- Assume paypal implements a smart contract system. Users have an option to keep their contracts public or encrypt them with their password/random secret key. Defining a contract is like specifying a template. Deploying the contract locks up the requisite sum from the concerned parties. The contract distributes this sum according to its logic, when triggered. Since we don't have mining/redundant copies of data, paypal can afford to charge lower transaction fees overall. The system is altogether more efficient and user privacy is ensured via encrypting the contract to ensure nobody except the owner sees them.
Apart from decentralization, what else does ethereum offer over and above this combination?
- Despite trying pretty hard, I have been unable to understand the valuations of cryptocurrencies.
According to my understanding, bitcoin is a commodity rather than a currency. Like gold, its value resides in how much value people put on it (unlike currencies, which have to be accepted all across their native country). However, unlike gold, bitcoin has no intrinsic value i.e the amount of money somebody would give to just hold onto it for eternity.
So the value of bitcoin should be estimated from [value of transactions that happen on the network / number of bitcoins in circulation]. However, most of the transactions happening on the blockchain (IMO) are transactions between cryptocurrencies (eth->bitcoin->eth..). The few that happen in the real world (buying goods/services) are hindered by the continuously changing market value of bitcoin/eth.
In this catch-22 (speculation hinders transactions, which makes it tougher to do fair valuation, which encourages speculation), how do we reach a consensus on the value of bitcoin?