8 ms·

Decentralized trust graph for online value exchange without a blockchain (2017)

123 points by spolu 5y ago

AgentME 5y ago
>Conversely, cryptocurrencies such as Bitcoin or Ethereum have decentralized the process of issuing and managing a currency. But while the operations of such currencies, based on blockchains, have been fully decentralized, the trust graph of these cryptocurrencies have remained entirely centralized. Everyone need to trust Bitcoin to transact in Bitcoin, and everyone needs to trust Ethereum to transact in Ethereum or assets issued on the Ethereum blockchain. The centralized nature of the trust involved in these cryptocurrencies being actually at the core of how these currencies operate, as the only viable way to properly incentivize a proof-of-work system. I don't think it's useful to equivocate the trust one places in an open decentralized system with the trust someone puts in a custodian of their money to not run off with it. That's like equivocating trusting end-to-end encryption to keep your messages secure with trusting Facebook to keep your messages secure. Sure, in both cases there's a risk, but one is based on your understanding of an open system, and the other is based on a guess that the custodian you're trusting your data to won't expose it by choice or accident. Just because the word "trust" can be used for both doesn't mean there aren't significant differences between them. I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet. The scalability of this system seems interesting, but I think the scalability upgrades that cryptocurrency is getting from sharding and rollups will make cryptocurrency more than scalable enough for human commerce purposes. I wonder if details of this system would be more useful in some kind of scenario of machine swarms bartering with each other, maybe in a situation where a common currency specifically doesn't make sense and is undesirable, or where there's no reasonable-latency access to the common blockchain because of the isolation of the network. Or maybe there's a technique here that's useful for cross-currency or cross-blockchain transactions.
- rojeee 5y ago
  I think the idea of money as credit is very interesting (look at my HN comment history for my ramblings on the topic!). > I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet. You are right, these are disadvantages but other than "trust paths" the complexity can be mitigated with: 1. Market makers who buy IOUs at a discount and swap them for _their_ IOU which can be more trusted. Essentially you want a little bit of centralisation around parties which are known to always make good on their liabilities. These parties could be fully automated (think like Ethereum DAO) and transparent. In some ways these market makers are like banks of today but instead of lending their credit into existence, like banks do, they require people to buy it (usually) at a premium. 2. Insurance or a credit derivatives market so people can hedge against counterparts defaults. 3. If everyone agrees on a common numeraire and wallets are sophisticated to show an aggregate balance in that numeraire taking into account credit risk then that could remove much of the complexity for users. Integrated with market makers, you could "auto swap" IOUs to issuers which you prefer. Wallets can also provide a credit risk break down on all counterparts. Agree this is more complicated than current notions of money. 4. Securitisation markets. Package up IOUs into tranches. Traders can speculate on various levels of credit quality. 5. Sensible reputation management. Non-invasive performance tracking of debtors. Did they meet margin requirements? Did they meet all coupon payments? Etc. Can also take into account degree of co-operation with other users, for example do they accommodate restructuring and help others meet their liabilities? I don't like crypto because there's essentially zero accountability for issuers and that kind of environment is optimal for scammers. Crypto behaves like synthetic equity/commodity instruments with no accountable issuers. In contrast, with a credit based system, issuers are responsible for their issued liabilities and are expected to make good on them. In crypto, no-one thinks in terms of liabilities and so you get ridiculous projects like "Synthentix" who are collateralising a USD Stablecoins with their own issued tokens. For anyone with a basic understanding of financial risk and accounting, their approach is mad. A credit based system is fairer because anyone can issue credit and the onus in on issuers to ensure they have the necessary reputation for others to accept their credit. Furthermore, credit-like instruments are natural Stablecoins - providing all agree on a numeraire, the value of credit is a function of credit risk which can be successfully managed in most cases.
eternalban 5y ago
This is a curious post. There is apparently a Settle Network and a github repo. But S. Spolu is not listed among the execs running it. https://settlenetwork.com/ https://settlenetwork.com/ https://github.com/spolu/settle https://github.com/spolu/settle https://settlenetwork.com/settle-network/ https://settlenetwork.com/settle-network/ (Scroll to bottom for the mug shots)
