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Thank you. From your sibling comment below: > Bitcoin doesn't actually solve the problem of needing trust it does solve the problem of needing to trust your e

by wdewind 12y ago

Thank you. From your sibling comment below: > Bitcoin doesn't actually solve the problem of needing trust it does solve the problem of needing to trust your escrow agent with your money but then again if you don't trust your escrow agent with your money why do you trust them to make a fair decision. So I'm still confused here. What new kind of contracts could I build using the blockchain? What existing contracts are made easier because of the blockchain?

deleted 12y ago
[deleted]
bdamm 12y ago
Here's one scenario. Two people want to exchange funds for service or goods. As usual, the seller wants to know that the funds will be available when the goods are delivered. Both people hire an escrow representative (similar to how houses are sold today) and all four create a transaction that binds the buyer's money into a contract; if any two of the remaining parties either enter complete or exit the transaction, then the money is either disbursed to the seller and service providers, or the money is returned to the buyer. This way, the buyer's money is bound into the contract and the seller can determine this to be the case before releasing their product or service. The escrow representatives are trust companies and can see for themselves whether the transaction is progressing as promised or not due to their connections with the buyer/seller and with each other.
- sanswork 12y ago
  What is to stop me from hiring a malicious escrow agent then and having me + them sign the transaction? Or rather what part of this process stops that from happening?
  - bdamm 12y ago
    Because escrow companies know each other, and both buyer and seller can have an escrow company they trust in the contract. If the escrow company doesn't trust the other escrow company, they can choose to not enter the contract.
    - sanswork 12y ago
      Then where is the improvement over the existing system you're still having to trust both Escrow companies and they still have to trust each other.
      - mbesto 12y ago
        My interpretation is that it doesn't necessarily solve escrow but solves one part of the escrow equation which is - "does the one party actually own enough money to pay". In other words because all BTC is tracked by the blockchain I can verify that the buyer has the $100 they are saying they are willing to pay me, as opposed to him simply saying "Ya I got the $100, don't worry". The "don't worry" part is eliminated because I can verify that his $100 actually does exist on the blockchain. If he decided to sell it, I could see that he is no longer the owner on the blockchain and thus rendering the "don't worry I swear I have the money" impossible. The release of the payment is still done by an escrow service.
        bdamm 12y ago
        Right - in the traditional escrow system, it takes weeks to wire money around. When buying a house that is not a big deal. But if we wanted to move escrow to be useful for much smaller payments, such as a TV set, then you could not use traditional escrow for that due to the high latency and fees ($40+!!!) that the banks will charge you overall for the fund wires.
        sanswork 12y ago
        >in the traditional escrow system, it takes weeks to wire money around. Have you ever wired money before? Either you haven't and are believing someone else who has told you it takes weeks or you are misrepresenting it here. I've done wires internationally between AU, CA, UK, and US and internal to each country between a variety of banks and in the past 10 years I've never had a wire transfer take more than 3 days(one off) with all the rest completing the next business day at the destination or 2 days later when I've sent it after business hours at the source.
alphydan 12y ago
I don't think it's what she/he's alluding to, but you could do the following: A: creates a hash of a contract B: creates a hash of the same contract A sends 0.1BTC to B (and in the transaction message includes the hash). B receives the money and replies with 0.1BTC and the same hash (and the bitcoin notary keeps a cut). A year later, A claims that the contract said "any member of the board" instead of "most members of the board". So we go to the blockchain and verify what the contract said, and how the two people agreed through a transaction. What does Bitcoin add? You can't erase the hash of the document to forge any part of it, and you can't erase the signature (transaction from A->B->A).

by wdewind 12y ago

deleted 12y ago

[deleted]

bdamm 12y ago

Here's one scenario. Two people want to exchange funds for service or goods. As usual, the seller wants to know that the funds will be available when the goods are delivered. Both people hire an escrow representative (similar to how houses are sold today) and all four create a transaction that binds the buyer's money into a contract; if any two of the remaining parties either enter complete or exit the transaction, then the money is either disbursed to the seller and service providers, or the money is returned to the buyer. This way, the buyer's money is bound into the contract and the seller can determine this to be the case before releasing their product or service. The escrow representatives are trust companies and can see for themselves whether the transaction is progressing as promised or not due to their connections with the buyer/seller and with each other.

sanswork 12y ago
What is to stop me from hiring a malicious escrow agent then and having me + them sign the transaction? Or rather what part of this process stops that from happening?
- bdamm 12y ago
  Because escrow companies know each other, and both buyer and seller can have an escrow company they trust in the contract. If the escrow company doesn't trust the other escrow company, they can choose to not enter the contract.
  - sanswork 12y ago
    Then where is the improvement over the existing system you're still having to trust both Escrow companies and they still have to trust each other.
    - mbesto 12y ago
      My interpretation is that it doesn't necessarily solve escrow but solves one part of the escrow equation which is - "does the one party actually own enough money to pay". In other words because all BTC is tracked by the blockchain I can verify that the buyer has the $100 they are saying they are willing to pay me, as opposed to him simply saying "Ya I got the $100, don't worry". The "don't worry" part is eliminated because I can verify that his $100 actually does exist on the blockchain. If he decided to sell it, I could see that he is no longer the owner on the blockchain and thus rendering the "don't worry I swear I have the money" impossible. The release of the payment is still done by an escrow service.
      - bdamm 12y ago
        Right - in the traditional escrow system, it takes weeks to wire money around. When buying a house that is not a big deal. But if we wanted to move escrow to be useful for much smaller payments, such as a TV set, then you could not use traditional escrow for that due to the high latency and fees ($40+!!!) that the banks will charge you overall for the fund wires.
        sanswork 12y ago
        >in the traditional escrow system, it takes weeks to wire money around. Have you ever wired money before? Either you haven't and are believing someone else who has told you it takes weeks or you are misrepresenting it here. I've done wires internationally between AU, CA, UK, and US and internal to each country between a variety of banks and in the past 10 years I've never had a wire transfer take more than 3 days(one off) with all the rest completing the next business day at the destination or 2 days later when I've sent it after business hours at the source.

alphydan 12y ago

I don't think it's what she/he's alluding to, but you could do the following: A: creates a hash of a contract B: creates a hash of the same contract A sends 0.1BTC to B (and in the transaction message includes the hash). B receives the money and replies with 0.1BTC and the same hash (and the bitcoin notary keeps a cut). A year later, A claims that the contract said "any member of the board" instead of "most members of the board". So we go to the blockchain and verify what the contract said, and how the two people agreed through a transaction. What does Bitcoin add? You can't erase the hash of the document to forge any part of it, and you can't erase the signature (transaction from A->B->A).