5 ms·

If two rival businesses are transacting with each other, and they don’t really trust each other fully, which one hosts the database? Whoever hosts the database

If two rival businesses are transacting with each other, and they don’t really trust each other fully, which one hosts the database? Whoever hosts the database is in a position to manipulate data to the disadvantage of the other. Which entity gives in and gives up that power to the other? Why should either party agree to take on that sort of counterparty risk when they don’t have to? Also, what instances of non-immutable blockchains are you referring to? Blockchains by definition are immutable post-finality.

laserlight 4y ago
> which one hosts the database? Both? > manipulate data to the disadvantage of the other How is this even possible? Don't they sign their transactions?
- hanniabu 4y ago
  Let me just operate a database for everyone I interact with, and also pay a lawyer to write a contract for every interation. > How is this even possible? Don't they sign their transactions? In a blockchain, yes. What you quoted was talking about a database. It seems like you accidentally just realized the issue with your own argument by trying to find an issue with his. Great way to get around bias.
  - fineIllregister 4y ago
    > Let me just operate a database for everyone I interact with. If I'm a company, I already have a database of transactions, even if it is a spreadsheet or physical file folders. > It seems like you accidentally just realized the issue with your own argument by trying to find an issue with his. Where is the issue? The two companies can sign and keep separate copies of the contract/transaction. That's literally what they do now. Just digitize it, no blockchain necessary. Companies could sign a text file of a contract with PGP keys. We could standardize a transaction format and both companies could sign each exchange. Company A would keep the contract and Company B's signature, and vice versa. Trusted third parties (our attornies, banks) could sign as witnesses for bigger transactions. What do cryptocurrency and blockchain achieve over that, especially given the high costs of transactions?
nradov 4y ago
The clearing house hosts the database. There's no need for a blockchain. https://www.cfainstitute.org/en/advocacy/issues/central-clearing-houses https://www.cfainstitute.org/en/advocacy/issues/central-clea...
- legutierr 4y ago
  What if there is no clearinghouse operating in that particular market?
  - RC_ITR 4y ago
    You build one because it's way easier and cheaper to build a clearinghouse than it is to build a massively decentralized network of trust-less computers?
    - hanniabu 4y ago
      "hey let's facilitate this transaction on Ethereum" "no, that's ridiculous, let's build a clearinghouse, get a bunch of lawyers and have paper contracts drafter, ad deal with differences in international law."
      - RC_ITR 4y ago
        Lmfao. What is this straw man transaction that can be settled on ETH (keep in mind, you’re already completely leaning on sunk cost fallacy) but needs a lawyer off chain?! Like, either the terms are known and you put them in a smart contract or they’re unknown and you need lawyers anyway. I dig the energy, but at least be sort of realistic in your “owns”
        hanniabu 4y ago
        I'm just going along with everyone else's rebuttal of "just use a lawyer", "just use a clearing house", "just pay someone to balance/record your own books", and whatever else they mention to avoid a solution that exists. It's a bit like hearing people dismiss email and saying "just use snail mail", "just have a scribe write the letter for you", "just use a personal carrier so it's faster".
pr0zac 4y ago
While running transactions on a distributed blockchain would provide some additional resilience here, I'm unsure if I can picture any situation where the added protection provided over current contract and civil law would outweigh the issue of having your financial transactions publicly available for review by all other actors to most businesses. It also doesn't really do much for most real world transactions because of the oracle problem. Unless both businesses only care about entities that exist on that blockchain as well having the transactions there doesn't provide any additional benefit since the blockchain cannot verify nor enforce anything outside of it. Regardless of whether the transaction of you sending me money is immutable I can still just not send you what you paid me for.
- legutierr 4y ago
  Good points! Yes, public blockchains are often not suitable for private or confidential transactions. That being said, anonymization tools do exist, which can solve this problem for many use cases. Also, I agree that blockchains only work in the context of a functioning legal system, in that the link between on-chain assets and physical assets must be enforced via some legal or governmental mechanism. This should be possible using contracts under current law, however, and such contracts could be limited to establishing this linkage, avoiding more complex issues that might otherwise come into play if it were not for the use of a blockchain for record-keeping, transfers and settlement.
  - pr0zac 4y ago
    It’s actually an interesting question if or how anonymization tooling/coins would work in a business context. You want to shield your transactions some of the time to prevent competitive analysis of your business expenses etc but other times require provable transaction reporting and tracking for stuff like tax purposes and financial disputes. You want to be able to prove you sent a payment or need to document yearly expenditures for instance, being anonymous in those situations could cause issues. You could use signatures to prove ownership of the keys involved in a transaction I suppose but I’m not familiar enough with the laws in this context to know if it’s sufficient legally nor am I an accountant. I guess stuff like that is kind of a gray area and is an example of the unclear guidance that pro-regulation crypto folks in the US have been asking for the government to provide clarity on.
