5 ms·

> Price and volatility aside, if we simply could have used a smart contract where money is automatically deposited upon project completion, we would have ensure

by hiq 5y ago

> Price and volatility aside, if we simply could have used a smart contract where money is automatically deposited upon project completion, we would have ensured payment. A smart contract doesn't allow you to do that though, so I'm not sure how much you thought this through, or if you're only writing about your initial impression and dismissing what you learned after (I do think you realize this, as most people do after a few weeks of experience with Ethereum). Either the smart contract would have automatically transferred money after a period of time, in which case it's basically like paying in advance. Or the smart contract would have received some external information, either from the consulting company, the client, a 3rd-party or a combination thereof, to decide whether the project has been completed or not. At that point, you're back to the problem you had without Ethereum.

sausage_dog 5y ago
One way to do this is that the agency places a deposit in the contract, client places deposit+payment in the contract. Then when the job is done both parties confirm and the agency receives deposit+payment and the client receives their deposit. This way both parties are incentivized to find a mutually satisfying outcome. It's not ideal in terms of funds used, but it improves the trust situation a little bit.
- hiq 5y ago
  The deposit you mention if you do this on Ethereum just corresponds to legal fees you have to pay in case of conflict in the traditional contractual approach. This incentive already exists without Ethereum, and Ethereum doesn't improve the situation in that regard.
cadillion 5y ago
Thanks for asking us to expand! We can always write a novel, but not everyone wants to read about oracles and unsolved problems in distributed compute. You are correct, for this smart contract to work you need defined rules around how the money is released should either party falsely claim success or failure, so you need to rely on automation or some third party to validate fulfillment of the contract. So you're back to an oracle problem, how do I know I can trust the validator? The nice advancement here is that anyone can be that third party! Your smart contract can explicitly identify a third party for multisig, or you can rely on a validator pool of mechanical turks instead of a licensed escrow agent, and accordingly the cost of escrow can decrease. The nice part is that this is customizable, and built into the very rails that move money. It's a much lower barrier to entry than trying to build something like that for ACH, and that's what excites us about cryptocurrency.
- btown 5y ago
  It's refreshing to hear well-thought-out responses to the "isn't it just escrow" question, which I admit I've asked in a skeptical way re: cryptocurrencies in the past! Decoupling oracle-ness from a need to be a legally trusted holder of money is indeed something that broadens/democratizes the pool of viable oracles. On that note, if an outstanding question is "how do we increase the supply (and thus decrease the price) of oracles beyond those who happen to know how to interact with smart contracts," I wonder if something like your Hedgehog tech, paired with standardized smart contract plugins, could make it possible for far more domain experts without crypto experience to enter and advertise themselves in the oracle market. Makes your system a one-stop easy-onboard volatility-reducing shop for the escrow problem you identified, for all participants in that marketplace!
  - cadillion 5y ago
    Wow, you hit the nail on the head! To point to our long term vision, cryptocurrency has the nice property of being data, but the double-edged feature of being money. In order to tell people how to get data from point A to point B you suddenly have to be a fiduciary financial adviser! We want to take that duty seriously and help people interact with the cryptocurrency ecosystem as a trusted adviser. If we can help you customize and interact with smart contracts and plug them into existing regulatory frameworks, then we can unlock a lot of value for everyone.
  - mchusma 5y ago
    I still struggle with smart contracts. I am glad they exist, but right now I think they will be some super rare thing, used in cases that previously required eacrow. I was in the e-signature world, and nobody tended to ever care about authentication. Nobody really wanted to pay for it, almost ever. They smart contracts have 2 of the largest features of escrow: handing control of your money to a third party and not being able to use the money now/bad payment "terms". It mitigates some counterparty risk, as it's harder for the oracle themselves to steal the money. It's also probably expensive, as oracles have to meditate disputes and take on risk. So interesting, but unsure what it would be used for.
- 5y ago
Kiro 5y ago
> A smart contract doesn't allow you to do that though This is why smart contract is such a bad name. A lot of people have a complete misunderstanding of what a smart contract is. They think it can enforce things like a real-world contract, but "automatically". It's just a decentralized script and without real-world input through an oracle it is of course impossible for the contract to know whether a project is completed. There's nothing smart or automatic about that part.
- cadillion 5y ago
  In fact, Ian Grigg's Ricardian Contract construct was originally created with centralized enforcement in mind. To him, the purpose of these contracts was to create an immutable record of the intent of any transaction that could then be followed all the way back to its inception in the event of a dispute. So part of the magic of the smart contract is illustrating intent from the beginning, and making that intent customizable! Oracles are still an unsolved problem, but we absolutely believe that reducing the barrier to entry for becoming or acting as an oracle will result in cost savings as the ecosystem matures.
- tracedddd 5y ago
  You hit the nail on the head. Unless it’s totally virtual - on chain finance, gambling, etc. the contracts are only as good as the oracles. I guess that’s why DeFi works so well. Fortunately decentralized oracles are an area of focus right now, but it’ll be a slow process since most expansion will require a special integration and potentially expert oracles.
sushid 5y ago
It seems like what they want here is an advance + escrow. If you're working on, say a website with xyz features, how is a smart contract going to evaluate whether you met or didn't meet the criteria?
- cadillion 5y ago
  Good question, we've answered a couple times in this thread already, so please forgive the copypasta: You are correct, for this smart contract to work you need defined rules around how the money is released should either party falsely claim success or failure, so you need to rely on automation or some third party to validate fulfillment of the contract. So you're back to an oracle problem, how do I know I can trust the validator? The nice advancement here is that anyone can be that third party! Your smart contract can explicitly identify a third party for multisig, or you can rely on a validator pool of mechanical turks instead of a licensed escrow agent, and accordingly the cost of escrow can decrease. The nice part is that this is customizable, and built into the very rails that move money. It's a much lower barrier to entry than trying to build something like that for ACH, and that's what excites us about cryptocurrency.
  - ganzuul 5y ago
    > So you're back to an oracle problem, how do I know I can trust the validator? With DLT it seems trust and predictability is virtually the same thing. "Everybody loses everything" is predictable but not efficient. DLT is a proposal for efficiency. We need to automatically negotiate contracts or we shift all the cost of fixing it later in courts up front. There will have to be a lot of smart defaults for the contracts to be smart, and very deep integration of tech so that the algorithms can be fed with enough data to negotiate in a very high-dimensional space. That requires infrastructure, but the DeFi culture does not seem to be interested in funding infrastructure.

