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I'm a big believer in cryptocurrencies, but blockchains have limited utility for many asset classes. Blockchains have a few serious disadvantages over other pr
by rdl 13y ago
I'm a big believer in cryptocurrencies, but blockchains have limited utility for many asset classes.
Blockchains have a few serious disadvantages over other protocols (chaumian blinding, or just signed receipts, or a central ledger) -- inefficiency, lack of privacy (zerocoin addresses this, but at the cost of incredibly advanced mathematics), and the 51% attack.
Essentially, anything which is inherently centralized has no business being on a blockchain. This is really anything backed by a physical asset -- the ideas to do colored coins which were gold warehouse receipts were insane/inane. Most of the sidechain proposals I've seen are equally absurd -- the idea of equities issued in a blockchain where the equities are essentially tied to a single real-world issuer is an unnecessary step. You could just have the entity issue digital shares using a centralized protocol; non-repudiation works just as well with signatures. (you might use a distributed system for a virtual corporation of some kind, but that's an exception).
Bitcoin itself makes sense (it's a decentralized store of value), and some of the smart contracts stuff might make sense (but the smart contracts cease being self-enforcing, and thus smart, as soon as a lawyer or government gets involved...), but most of the sidechain proposals involve trying to recreate assets from off the blockchain in a less efficient, less secure way, just to prop up the value of bitcoin itself.
There's no reason to use a smart contract to "prevent issue of too many shares" -- you can just have the market price shares based on what the market believes is the outstanding treasury and float. People can build systems to provide better controls there, which might in some cases involve the blockchain, but it's not essential -- we can price assets using a market with imperfect information already.
A system with ~infinity of distinct issues, traded in realtime on market(s), with perhaps something like bitcoin as a unit of account, makes a lot more sense to me than trying to have one global currency (bitcoin) and then doing things like sidechains (which don't let you escape the limitations of the blockchain protocol).
- michaelt 13y agonon-repudiation works just as well with signatures How would you prevent double-spending?
- wyager 13y ago>or a central ledger Yeah, a central ledger works great if you want none of the benefits that Bitcoin offers. >Essentially, anything which is inherently centralized has no business being on a blockchain. This is really anything backed by a physical asset Bitcoin has proven that decentralized assets have huge advantage. Your starting assumption is wrong; wealth is not inherently centralized, and assets are not inherently centralized.
- rdl 13y agoMany classes of assets are inherently centralized. IBM shares are essentially centrally controlled by IBM. Gold (or other physical commodity) backed shares can be centrally issued by each holder of gold; essentially, each bar or vault would have its own issue. This is just negotiable warehouse receipts. The only classes where decentralized issues make sense are "virtual" currencies like bitcoin, or equities/debts of virtual corporations. There probably isn't a market for more than one virtual currency in the long run, except maybe for sidechains (or exchangeable alternatives) due to purely technical things, or compliance, like zerocash vs. bitcoin.
- wyager 13y ago>IBM shares are essentially centrally controlled by IBM. Why does that mean we have to trade IBM shares with a centralized system? There are huge advantages to having decentralized trading systems.
- Retric 13y agoShares are not cash, IBM has to know who to send dividends to. That does not mean you can't have middlemen just a known address or bank account + number of shares.
- rdl 13y agoFor "real" shares, yeah. (also, voting, and other rights at dissolution). I think it is possible to have a virtual corporation which has some kind of self-enforcing dividend also payable in bitcoins. The practical benefit of this for any company with a legal presence is minor, but allowing something to exist entirely online with no particular jurisdictional ties would be nice. I still don't think the benefits of this make up for the costs of the blockchain for most uses.