- tyingq 5y ago
  "settlenetwork.com" seems to be unrelated to this, other than having the words "settle" and "network" in it.
  - eternalban 5y ago
    github repo points to it. and the archive.org page footer points to the repo.
    - tyingq 5y ago
      Where? I see a link to https://settle.network https://settle.network which isn't the same as https://settlenetwork.com https://settlenetwork.com
      - eternalban 5y ago
        Did you click that link? It ends up in settlenetwork.com.
        tyingq 5y ago
        Ah, okay. My guess is he probably let "settle.network" expire, and the owners of the unrelated "settlenetwork.com" bought the domain and redirected it for anti-brand confusion, SEO or latent traffic reasons. I don't see anything technically related across them. The original settle.network was "without a blockchain", settlenetwork.com is very much "with a blockchain". Edit: The "settle.network" domain as it sits now was first registered in 2019, well after the last activity on the github repo. So yeah, he let the domain lapse out.
Ar-Curunir 5y ago
Aspects of this sound similar to Stellar and Ripple. Could folks with more knowledge elaborate on the differences?
- _def 5y ago
  I didn't know this project but if you visit their website today you can see that Stellar is listed there as a reference.
- max_ 5y ago
  It seems so. Its the notion of "Trust Lines"[0] All this thing does is limit potential losses from fraud. Not eliminating. The main value proposition of a blockchain is to solve the "principal-agent" problem [1] and gis simply reduces the risk but doesn't remove it entirely. Plus some of the requirements on a node having to be online (in a decentalized, byzantine environment) all the time are unrealistic. This seems more like ripple. Stellar uses a more sophisticated notion of "quorum slices" and is resistant to byzantine faults [2] [0]: https://trustlines.foundation/faq.html https://trustlines.foundation/faq.html [1]:https://as1ndu.xyz/2021/04/clarifying-the-blockchain-proposition/ https://as1ndu.xyz/2021/04/clarifying-the-blockchain-proposi... [2]: https://youtu.be/vmwnhZmEZjc https://youtu.be/vmwnhZmEZjc
- nano_o 5y ago
  The Stellar Network relies on nodes declaring quorum slices, which can be understood as trust relationships, but it implements a single global blockchain. So I don't think it's very similar. Edit: one similarity is that token issuers in Stellar can remain authoritative on their token.
Geee 5y ago
I think this idea has been implemented in Offset https://www.offsetcredit.org https://www.offsetcredit.org HN thread: https://news.ycombinator.com/item?id=23438241 https://news.ycombinator.com/item?id=23438241
- realcr 5y ago
  It's true. In addition, spolu gave some very useful pieces of advice during the design of Offset. Too bad settle.network is not live anymore. I am not sure whether https://settlenetwork.com https://settlenetwork.com is actually affiliated with the original settle.network written by spolu.
  - michielbdejong 5y ago
    > I am not sure whether https://settlenetwork.com https://settlenetwork.com is actually affiliated with the original settle.network written by spolu. See also https://news.ycombinator.com/item?id=27082751 https://news.ycombinator.com/item?id=27082751
openfuture 5y ago
I am working on something like this. Having a money in the system is a pretty hard problem (quantitative type theory-ish / lifted inference). You can get around that with culture and using existing systems as settlement layer (for the time being). Even then there is only one cryptocurrency that has a proper mechanism design for oracles (amoveo) - which you need if you want a trustless layer 2. Datalisp (@ for telegram .is for binge-written PDF) is this project (that I just started) it's basically a vector clock for wrapping interfaces in authenticated data structures and Bayesian inference with logic programming for estimating / inferring trust. By giving a useful framework for refining reproducibility we can build trust. Trust we need if we want a system to serve as a foundation for digital societies. Francis Bacon said knowledge was possible and science could establish trust. Now we need that, automated.
jl2718 5y ago
Read early versions of the Ripple white paper, before they decided to make XRP a store of value. The compulsion to cash in on a settlement layer by establishing your own scarce medium of exchange is too great.
- toomim 5y ago
  Just to be pedantic, what happened is the original founder sold it to some skeezy guys who wanted to cash in on the digital currency crazy, and those skeezy guys added XRP as a way to cash in. So it's not quite that the original founder felt pressure to create the token, but he did feel some pressure to make money, and eventually that led to a token.
- noxer 5y ago
  Ripple didn't exist when XRP was created. ripplepay now rumplepay.com was probably what you meant.
randomopining 5y ago
Aren't gas fees and decentralization inversely correlated?