cduzz 4y ago
The two rivals write a contract? The contract involves a 3rd party that's mutually agreed upon by the rivals? If the two rivals can't abide by a contract, a blockchain wouldn't resolve the scenario either. Imagine "bug vs boot" or "shooting war" kinds of contract violations where overwhelming force is in play; why would a blockchain make a difference? Human history has lots of "people don't trust each other" scenarios, and they've been resolved in the past, with reasonable efficiency, without blockchain.
- legutierr 4y ago
  My point is not that the problem cannot be solved by traditional approaches, but rather to identify that it is a problem that somehow needs to be solved. It's something that people need to expend resources and take on risk to solve. The reason so much time is spent negotiating legal agreements is to reduce the surface area of dispute. On one hand, we want to reduce the possibility of misunderstandings that could lead to a "shooting war" as you put it, and also to reduce as much as possible the scope of the matter that may need to be evaluated by a court in the event of a litigation. Using a blockchain in a situation like this can make achieving both of those objectives much easier and less costly from both legal and operating points of view. There would still need to be some contractual relationship among the participants, but the scope of the contract can be simplified and reduced. And if the number of participants involved exceeds two entities, a blockchain can vastly simplify the relationships of all the participants with each other, without needing to empower a centralized entity to coordinate among all the participants. > Human history has lots of "people don't trust each other" scenarios, and they've been resolved in the past, with reasonable efficiency, without blockchain. Sure, but what's wrong with reducing costs and complexity even further?
  - marcus_holmes 4y ago
    How does the blockchain solve any of these issues in a way that couldn't be done with a database and a third party/escrow as normal? And it's interesting to note that no-one (as far as I'm aware) is doing this. Blockchains have been around for a decade and escrows are still going strong - I don't see any movement to adopt blockchain for this.
eldenwrong 4y ago
>"Blockchains by definition are immutable post-finality." This is the greatest misunderstanding. Immutability is NOT a property of blockchains. Its a property of Bitcoin and possibly Ethereum through PoW/PoS
- deleted 4y ago
  [deleted]
- legutierr 4y ago
  Could you explain what you mean? As I noted, "by definition" a block that has reached finality will not be removed. Any attempt to add, modify or delete transactions or blocks prior to this point would be self-defeating because it would be automatically rejected. Yes, newer blocks can be forked out of existence before they reach finality, which is why only blocks that have reached finality are deemed immutable.
joe_the_user 4y ago
If the two rival businesses are trading real world things, they each need a database and the actual situation of the trading has to be established by real-world paper trails or whatever. So basically, the only use-case of the blockchain is "virtual currency" like bitcoin and we've seen that these "virtual currencies" doesn't actually operate as a practical currencies but rather a speculative investments and means of laundering money/control-of-sources (if you have free electricity, you can turn it into cash at a cost to the planet etc).
pclmulqdq 4y ago
The two rival businesses keep detailed records of their transactions, and if anyone does anything funny, they get sued.
- legutierr 4y ago
  One reasonable way to keep detailed records of transactions is a blockchain! The best thing about a blockchain in a situation like this is that the different participants don't need to reconcile their transaction records to make sure they agree. Reconciliation between the participants—which is costly and can lead to disputes—is unnecessary. Of course there are other technologies you can use as well, but using a blockchain would be easier and cheaper—especially if additional parties begin to participate in the arrangement as well.
  - pclmulqdq 4y ago
    It's not reasonable, because the moment you have to interact with things off the blockchain, like dollars or physical stuff, you get the same reconciliation problems you had before. It's needlessly complicated for no gain.
    - legutierr 4y ago
      Reconciling digital records against physical assets is something that all electronic systems of this sort must contend with. But traditional multi-party systems also need to worry about reconciling each entity's records against all the other entities' records. The blockchain simplifies the arrangement. Where is the additional complexity you are referring to?
      - pclmulqdq 4y ago
        The use of a blockchain itself is the complexity, and it is a tremendous amount of complexity. All the smart contracts, infrastructure, and cryptography that it entails adds up. And there's the maintenance burden of setting up and running a byzantine fault tolerant system - If this is a private chain, who owns the servers and how many votes for each participant? How do you keep the voting fair if one side has to scale up more than the other? If this is a public chain, how do you keep your transactions private? What if there's a bug in the chain or the smart contract? All of these questions need serious consideration if you are doing real business. Particularly when a database looks like it gets you 98% of the way there and your legal department covers the other 2%. What value is a blockchain actually adding compared to MySQL and a lawyer? After all, the threat of a lawsuit is enough to keep the databases in sync almost 100% of the time, and to resolve most other problems quickly. For anything more serious, you will need to do a full reconciliation of the stuff and the money, which a blockchain won't help you with anyway.

