuffed anywhere, but observationally, there must be a good reason why blockchain shows up in these situations so often. There’s definitely the hype factor, but blockchain does have value in that it’s reasonably trusted by average people (perhaps unlike signing a contract everytime you wanted to purchase a piece of a creator - coins gamify it), and it’s easy to setup trust systems - Alex setup his own token in a weekend for a “human IPO”, rather than running through the cost and time of properly setting it up with a lawyer and contracts. Maybe blockchain’s biggest value proposition right now is that it’s lightly regulated and has hype, so using it greases the wheels when growing an audience or building a usually regulated product.
- prox 6y ago
  Author mentions the ponzi scheme, and quite right. As long as the general trust is there and the investments are on the up and up you’re fine. But the insidiousness is once you’re in, you’re in. Once you bought 4000 Tupperware to resell (insert any pyramid scheme here) , you can’t find fault in it, and when it crashes you’re burned. I don’t want to bash blockchain, there might be interesting use cases, but I haven’t seen it yet in it’s current implementations.
  - VRay 6y ago
    It's sort of useful for sending money to Asia without losing 1.5 to 5% on transaction fees, but that doesn't involve actually investing in it
    - Kbelicius 6y ago
      Meh, one probably loses more by converting from fiat to crypto and back then on transaction fees for sending fiat directly.
- pavel_lishin 6y ago
  > blockchain does have value in that it’s reasonably trusted by average people I don't think you and I would agree on what constitutes "average people". > it’s easy to setup trust systems - Alex setup his own token in a weekend for a “human IPO”, rather than running through the cost and time of properly setting it up with a lawyer and contracts. Easy to set up, but how easy it is it to enforce?
mooreds 6y ago
I get the point of the shocking title. But what he describes, hedging risk, is not a new concept. It is something that people do every day when they diversify investments or buy insurance. ISAs and "person as tokens" just push this to new levels. > In such a scenario, every career becomes a pyramid scheme. In other words, the rich get richer--scalability works. One thing the author left out (or that I missed) is that scalability increases overall wealth. If I have to learn calculus from an average teacher because of geographic limitations, and then my child gets to learn from the best calculus teacher in the world, in the latter case the world gets richer because the same knowledge is arrived at quicker at less expense. (Of course, there's fallout for the average worker, but this is something we've been dealing with in the developed world for decades and still haven't figured out.)
forrestthewoods 6y ago
You’re 100% correct. Which is also why I found the article thought provoking! Blockchain isn’t magic. It can’t do very much “new”. But if it can take something old (contract) and make that more accessible to more potential contract buyers/sellers, then that’s actually interesting. Technology that makes slow complicated things fast and easy can have a lot of impact. I won’t be selling shares of myself nor buying shares of others. But this we’re close to the point where blockchain actually provides real value beyond tulip speculation.
AlexCoventry 6y ago
Maybe ask Masmej why he chose to use an ethereum token instead of a traditional contract. I think it probably made things much easier for him.
- Kbelicius 6y ago
  Or maybe he knows that traditional contracts are enforceable while ethereum tokens are not.
joelbluminator 6y ago
I agree. Its not unlike an options agreement...u can do that without tech.
zshrdlu 6y ago
It sells itself better to a target audience that is bamboozled/enthusiastic/optimistic about the technology. Think of it as you would SEO - it's merely a feature/optimization that gets you an audience.
RhodoGSA 6y ago
I always see this sentiment here on HN. Everyone says "Why use blockchain, when you could just do X". Alot of the time when people say this, i don't think they actually understand blockchain. There's a million here but i'll only ask one...How could you actively trade a 'contract' if it's not on the blockchain?

seibelj 6y ago

It’s protocol-ized finance. Sure you can do it all old school, but that takes a ton of effort and makes your situation a unique snowflake. If you do it the way everyone has agreed on with tokens, all of your tokens plug into the existing infrastructure, is standardized, and makes the cost of capital go down. Why people continually can’t understand this, and keep saying “buh buh buh mysql and lawyer fees! No need for blockchain!” is a failure of imagination.

