What Problem Blockchains Solve(solutionspace.blog) |
What Problem Blockchains Solve(solutionspace.blog) |
This is really the key issue, which is difficult to change. I can't think of many important systems where we wouldn't expect human intervention if something goes wrong.
Take the existing legal system in the US – laws are interpreted by courts/judges/etc, who AFAICT generally choose to interpret laws by their letter rather than their spirit.
As an example, you can look at the recent Kyle Rittenhouse trial with regards to whether or not it was legal for Rittenhouse to be carrying his firearm. The way the law was written, it basically carved out an exception so that 17 year olds can open carry, even though that was unlikely to be the intent of the law's drafters. But of course the judge found Rittenhouse to be not in violation because that's how the law was written. Smart contracts don't seem much different, except you're removing the inefficiency of someone having to judge what the letter of the law is.
For contracts you don’t know what you want up front. Same issue in a lot of programming where you don’t know all the requirements up front. You horse trade towards mutual agreement but things are usually always open for renegotiation. There was a very dry article published yesterday that had this great insight:
“A key tenet of economic analysis is that enterprises are unable to devise contracts that cover all possible eventualities, eg in terms of interactions with staff or suppliers. Centralisation allows firms to deal with this "contract incompleteness" (Coase (1937) and Grossman and Hart (1986)). In DeFi, the equivalent concept is "algorithm incompleteness", whereby it is impossible to write code spelling out what actions to take in all contingencies.”
The US legal system is based on English Common Law, where precedent and interpretation by a judge have force of law. This is in contrast with Civil Law where the law must be executed as written and judges have very little room for interpretation. Note that in North America, both Quebec and to an extent Louisiana continue to follow the Napoleonic code.
Basically while code is law for these blockchains, human attention and usage still dictates the value.
So I've made a relatively small investment in crypto across a couple of dozen coins as an experiment. I am cautiously optimistic in the future, assuming it'll be 5-10 years until viability at any practical level for a mainstream audience.
Like couldn’t it be used across a dyson swarm of rotating habitats or something as the transaction currency between them?
You can use the original Bitcoin protocol to stream (and pay) for each packet of data. We can now make a pay-to-use netflix, something we haven’t done yet. https://xiaohuiliu.medium.com/netflix-over-bitcoin-payment-c...
https://www.ibm.com/blockchain
This gives you an idea of some real world business problems that have been solved with the technology. Still, personally, I find the question of "when do I decide to consider using a blockchain as an implementation choice?" a difficult one to answer.
The same issues persist, they're just packaged/framed differently - and, due to lack of regulation and norms to mitigate them in the real world, can still be exploited.
People were complaining that Google eats up so many engineers to solve ad-problems but the whole blockchain space is much worse - what a colossal waste of human and ecological resources.
Why is this topic so charged? Is it because the environmental damage (but then PoS should change it)? or because there's money involved (but then ENS+IPFS are poor, so should be good)? Or is it just because it's complex and takes a lot of effort to understand?
TFA makes a solid argument about the limited problem space where blockchain tech is useful.
> Or is it just because it's complex and takes a lot of effort to understand?
Look, I see that you're deep into the ecosystem and you're excited about it. The core ideas of blockchain are not that complex. It's the human factors surrounding all of it that make it so fucking tiresome thread after thread.
But that is also what makes it so interesting. Nobody forces people to use and assign value to Bitcoin. It all happens only because people want it. No government mandates, nothing.
Am I indeed inside the bubble of a giant pyramid scheme? If so, what does that say about me and my judgement?
On the flip side, what if all this blockchain/Bitcoin/web3 stuff is the next big thing? Does it mean HN has passed its prime and innovative people at the cutting edge move elsewhere? I wonder what someone like Brian Armstrong from Coinbase would say, being in both worlds.
The OP article itself is banal, it reads like a high school book report. How is this at the top of the ranks?
From "Hacker News: Welcome" [0]: "HN is an experiment. As a rule, a community site that becomes popular will decline in quality. Our hypothesis is that this is not inevitable—that by making a conscious effort to resist decline, we can keep it from happening."
Block chain as a concept with the single use case of store of value has been around since 2009 in the form of Bitcoin. So let me only pick one battle here: The problem is federally-issued inflationary currency. Bitcoin solves it.