laserlight 4y ago

> which one hosts the database? Both? > manipulate data to the disadvantage of the other How is this even possible? Don't they sign their transactions?

hanniabu 4y ago
Let me just operate a database for everyone I interact with, and also pay a lawyer to write a contract for every interation. > How is this even possible? Don't they sign their transactions? In a blockchain, yes. What you quoted was talking about a database. It seems like you accidentally just realized the issue with your own argument by trying to find an issue with his. Great way to get around bias.
- fineIllregister 4y ago
  > Let me just operate a database for everyone I interact with. If I'm a company, I already have a database of transactions, even if it is a spreadsheet or physical file folders. > It seems like you accidentally just realized the issue with your own argument by trying to find an issue with his. Where is the issue? The two companies can sign and keep separate copies of the contract/transaction. That's literally what they do now. Just digitize it, no blockchain necessary. Companies could sign a text file of a contract with PGP keys. We could standardize a transaction format and both companies could sign each exchange. Company A would keep the contract and Company B's signature, and vice versa. Trusted third parties (our attornies, banks) could sign as witnesses for bigger transactions. What do cryptocurrency and blockchain achieve over that, especially given the high costs of transactions?

nradov 4y ago

The clearing house hosts the database. There's no need for a blockchain. https://www.cfainstitute.org/en/advocacy/issues/central-clearing-houses https://www.cfainstitute.org/en/advocacy/issues/central-clea...

legutierr 4y ago
What if there is no clearinghouse operating in that particular market?
- RC_ITR 4y ago
  You build one because it's way easier and cheaper to build a clearinghouse than it is to build a massively decentralized network of trust-less computers?
  - hanniabu 4y ago
    "hey let's facilitate this transaction on Ethereum" "no, that's ridiculous, let's build a clearinghouse, get a bunch of lawyers and have paper contracts drafter, ad deal with differences in international law."
    - RC_ITR 4y ago
      Lmfao. What is this straw man transaction that can be settled on ETH (keep in mind, you’re already completely leaning on sunk cost fallacy) but needs a lawyer off chain?! Like, either the terms are known and you put them in a smart contract or they’re unknown and you need lawyers anyway. I dig the energy, but at least be sort of realistic in your “owns”
      - hanniabu 4y ago
        I'm just going along with everyone else's rebuttal of "just use a lawyer", "just use a clearing house", "just pay someone to balance/record your own books", and whatever else they mention to avoid a solution that exists. It's a bit like hearing people dismiss email and saying "just use snail mail", "just have a scribe write the letter for you", "just use a personal carrier so it's faster".

pr0zac 4y ago

While running transactions on a distributed blockchain would provide some additional resilience here, I'm unsure if I can picture any situation where the added protection provided over current contract and civil law would outweigh the issue of having your financial transactions publicly available for review by all other actors to most businesses. It also doesn't really do much for most real world transactions because of the oracle problem. Unless both businesses only care about entities that exist on that blockchain as well having the transactions there doesn't provide any additional benefit since the blockchain cannot verify nor enforce anything outside of it. Regardless of whether the transaction of you sending me money is immutable I can still just not send you what you paid me for.

legutierr 4y ago
Good points! Yes, public blockchains are often not suitable for private or confidential transactions. That being said, anonymization tools do exist, which can solve this problem for many use cases. Also, I agree that blockchains only work in the context of a functioning legal system, in that the link between on-chain assets and physical assets must be enforced via some legal or governmental mechanism. This should be possible using contracts under current law, however, and such contracts could be limited to establishing this linkage, avoiding more complex issues that might otherwise come into play if it were not for the use of a blockchain for record-keeping, transfers and settlement.
- pr0zac 4y ago
  It’s actually an interesting question if or how anonymization tooling/coins would work in a business context. You want to shield your transactions some of the time to prevent competitive analysis of your business expenses etc but other times require provable transaction reporting and tracking for stuff like tax purposes and financial disputes. You want to be able to prove you sent a payment or need to document yearly expenditures for instance, being anonymous in those situations could cause issues. You could use signatures to prove ownership of the keys involved in a transaction I suppose but I’m not familiar enough with the laws in this context to know if it’s sufficient legally nor am I an accountant. I guess stuff like that is kind of a gray area and is an example of the unclear guidance that pro-regulation crypto folks in the US have been asking for the government to provide clarity on.