bradleyjg 6y ago
Standardized contracts trade all day every day on exchanges all over the world. That’s how everyone doing legitimate business has agreed to do it. That’s where the existing infrastructure is. That’s where serious capital is. Tokens, on the other hand, are the favorite tool of scammers.
- natchy 6y ago
  How is a large insurance company refusing to pay on a legitimate claim any less of a scam? I don’t think cryptocurrency is near mature enough to replace traditional contracts, but technology changes a lot in 5-10 years.
PragmaticPulp 6y ago
> Sure you can do it all old school, but that takes a ton of effort and makes your situation a unique snowflake. Many of the situations required in this article still require real-world contracts to make them work. The crypto tokens are additive on top of the contracts, but they don't replace contracts. Someone could sell you an NFT that represents 15% of their future earnings over the next 3 years, but the blockchain can't enforce that. Even if we had all payments occurring on the blockchain, the person could simply create a new blockchain wallet and give their new address to future employers, claiming $0 earnings for their original blockchain address. The NFT itself is only valuable if supported by the weight of real contracts in the real world with real enforceability. Crypto tokens only stand alone when the crypto token itself is being traded. Actual value still requires consensus that the token is worth something (Bitcoin, Ethereum) or a real-world contract that stipulates that whoever holds the token has a claim to some actual rights or asset. It's likely that most of the real-world contracts for something of actual value have stipulations that the crypto tokens are null and void if determined to be lost or stolen. The crypto tokens are largely a distraction.
- athrowaway3z 6y ago
  I think this entire idea is insane, but that's not the argument. >Many of the situations required in this article still require real-world contracts to make them work. The crypto tokens are additive on top of the contracts, but they don't replace contracts. There is no duality of 'real-world contract'/'digital contracts'. The question is if a digital document and signatures are accepted by a judicial system. In 50 years every judicial system will accept some format of digital contracts. The potential upside of 'tokenized' and standardized/automated legal documents are: less ambiguous interpretations, automatic resolution, simpler trading, and easier cross-border contracts ( to some extent ). All of this is possible by human hands, but legal systems are not known for their digital innovation. ( They don't even use standard 'diffs' to negotiate contracts )
  - bradleyjg 6y ago
    > The potential upside of 'tokenized' and standardized/automated legal documents are: less ambiguous interpretations, automatic resolution, simpler trading, and easier cross-border contracts ( to some extent ). This all requires contracts as code capable of ascertaining external facts. As far as I know the only such facts that have been made to work are facts about the prices of other cryptocoins. Furthermore, most of the benefits can already be obtained by registering a contract to be traded over a commodities exchange. There are, for example, weather futures being bought, sold, and adjudicated without any need or use for a blockchain.
    - jkhdigital 6y ago
      > This all requires contracts as code capable of ascertaining external facts Do meatspace contracts ascertain external facts? No, a court of law does. For most things that will likely never change. But if the contract is of a fungible nature, then allowing it to exist on a blockchain means ownership can be traded with no additional infrastructure required. This is why I prefer to call blockchain “market-as-a-service”...
      - bradleyjg 6y ago

danans 6y ago

> The idea of selling contracts against future income is interesting Isn't that also basically what any interest bearing loan/mortgage is?

bradleyjg 6y ago
No, those are personal debts (in one case secured). There’s been on and off again interest for as long as I can remember about creating personal equity interests (i.e. the payout depends on how much the person earns). Now with blockchain(tm).
- danans 6y ago
  I agree that there is a difference in the collateral involved, but the collateral mostly functions as a risk adjuster (which is why mortgage rates are on average lower than personal loan rates: if a borrower defaults, the house can be sold to recover part of the principal). At the end of the day, a mortgage is a contract that allows the borrower to purchase a home in exchange for a share of their future income, paid as interest on the loan. Personal loans also already exist today. The primary difference in the scheme in the article is that it is blockchain-based, instead of bank-based, and the trust establishment mechanism between borrower and lender is based on personal marketing, not credit agencies. Perhaps a bigger factor is that if the currency in which such a loan is offered is deflationary in the BTC style, it is a disadvantage to the borrower who will see the cost of their loan escalate over time, so this should be accounted for by lowering the interest rate.
  - bradleyjg 6y ago
    The difference isn’t the collateral, a personal loan like a credit card is unsecured. It’s how you calculate the payment. In a loan it doesn’t matter how much money I make, I owe what I owe. In the proposed equity arrangement I owe a percentage of my income. If I don’t make anything, I don’t owe anything. If I’m the next Musk, I owe billions.
    - danans 6y ago

bsanr2 6y ago

Putting the contract on the blockchain allows it to be traded like, but not as, a security while the SEC et al. drag their feet on classifying crypto-tokens as securities. Something like that.