123 points by spolu 5y ago

>Conversely, cryptocurrencies such as Bitcoin or Ethereum have decentralized the process of issuing and managing a currency. But while the operations of such currencies, based on blockchains, have been fully decentralized, the trust graph of these cryptocurrencies have remained entirely centralized. Everyone need to trust Bitcoin to transact in Bitcoin, and everyone needs to trust Ethereum to transact in Ethereum or assets issued on the Ethereum blockchain. The centralized nature of the trust involved in these cryptocurrencies being actually at the core of how these currencies operate, as the only viable way to properly incentivize a proof-of-work system. I don't think it's useful to equivocate the trust one places in an open decentralized system with the trust someone puts in a custodian of their money to not run off with it. That's like equivocating trusting end-to-end encryption to keep your messages secure with trusting Facebook to keep your messages secure. Sure, in both cases there's a risk, but one is based on your understanding of an open system, and the other is based on a guess that the custodian you're trusting your data to won't expose it by choice or accident. Just because the word "trust" can be used for both doesn't mean there aren't significant differences between them. I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet. The scalability of this system seems interesting, but I think the scalability upgrades that cryptocurrency is getting from sharding and rollups will make cryptocurrency more than scalable enough for human commerce purposes. I wonder if details of this system would be more useful in some kind of scenario of machine swarms bartering with each other, maybe in a situation where a common currency specifically doesn't make sense and is undesirable, or where there's no reasonable-latency access to the common blockchain because of the isolation of the network. Or maybe there's a technique here that's useful for cross-currency or cross-blockchain transactions.

rojeee 5y ago
I think the idea of money as credit is very interesting (look at my HN comment history for my ramblings on the topic!). > I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet. You are right, these are disadvantages but other than "trust paths" the complexity can be mitigated with: 1. Market makers who buy IOUs at a discount and swap them for _their_ IOU which can be more trusted. Essentially you want a little bit of centralisation around parties which are known to always make good on their liabilities. These parties could be fully automated (think like Ethereum DAO) and transparent. In some ways these market makers are like banks of today but instead of lending their credit into existence, like banks do, they require people to buy it (usually) at a premium. 2. Insurance or a credit derivatives market so people can hedge against counterparts defaults. 3. If everyone agrees on a common numeraire and wallets are sophisticated to show an aggregate balance in that numeraire taking into account credit risk then that could remove much of the complexity for users. Integrated with market makers, you could "auto swap" IOUs to issuers which you prefer. Wallets can also provide a credit risk break down on all counterparts. Agree this is more complicated than current notions of money. 4. Securitisation markets. Package up IOUs into tranches. Traders can speculate on various levels of credit quality. 5. Sensible reputation management. Non-invasive performance tracking of debtors. Did they meet margin requirements? Did they meet all coupon payments? Etc. Can also take into account degree of co-operation with other users, for example do they accommodate restructuring and help others meet their liabilities? I don't like crypto because there's essentially zero accountability for issuers and that kind of environment is optimal for scammers. Crypto behaves like synthetic equity/commodity instruments with no accountable issuers. In contrast, with a credit based system, issuers are responsible for their issued liabilities and are expected to make good on them. In crypto, no-one thinks in terms of liabilities and so you get ridiculous projects like "Synthentix" who are collateralising a USD Stablecoins with their own issued tokens. For anyone with a basic understanding of financial risk and accounting, their approach is mad. A credit based system is fairer because anyone can issue credit and the onus in on issuers to ensure they have the necessary reputation for others to accept their credit. Furthermore, credit-like instruments are natural Stablecoins - providing all agree on a numeraire, the value of credit is a function of credit risk which can be successfully managed in most cases.