cduzz 4y ago

The two rivals write a contract? The contract involves a 3rd party that's mutually agreed upon by the rivals? If the two rivals can't abide by a contract, a blockchain wouldn't resolve the scenario either. Imagine "bug vs boot" or "shooting war" kinds of contract violations where overwhelming force is in play; why would a blockchain make a difference? Human history has lots of "people don't trust each other" scenarios, and they've been resolved in the past, with reasonable efficiency, without blockchain.

legutierr 4y ago
My point is not that the problem cannot be solved by traditional approaches, but rather to identify that it is a problem that somehow needs to be solved. It's something that people need to expend resources and take on risk to solve. The reason so much time is spent negotiating legal agreements is to reduce the surface area of dispute. On one hand, we want to reduce the possibility of misunderstandings that could lead to a "shooting war" as you put it, and also to reduce as much as possible the scope of the matter that may need to be evaluated by a court in the event of a litigation. Using a blockchain in a situation like this can make achieving both of those objectives much easier and less costly from both legal and operating points of view. There would still need to be some contractual relationship among the participants, but the scope of the contract can be simplified and reduced. And if the number of participants involved exceeds two entities, a blockchain can vastly simplify the relationships of all the participants with each other, without needing to empower a centralized entity to coordinate among all the participants. > Human history has lots of "people don't trust each other" scenarios, and they've been resolved in the past, with reasonable efficiency, without blockchain. Sure, but what's wrong with reducing costs and complexity even further?
- marcus_holmes 4y ago
  How does the blockchain solve any of these issues in a way that couldn't be done with a database and a third party/escrow as normal? And it's interesting to note that no-one (as far as I'm aware) is doing this. Blockchains have been around for a decade and escrows are still going strong - I don't see any movement to adopt blockchain for this.

eldenwrong 4y ago

>"Blockchains by definition are immutable post-finality." This is the greatest misunderstanding. Immutability is NOT a property of blockchains. Its a property of Bitcoin and possibly Ethereum through PoW/PoS

deleted 4y ago
[deleted]
legutierr 4y ago
Could you explain what you mean? As I noted, "by definition" a block that has reached finality will not be removed. Any attempt to add, modify or delete transactions or blocks prior to this point would be self-defeating because it would be automatically rejected. Yes, newer blocks can be forked out of existence before they reach finality, which is why only blocks that have reached finality are deemed immutable.

joe_the_user 4y ago

If the two rival businesses are trading real world things, they each need a database and the actual situation of the trading has to be established by real-world paper trails or whatever. So basically, the only use-case of the blockchain is "virtual currency" like bitcoin and we've seen that these "virtual currencies" doesn't actually operate as a practical currencies but rather a speculative investments and means of laundering money/control-of-sources (if you have free electricity, you can turn it into cash at a cost to the planet etc).

pclmulqdq 4y ago

The two rival businesses keep detailed records of their transactions, and if anyone does anything funny, they get sued.

legutierr 4y ago
One reasonable way to keep detailed records of transactions is a blockchain! The best thing about a blockchain in a situation like this is that the different participants don't need to reconcile their transaction records to make sure they agree. Reconciliation between the participants—which is costly and can lead to disputes—is unnecessary. Of course there are other technologies you can use as well, but using a blockchain would be easier and cheaper—especially if additional parties begin to participate in the arrangement as well.
- pclmulqdq 4y ago
  It's not reasonable, because the moment you have to interact with things off the blockchain, like dollars or physical stuff, you get the same reconciliation problems you had before. It's needlessly complicated for no gain.
  - legutierr 4y ago
    Reconciling digital records against physical assets is something that all electronic systems of this sort must contend with. But traditional multi-party systems also need to worry about reconciling each entity's records against all the other entities' records. The blockchain simplifies the arrangement. Where is the additional complexity you are referring to?
    - pclmulqdq 4y ago
      The use of a blockchain itself is the complexity, and it is a tremendous amount of complexity. All the smart contracts, infrastructure, and cryptography that it entails adds up. And there's the maintenance burden of setting up and running a byzantine fault tolerant system - If this is a private chain, who owns the servers and how many votes for each participant? How do you keep the voting fair if one side has to scale up more than the other? If this is a public chain, how do you keep your transactions private? What if there's a bug in the chain or the smart contract? All of these questions need serious consideration if you are doing real business. Particularly when a database looks like it gets you 98% of the way there and your legal department covers the other 2%. What value is a blockchain actually adding compared to MySQL and a lawyer? After all, the threat of a lawsuit is enough to keep the databases in sync almost 100% of the time, and to resolve most other problems quickly. For anything more serious, you will need to do a full reconciliation of the stuff and the money, which a blockchain won't help you with anyway.