by hiq 5y ago

sausage_dog 5y ago

One way to do this is that the agency places a deposit in the contract, client places deposit+payment in the contract. Then when the job is done both parties confirm and the agency receives deposit+payment and the client receives their deposit. This way both parties are incentivized to find a mutually satisfying outcome. It's not ideal in terms of funds used, but it improves the trust situation a little bit.

hiq 5y ago
The deposit you mention if you do this on Ethereum just corresponds to legal fees you have to pay in case of conflict in the traditional contractual approach. This incentive already exists without Ethereum, and Ethereum doesn't improve the situation in that regard.

cadillion 5y ago

Thanks for asking us to expand! We can always write a novel, but not everyone wants to read about oracles and unsolved problems in distributed compute. You are correct, for this smart contract to work you need defined rules around how the money is released should either party falsely claim success or failure, so you need to rely on automation or some third party to validate fulfillment of the contract. So you're back to an oracle problem, how do I know I can trust the validator? The nice advancement here is that anyone can be that third party! Your smart contract can explicitly identify a third party for multisig, or you can rely on a validator pool of mechanical turks instead of a licensed escrow agent, and accordingly the cost of escrow can decrease. The nice part is that this is customizable, and built into the very rails that move money. It's a much lower barrier to entry than trying to build something like that for ACH, and that's what excites us about cryptocurrency.