So far it is only proving that it cannot be both.
For assets, one can choose to invest in already existing inflation resistant assets, and many investors and even unsophisticated laypeople did that across the ages before Bitcoin was invented. So essentially federally-issued inflationary currency is not really a problem of investment because there are other alternatives to it when investment is concerned.
As an asset class BTC solves yet another problem: It is a better version of gold due to the hard supply cap.
https://www.sciencedirect.com/science/article/pii/S016517652...
https://en.m.wikipedia.org/wiki/Neptune%27s_Brood
Money was split into slow, medium, and fast variants -- the former of which was subject to speed of light limitations in the key signing for verification.
> Lag of up to 24 hours is ok
So you could use any eventually consistent DB? Or a pub-sub type queue that you process at your leisure?
> and the relatively small number of parties is quite trustworthy.
I'm assuming this parties need to apply/be invited? How is that different than needing an API key?
> Basically they just use the bc for consensus
Consensus of what exactly? AFAIU the consensus is about the state of the data on the blockchain, with sanity checking against itself, not about if many parties agree if "this number should be blocked"
> and mirror it to a rdbms for read queries.
I was always under the impression that it's quite fast to read the data off the blockchain if you are a node. Am I misunderstanding something or is what they are doing just overkill?
As Nick Szabo will attest, each transaction you make consciously carries with it a mental cost. It sucks. People would much rather a Netflix model to a pay-as-you-go model even if it ends up costing them more money in the long run. [1]
> We can now make a pay-to-use netflix, something we haven’t done yet.
[edit] I hate to break this to you, but you just described the Apple Music, TV and Movie stores, the first of which (music) has existed since the dawn of the iPod in 2001. Also the Amazon equivalents. And a pile of others.
[1] https://nakamotoinstitute.org/static/docs/micropayments-and-...
However, why couldn’t we have both options be available?
If there is one film on a streaming service that I know I’d like to watch, but don’t want to commit to $10 a month just to watch the first 30 mins of, why can’t I pay for the minutes of the media I watch instead?
This also could be an interesting monetization method for creators who make videos on YouTube who dislike adverts. I’d be more happy to pay to support the creators directly, if I knew they’d get a good cut.
I don’t think it’s fair to say that humans don’t like micro transactions as we’ve never been able to try it in the real world. Sure, they might not work for everything, but they may allow for new things to flourish. Things that cost $0.001 cents for example.
Yes. Extremely slow, inefficient and expensive. We really haven't been able to do micro transactions this way before.
[1] https://cointelegraph.com/news/microsoft-quietly-closing-dow...
The article did a good job explaining what general problem blockchain solves, but didn’t give me a very good idea of what problems one might try to solve beyond existing implementations.
2. If you need to be able to add more entities who want to participate in the distributed ledger. Or, conversely, drop out entities that are no longer participating, but everyone else still wants to preserve the history of their transactions. If you do deploy to a centrally-owned databsase, if the managing entity ever wants, for any reason, they can pull the plug on the whole operation. A distributed ledger ensures you can add people at any time — no one can lock you out from joining. And also it ensures that if you ever want to leave, the data and the work continue.
3. If you need strongly-consistent views of data, and you don't care about transactional limits. Most distributed ledger technologies are greatly bottlenecked in terms of transactions per second. And I mean some are limited to less than 10 transactions per second. Others can scale to thousands of operations per second. But many centrally-managed and even distributed databases can operate at millions of operations per second. So blockchain is not going to do anything like "eventual consistency." It just won't. And because of that, you'll have these strong throughput (ops per second) limits.
This basically means most of the examples in IBMs marketing (supply chain management, vaccine rollouts etc) don’t actually make any sense to do on blockchain vs using a regular database.
Luckily, there's a helpful guide available, if you hit Learn More on the first "most probably NO." [1] It's based on this paper. [2]
This is a typical way of looking at the world from people who were lucky enough to grow up in a society that sort of works, unfortunately not the norm for a large fraction of the human race.
I suspect that - had you lived under German occupation in 39-45 - you would have a very different take on things.
So much so, that your hard currency is kind of a rounding error in this situation.
If the state loses its monopoly on violence, well, someone can just beat you until you're dead or you give up your private keys. Either one should be fine.