eternalban 5y ago

This is a curious post. There is apparently a Settle Network and a github repo. But S. Spolu is not listed among the execs running it. https://settlenetwork.com/ https://settlenetwork.com/ https://github.com/spolu/settle https://github.com/spolu/settle https://settlenetwork.com/settle-network/ https://settlenetwork.com/settle-network/ (Scroll to bottom for the mug shots)

tyingq 5y ago
"settlenetwork.com" seems to be unrelated to this, other than having the words "settle" and "network" in it.
- eternalban 5y ago
  github repo points to it. and the archive.org page footer points to the repo.
  - tyingq 5y ago
    Where? I see a link to https://settle.network https://settle.network which isn't the same as https://settlenetwork.com https://settlenetwork.com
    - eternalban 5y ago
      Did you click that link? It ends up in settlenetwork.com.
      - tyingq 5y ago
        Ah, okay. My guess is he probably let "settle.network" expire, and the owners of the unrelated "settlenetwork.com" bought the domain and redirected it for anti-brand confusion, SEO or latent traffic reasons. I don't see anything technically related across them. The original settle.network was "without a blockchain", settlenetwork.com is very much "with a blockchain". Edit: The "settle.network" domain as it sits now was first registered in 2019, well after the last activity on the github repo. So yeah, he let the domain lapse out.

Ar-Curunir 5y ago

Aspects of this sound similar to Stellar and Ripple. Could folks with more knowledge elaborate on the differences?

_def 5y ago
I didn't know this project but if you visit their website today you can see that Stellar is listed there as a reference.
max_ 5y ago
It seems so. Its the notion of "Trust Lines"[0] All this thing does is limit potential losses from fraud. Not eliminating. The main value proposition of a blockchain is to solve the "principal-agent" problem [1] and gis simply reduces the risk but doesn't remove it entirely. Plus some of the requirements on a node having to be online (in a decentalized, byzantine environment) all the time are unrealistic. This seems more like ripple. Stellar uses a more sophisticated notion of "quorum slices" and is resistant to byzantine faults [2] [0]: https://trustlines.foundation/faq.html https://trustlines.foundation/faq.html [1]:https://as1ndu.xyz/2021/04/clarifying-the-blockchain-proposition/ https://as1ndu.xyz/2021/04/clarifying-the-blockchain-proposi... [2]: https://youtu.be/vmwnhZmEZjc https://youtu.be/vmwnhZmEZjc
nano_o 5y ago
The Stellar Network relies on nodes declaring quorum slices, which can be understood as trust relationships, but it implements a single global blockchain. So I don't think it's very similar. Edit: one similarity is that token issuers in Stellar can remain authoritative on their token.

Geee 5y ago

I think this idea has been implemented in Offset https://www.offsetcredit.org https://www.offsetcredit.org HN thread: https://news.ycombinator.com/item?id=23438241 https://news.ycombinator.com/item?id=23438241

realcr 5y ago
It's true. In addition, spolu gave some very useful pieces of advice during the design of Offset. Too bad settle.network is not live anymore. I am not sure whether https://settlenetwork.com https://settlenetwork.com is actually affiliated with the original settle.network written by spolu.
- michielbdejong 5y ago
  > I am not sure whether https://settlenetwork.com https://settlenetwork.com is actually affiliated with the original settle.network written by spolu. See also https://news.ycombinator.com/item?id=27082751 https://news.ycombinator.com/item?id=27082751

openfuture 5y ago

I am working on something like this. Having a money in the system is a pretty hard problem (quantitative type theory-ish / lifted inference). You can get around that with culture and using existing systems as settlement layer (for the time being). Even then there is only one cryptocurrency that has a proper mechanism design for oracles (amoveo) - which you need if you want a trustless layer 2. Datalisp (@ for telegram .is for binge-written PDF) is this project (that I just started) it's basically a vector clock for wrapping interfaces in authenticated data structures and Bayesian inference with logic programming for estimating / inferring trust. By giving a useful framework for refining reproducibility we can build trust. Trust we need if we want a system to serve as a foundation for digital societies. Francis Bacon said knowledge was possible and science could establish trust. Now we need that, automated.

jl2718 5y ago

Read early versions of the Ripple white paper, before they decided to make XRP a store of value. The compulsion to cash in on a settlement layer by establishing your own scarce medium of exchange is too great.

toomim 5y ago
Just to be pedantic, what happened is the original founder sold it to some skeezy guys who wanted to cash in on the digital currency crazy, and those skeezy guys added XRP as a way to cash in. So it's not quite that the original founder felt pressure to create the token, but he did feel some pressure to make money, and eventually that led to a token.
noxer 5y ago
Ripple didn't exist when XRP was created. ripplepay now rumplepay.com was probably what you meant.

randomopining 5y ago

Aren't gas fees and decentralization inversely correlated?