btown 5y ago
It's refreshing to hear well-thought-out responses to the "isn't it just escrow" question, which I admit I've asked in a skeptical way re: cryptocurrencies in the past! Decoupling oracle-ness from a need to be a legally trusted holder of money is indeed something that broadens/democratizes the pool of viable oracles. On that note, if an outstanding question is "how do we increase the supply (and thus decrease the price) of oracles beyond those who happen to know how to interact with smart contracts," I wonder if something like your Hedgehog tech, paired with standardized smart contract plugins, could make it possible for far more domain experts without crypto experience to enter and advertise themselves in the oracle market. Makes your system a one-stop easy-onboard volatility-reducing shop for the escrow problem you identified, for all participants in that marketplace!
- cadillion 5y ago
  Wow, you hit the nail on the head! To point to our long term vision, cryptocurrency has the nice property of being data, but the double-edged feature of being money. In order to tell people how to get data from point A to point B you suddenly have to be a fiduciary financial adviser! We want to take that duty seriously and help people interact with the cryptocurrency ecosystem as a trusted adviser. If we can help you customize and interact with smart contracts and plug them into existing regulatory frameworks, then we can unlock a lot of value for everyone.
- mchusma 5y ago
  I still struggle with smart contracts. I am glad they exist, but right now I think they will be some super rare thing, used in cases that previously required eacrow. I was in the e-signature world, and nobody tended to ever care about authentication. Nobody really wanted to pay for it, almost ever. They smart contracts have 2 of the largest features of escrow: handing control of your money to a third party and not being able to use the money now/bad payment "terms". It mitigates some counterparty risk, as it's harder for the oracle themselves to steal the money. It's also probably expensive, as oracles have to meditate disputes and take on risk. So interesting, but unsure what it would be used for.
5y ago

Kiro 5y ago

> A smart contract doesn't allow you to do that though This is why smart contract is such a bad name. A lot of people have a complete misunderstanding of what a smart contract is. They think it can enforce things like a real-world contract, but "automatically". It's just a decentralized script and without real-world input through an oracle it is of course impossible for the contract to know whether a project is completed. There's nothing smart or automatic about that part.

cadillion 5y ago
In fact, Ian Grigg's Ricardian Contract construct was originally created with centralized enforcement in mind. To him, the purpose of these contracts was to create an immutable record of the intent of any transaction that could then be followed all the way back to its inception in the event of a dispute. So part of the magic of the smart contract is illustrating intent from the beginning, and making that intent customizable! Oracles are still an unsolved problem, but we absolutely believe that reducing the barrier to entry for becoming or acting as an oracle will result in cost savings as the ecosystem matures.
tracedddd 5y ago
You hit the nail on the head. Unless it’s totally virtual - on chain finance, gambling, etc. the contracts are only as good as the oracles. I guess that’s why DeFi works so well. Fortunately decentralized oracles are an area of focus right now, but it’ll be a slow process since most expansion will require a special integration and potentially expert oracles.

sushid 5y ago

It seems like what they want here is an advance + escrow. If you're working on, say a website with xyz features, how is a smart contract going to evaluate whether you met or didn't meet the criteria?

cadillion 5y ago
Good question, we've answered a couple times in this thread already, so please forgive the copypasta: You are correct, for this smart contract to work you need defined rules around how the money is released should either party falsely claim success or failure, so you need to rely on automation or some third party to validate fulfillment of the contract. So you're back to an oracle problem, how do I know I can trust the validator? The nice advancement here is that anyone can be that third party! Your smart contract can explicitly identify a third party for multisig, or you can rely on a validator pool of mechanical turks instead of a licensed escrow agent, and accordingly the cost of escrow can decrease. The nice part is that this is customizable, and built into the very rails that move money. It's a much lower barrier to entry than trying to build something like that for ACH, and that's what excites us about cryptocurrency.
- ganzuul 5y ago
  > So you're back to an oracle problem, how do I know I can trust the validator? With DLT it seems trust and predictability is virtually the same thing. "Everybody loses everything" is predictable but not efficient. DLT is a proposal for efficiency. We need to automatically negotiate contracts or we shift all the cost of fixing it later in courts up front. There will have to be a lot of smart defaults for the contracts to be smart, and very deep integration of tech so that the algorithms can be fed with enough data to negotiate in a very high-dimensional space. That requires infrastructure, but the DeFi culture does not seem to be interested in funding infrastructure.