I don't optimize my life for some hypothetical dystopian failed state situation in any other aspect of my life. I don't have a fallout shelter in my back yard. I don't have bricks of gold. I don't have Kalashnikovs. I don't have bullets. I don't keep a stash of canned peaches. I don't have gas masks or iodine pills. This isn't Metro Exodus. It's massively inefficient to plan for such a situation in any aspect of my life.
The risk-reward profile is just flat out nuts. I can't know ahead of time beyond these key resources what I'd actually need. And I know I can't count on the internet being up for me to trade spreadsheet cells for gasoline in the apocalypse - nor can I count on good actors to have 51% control of the network.
Why on earth would we force our currency to operate as though there was a German occupation at all times, and take on all the massive inefficiency that goes along with it? Especially when its climate implications are pushing us towards this dystopian future.
What does this mean exactly? I don't think I would want to live through a Nazi regime that could inspect all transactions by scraping the block chain.
Arguably the greater problem is that people upvote this stuff; this subthread was at the top of the page when I saw it (I've downweighted it now—which we try to do whenever we see a generic subthread at the top of a page). But it's harder to tackle the problem at that level.
Read the whitepaper; Bitcoin solves the problem of centralization of trust, fraud and it enables transparency. No more creative accounting and cooking the books. On top of that it enables microtransactions as small as faction of the cent. It is quite big innovation.
Somehow Reddit looks smarter when it comes to blockchain topics.
Sure there were probably blockchain projects that got traction and use blockchain, but the only reason it’s blockchain was that it’s easier to get funding for that.
Genuinely curious.
Unfortunately, HN became /r/buttcoin long ago, and it looks like it's not the place to have a nuanced and rational conversation about blockchain or anything crypto. There is such a wide array of rich conversation about very interesting topics happening elsewhere (monetary policy being my favorite topic after reading The Bitcoin Standard) that is just routing around HN into subreddits/discords/twitter.
You literally need to create a grammar for that, and an application layer, which is not part nor parcel to the blockchain architecture.
Nor should it be.
You should be able to make an assertion of rights, and then provide proof of those rights, based on multiple computing paradigms, whether from a SQL or NoSQL database, or embedded within a computer file itself, or so on.
There's a whole body of work in my life associated with this idea, and no, blockchain doesn't automagically solve for many or any of the problems I saw looming back in the 1990s:
What's the Constitution? It is a piece of paper with ink on it. The paper and ink aren't that valuable, actually I have many better pieces of paper and some better ink. So that isn't where the real value is.
I could also buy a modern copy of the Constitution which would be, practically, much better than the original (in the sense that it would be made of modern materials and more durable as a result), so the value must not be there either.
I guess it could be in the investment value of the Constitution. I mean, I bet if I had the Constitution and held onto it for a couple decades, I could sell it to some collector for more that I bought it for. But that's not really a satisfying answer -- clearly the investment value is derived from some other underlying belief that the thing is important.
Anyway, if I was really good at writing I could string you along indefinitely and keep cutting away aspects of the Constitution that clearly don't provide the value, but I'm just a programmer so let's get to the point: I think the value of the Constitution is actually completely divorced from the physical thing itself. It comes from the history that it represents -- which is actually an intangible idea.
So, if someone were to mint an NFT of the Constitution and we decided that it also represented that idea, I guess it would be just as valuable? Good luck convincing other people! But I don't really see why the physical piece of paper is fundamentally a better representation of the idea, other than that's just the way we've always done it. Maybe you can mint an NFT of the Constitution for yourself, and convince yourself it represents the idea better than the piece of paper did. I think this would be a pretty silly thing to do, but no more so than trying to own the paper representation.
These are all just ways of satisfying our irrational desire to own part of an idea, the problem comes from our belief that ideas are ownable, not the shape of the token.
The same way you can buy or even make replicas of nearly any artwork out there. The one blessed by the creator has value that the illegitimate copies do not.
My point was: BTC is more deflationary than USD. A relationship between the topic of the study and my statement does not exist. But if you read chart 1 of Figure 1 carefully, you will find that its data in fact supports my statement.
I’m not here to shill. But defi and private digital money have value.
Increasingly so when you look at government incompetence globally.