joosters 6y ago
So it's a way to dodge the law? (while ruining the environment, of course)
- meowkit 6y ago
  No. What law is being dodged here? Again, no. Brute force Nakamoto consensus is bad for the environment, but lumping all crypto into that bucket is ignorant/intellectually dishonest.
  - deleted 6y ago
    [deleted]
  - jkhdigital 6y ago
    Proof of work uses a lot of energy. There are a few steps between that and “bad for the environment”, and you probably also need to explain why any other economic activity which uses a lot of energy is not also bad for the environment. All human production processes use energy, and therefore all economic activity is “bad for the environment” in the exact proportion of its energy use.
- bsanr2 6y ago
  It's a way to engage in activity that is superficially distinct enough that the law has not yet caught up with it, like driving for Uber or owning an AirBNB. It remains to be seen if the "innovation" in question is tangential to the main purpose (skirting an existing activity whose lawful bounds are already well-defined), or if it isn't, and the tech is instead truly transformative. You may think you know, but nothing really matters until a court, regulatory body, or legislature weighs in. Also Proof of Stake.

tjs8rj 6y ago

I’m usually in total agreement about blockchain just being stuffed anywhere, but observationally, there must be a good reason why blockchain shows up in these situations so often. There’s definitely the hype factor, but blockchain does have value in that it’s reasonably trusted by average people (perhaps unlike signing a contract everytime you wanted to purchase a piece of a creator - coins gamify it), and it’s easy to setup trust systems - Alex setup his own token in a weekend for a “human IPO”, rather than running through the cost and time of properly setting it up with a lawyer and contracts. Maybe blockchain’s biggest value proposition right now is that it’s lightly regulated and has hype, so using it greases the wheels when growing an audience or building a usually regulated product.

prox 6y ago
Author mentions the ponzi scheme, and quite right. As long as the general trust is there and the investments are on the up and up you’re fine. But the insidiousness is once you’re in, you’re in. Once you bought 4000 Tupperware to resell (insert any pyramid scheme here) , you can’t find fault in it, and when it crashes you’re burned. I don’t want to bash blockchain, there might be interesting use cases, but I haven’t seen it yet in it’s current implementations.
- VRay 6y ago
  It's sort of useful for sending money to Asia without losing 1.5 to 5% on transaction fees, but that doesn't involve actually investing in it
  - Kbelicius 6y ago
    Meh, one probably loses more by converting from fiat to crypto and back then on transaction fees for sending fiat directly.
pavel_lishin 6y ago
> blockchain does have value in that it’s reasonably trusted by average people I don't think you and I would agree on what constitutes "average people". > it’s easy to setup trust systems - Alex setup his own token in a weekend for a “human IPO”, rather than running through the cost and time of properly setting it up with a lawyer and contracts. Easy to set up, but how easy it is it to enforce?

mooreds 6y ago

I get the point of the shocking title. But what he describes, hedging risk, is not a new concept. It is something that people do every day when they diversify investments or buy insurance. ISAs and "person as tokens" just push this to new levels. > In such a scenario, every career becomes a pyramid scheme. In other words, the rich get richer--scalability works. One thing the author left out (or that I missed) is that scalability increases overall wealth. If I have to learn calculus from an average teacher because of geographic limitations, and then my child gets to learn from the best calculus teacher in the world, in the latter case the world gets richer because the same knowledge is arrived at quicker at less expense. (Of course, there's fallout for the average worker, but this is something we've been dealing with in the developed world for decades and still haven't figured out.)

forrestthewoods 6y ago

You’re 100% correct. Which is also why I found the article thought provoking! Blockchain isn’t magic. It can’t do very much “new”. But if it can take something old (contract) and make that more accessible to more potential contract buyers/sellers, then that’s actually interesting. Technology that makes slow complicated things fast and easy can have a lot of impact. I won’t be selling shares of myself nor buying shares of others. But this we’re close to the point where blockchain actually provides real value beyond tulip speculation.

AlexCoventry 6y ago

Maybe ask Masmej why he chose to use an ethereum token instead of a traditional contract. I think it probably made things much easier for him.

Kbelicius 6y ago
Or maybe he knows that traditional contracts are enforceable while ethereum tokens are not.

joelbluminator 6y ago

I agree. Its not unlike an options agreement...u can do that without tech.

zshrdlu 6y ago

It sells itself better to a target audience that is bamboozled/enthusiastic/optimistic about the technology. Think of it as you would SEO - it's merely a feature/optimization that gets you an audience.

RhodoGSA 6y ago

I always see this sentiment here on HN. Everyone says "Why use blockchain, when you could just do X". Alot of the time when people say this, i don't think they actually understand blockchain. There's a million here but i'll only ask one...How could you actively trade a 'contract' if it's not on the blockchain?