There's always a "not true blockchain" in these discussions, isn't there
> more transactions each day than any other network at a magnitude less cost.
So. It maybe, barely approached real world. It's a far cry from "allow for micro transactions in a way we’ve not been able to do so far"
> Less cost in both user end and CO2.
I don't buy "we only run on clean energy" claims
I've met quite a lot of people invested in crypto around here (seems to be quite a big fad for a few years now) and only one had proper understanding of the technical aspects and believed in the technology itself to solve other problems that aren't just finance scams. One from a pool of 100+ people that I had conversations about crypto in the past 4 years.
Nowadays I simply avoid any chat around crypto in real-life, the signal-to-noise ratio is so damn low that it's impossible to have a good, intellectual conversation around it, it's a rotten subject.
Gold is the least good example among these kind of assets, because ownership is less bound and provable by law. Stocks and real estate are much better in that regard.
[1] https://foreignpolicy.com/2021/12/06/bitcoin-city-el-salvado...
Or is that why Bitcoin is "worth less", too?
If Alice makes a Constitution NFT, and Bob makes a Constitution NFT, which NFT is the legitimate one? I'm not sure how using "Blockchain" to track the trust issue helps at all.
If you say "The first one to file the NFT wins" (lets ignore the fact that this only works if both Alice and Bob are using the same blockchain with the same concept of time), then what if Bob files the NFT but doesn't in fact, have ownership of the Constitution? What if Alice is the true owner, but heard about NFTs later and thus does the filing process after Bob?
Unless Alice or Bob are minting an NFT which they claim is redeemable for the Constitution, which isn't how these things generally work I think, either of their copies has some argument for representing the Constitution. In any case these are all just mementos that represent the idea of the history of the Constitution, as is the real one, as is Ben Franklin's switcharoo copy, as would be your own privately minted copy. I think it is impossible to meaningfully get it right.
Says (s)he as multiple artists see their artworks stolen and sold on OpenSea.
Nobody can (or should) take NFTs for Real-Life goods seriously until this problem is solved for good.
I myself doubt it can be solved properly without a centralised authority which would contradict the whole "trustless" selling point. But I'd be glad to hear approaches how this and the Oracle problem could be solved in a trustless manner.
But the application-level definition of parsing and comprehending what an entry in a ledger stands for is not universal. These are proprietary, or at least, communally-held paradigms being set up independently by each ledger designer.
We're lacking universal grammars so that the logic of an item designed to operate on distributed ledger X would be recognized or honored if migrated to distributed ledger Y.
Assuring ownership of the data itself in a decentralized way has value outside of this current fake / grifted meme of owning a random PNG. It's tiring that a community that seemingly prides itself on technical understanding gets so hung up on an overused fake use case.
I actually own around 200 frames of a certain movie (bought them from the production company as a way to help sponsor the movie) and I would like to put them up for sale as NFT's, but I dont really see how everyone else could just claim the ownership and do the same.
The use cases are: regulatory arbitrage, crime and grift. That's it and that's all folks. Nothing more. Everything else is better solved by classical means.
The golden rule of blockchain is: if you think blockchain solves any given problem better than a classical solution you either don't know enough about the problem, or you don't know enough about the blockchain.
> Like that's nice and all but you sound like sour grapes.
[edit] As always, it's important to remind crypto folks that outside of the cult, ad hominem attacks are not suitable replacements for fact.
Fuck the law. Law != Justice. Use some critical thinking skills for once.
You earned your wealth. It's not the government's.
It's practically impossible to get meaningful quantities of it without having a SAR or CTR filed against you. Denominations are small so having a large amount is visible, risky, bulky and inefficient. Not to mention hard to explain away. And it's practically impossible to deposit meaningful quantities of it without having a SAR or CTR filed. The whole modern financial system is designed to catch criminals using cash.
Cash does a good job of threading the needle, taking into consideration the need for individuals to have a peer-to-peer, anonymous, offline decentralized currency while also taking into consideration regulatory and compliance needs.
I've nothing against cash, it has it's place, and no need to put words in my mouth.
Except ownership is difficult. Eventually the creators will die, and the ownership of their IP will transfer to their estate. Those estates have arguments. If two people, part of a hypothetical estate with a claim on some IP / Artwork / whatever make competing NFTs, how does "blockchain" resolve the issue at all?
Suddenly, we're back to courts and arguments. No technology seems to be able to magic-away the agreements we have with each other as a society.
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The other issue is: if you aren't using blockchain for trust, then blockchain is no better than a literal physical certificate. A fancy piece of paper with the signature of the artist.
Here's the full claim: "Provenance is a thing, so no. You're just some rando and nobody would care about your NFT."
It turns out, that "some randos" have a jolly good time on NFT platforms selling stolen goods, and it's not an exception, considering how many of them are. NFTs provide exactly zero help with provenance that "matters".
> tolen art isn't the norm, it's the exception, IRL and on-chain, it's not honest to imply otherwise, and you know better than that.
OpenSea had so many complaints about stolen art that they decided to just remove the complaint form. Because stolen art is the norm on-chain, and NFTs provide exactly zero protection against that, no matter how much you claim that "provenance matters".
It's a norm to such a degree, that it's easy to watch this in near real-time (e.g. https://twitter.com/NFTtheft).
Now let's have some numbers on how many legitimate mints/trades are made every day, and then this will be a useful comparison.
One example: Trade reconciliations. Lots of things (eg swaps contracts) that trade "over the counter" (not on an exchange) start off crazy bespoke but over time end up being largely standardized. So these days if you trade a swap, the contract is a standard contract called an "ISDA Master" with essentially a one-pager referencing the isda master filling in the blanks in the standard contract - what the legs and key numbers are, who is long vs short the legs etc. 10s of thousands of these are traded every day.
In order to settle these so can people actually start paying each other money, there needs to be a reconciliation (ie I need to agree with you on the contents of the one-pager so we both know exactly what we are both holding). Because the two sides don't trust each other (they are adversaries in the market), both will have entered the details of the trade in their own systems as they understood them and there will be errors and breaks and things are hard. Armies of people and systems are employed to solve this problem. If there was just a central database it would all be so much easier[1] and this whole reconciliation problem would go away, but how do things get into the central database in the first place and how do the participants trust that the record there is good? Well, you can see you would still have the same reconciliation problem.
Blockchain could resolve this by having a single definitive contract record stored in a trustless fashion. You could make it so if both sides put in the same details the trade is matched and otherwise both sides get the trade rejected until they can resolve. It becomes trivial because you have a database that can be shared without trusting any central party. There are trusted central parties (eg clearing houses) in these systems by the way, but they behave as another counterparty so they don't solve the matching and reconciliation problem described above. You still have to match the two potentially-conflicting versions of the real contract for the clearing house to novate (step into) it.
Now are there other ways to address this problem? Of course - they are doing that now. They just suck.
I'm sure other industries have similar issues around reconciliation between parties etc that would work the same - I'm just not personally familiar with them.
[1] It would also be far easier to report these trades to the CFTC btw so that's another pile of cost that could get taken out by such a solution.
What typically happens is that a company suggests they want blockchain to solve some problem, like trade reconciliations for example and gets together a groups of likeminded partners. After lots of deliberation they then build some blockchain thing. However it turns out that the blockchain solution is more expensive (hardware and devs), more difficult to understand (see upgrades comment below) and generally worse in most regards compared to a centralised solution.
Furthermore, there are difficult technical problems to overcome like versioning (eg flag days vs rolling upgrades, backward compatibility of protocol upgrades) which there are no good compromises to. Eg company A wants to upgrade but B doesn’t, so no one can upgrade. Because of this you can’t really use a single network so you need a federation of networks and this gets really complicated.
The other issue is around systems of record. Companies - of sufficient size - by law need to maintain financial and operation records and of course they manage the golden source for these records. Conventional wisdom is that blockchain can be the new golden source but it doesn’t work like that because what’s ends up needing to happen is that all the participants end up reconciling what’s in the blockchain to their own systems! The blockchain becomes another system! They need to do this because the blockchain can’t contain any private/enriched data for a particular company (eg company A reports using UK GAAP and company B reports using IFRS).
Some companies struggle on with the blockchain because there is a true believer sponsoring the project. They waste a lot of effort. I’ve seen companies Chuck away tens of millions and have nothing to show for it. Most companies end up ditching the blockchain and build a centralised solution using something like a clearing house model where all participants are owners and get a proportionate say on governance for the centralised entity.
Don’t get me wrong… There are uses for blockchain but they are typically infeasible to implement because the costs outweigh the benefits.
I was doing blockchain for 10 years before I gave up. I was really enthusiastic about it before but now I know that the enterprise space won’t go anywhere and the permissionless/web3 space will likely get regulated out of existence in due course.
Either party enters them as a candidate record, including identifying the counterparty, and both acknowledge it.
Or one party creates and digitally signs a record, and sends it to the other, who digitally signs and records it in the central database that act also constituting acceptance.
Blockchain doesn't solve anything explicit in this scenario (it doesn't address lack of trust between parties better than a centralized system), what it arguably does is address lack of trust in the operator of the centralized system, if one can instead trust the aggregate of operators of the distributed system.
1) If you had a centralised database, it would be extremely difficult to prevent the people operating the central database from exploiting the fact that they literally know how every bank in the financial system is positioned. It would be the juciest inside information ever.
You definitely need some kind of system where both sides can know they have agreed without anyone within the system being able to get access to all the facts globally in a timeframe where they would be able to take advantage of this knowledge.
2)Who would run it? The only feasible bodies that I could see would be the central clearing houses and they definitely haven't shown the level of operational competence that would be required given that if this thing went down pretty much all finance would stop until it was fixed. Banks use the swap rates to bootstrap their discount curves so if the swaps market disappeared for a few hours literally noone in the world would be able to accurately risk-manage any sort of trade that was dependent on future cashflows.
Or does this not actually validate the transaction directly? Is this just about creating a trustless arbiter for market prices or something along those lines?
What's being traded in a swap are just cashflows. An example of a swap would be for the next 5 years every month I pay you 4% interest on 1m USD and you pay me 3 month USD Libor + 250bps (interest on 1m USD). The facts that we need to agree are all of those things plus a couple of others that are a bit more technical but are important to make sure everything calculates correctly (various dates, the calendar basis to pro rate the payments correctly etc).
2. You've replaced a natural language that people understand with a program in an esoteric programming language
How is this a unique solution etc.?
Easy, next one.
- Extremely costly
- Very slow
> One concept: Kill the middlemain
You're not killing middlemen. The moment you step outside blockchain, you need middlemen.
When you need someone to verify that this esoteric code actually encodes you contract, you need middlemen. etc.
> Easy, next one.
If you ignore reality, everything is easy, sure.
BTW. Contracts-as-code have been done since computers became a thing.
We have a mechanism for getting rid of useless middlemen already, it's called capitalism. It's by no means perfect, of course, but the incentive to remove middlemen is codified in cold hard cash and shareholder value.
Typically people were smuggling foreign currency (US dollars) out of the Soviet Union rather than rubles. Rubles were of little use in America. But smuggling dollars was in violation of two soviet laws at one -- any operation with foreign currency was illegal (up to death penalty for currency "speculation" at scale); and transporting undeclared valuables across the border was illegal too. People in 1978 were literally risking ending up in a Siberian labor camp while trying to board an Aeroflot plane to Vienna (transit hub for immigration from the soviet union during iron curtain).
> You earned your wealth. It's not the government's
A common misconception among libertarians and alike; that's outright false. Pretty much everyone in a regular developed/ing country, especially in a centrally planned economy like the USSR, has wealth because a society and a government enable it. Be it with infrastructure, education, regulations, monetary system, or whatever. For examples how important those are for any wealth generation, look at Venezuela or Turkey.
You cannot divorce one from the other.
[edit] (They earned units that they could exchange immediately or at some future time. Whether or not that amounted to wealth is based on what those units could or did turn into at the point of measure within the framework of the society in which they exist.)
But yes, they were kept inside the country, which is a separate issue.
Yes, that’s exactly why people who actually lived there now regret its collapse. The younger the person, the more they were oppressed by the KGB.
Taxes are a great way for citizens to give back to the pool used on them, proportionally, and for governments to insentivise and discourage behaviour ( e.g. lower taxes on electric vehicles and raise them on more polluting types). Saying taxation is theft is a great way to out oneself as incredibly naïve and with approximately zero understanding of how anything related to government, politics or economy functions.
It was their way of sticking it to people for "abandoning" the country.