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Comment by TrevorAustin | Hacker News Reader

Speaking as a longtime skeptic, A16Z has actually produced the single clearest answer I've seen to that question: blockchains may be good for bootstrapping new network effects by giving early participants in a network (in a Metcalfe's Law sense of network) an incentive to participate. Pure utility tokens can be like call options on the eventual value of the network if it gets off the ground. It's a novel way of solving a collective action problem.

https://a16z.com/2017/12/08/summit-crypto-alex-rampell/

Kind of like Kickstarter or Groupon, at least in their original incarnations?

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Except the early adopters don't need to actually participate in the network, just acquire and hoard tokens. There's almost no connection between the profits and the actual advocacy, resources and risks required for the network to succed.

So the incentive structure is quite different from, say, the stock market or even a kickstarter. It's more like a tradeable Ponzi with strong incentives to overpromise and overhype in the early phase, and to get out when the valuation approaches the claims without actually delivering anything more than yet another speculative asset.

You could find a way to associate someone's activity with positive signals, like give them credits for generating positive value in the network.

Detecting positive value is difficult though.

But organizing “payment” in the form of a cryptocurrency is no different than just depositing money in their bank account.

In some cases it would be: payment that evades government detection, payment that allows network participation to be anonymous, etc.

The trust issue would not be part of it in these cases, from a business perspective.

I guess I mean that predicating some network-effect-needing business on blockchain, for these reasons, still just seems like hype. Unless the business is fundamentally about anonymously being compensated in some way, then other existing financial institutions solve the problem (with just as much trust in 99.99999% of scenarios) in a far simpler way.

Your final comment doesn't really work out.

Yeah, by over-promising and hyping you could raise the price of your coin, but it doesn't mean your volume will rise as much. You cant just liquidate everything at once and get anything as close as what a simple Q * P calculation would do for you.

So that's why you work on your network, create value in it. Then later on the line, you become obscenely rich as your token's liquidity is good enough to live with forever.

That's what people calling Ponzi/scam are missing. The short-term profits are nothing compared to the LIFECHANGING profits of being the founder of a network protocol.

The best thing I've seen blockchains used for, besides currency, is as an integration platform for a non-centralized supply chain. There's really no money in it, since there aren't any gatekeepers, but that's sort of the point.

The idea is that the farmer picks his carrots, puts them in a box and sends them off to the carrot juice guy. When he does this he puts a upc code on the side of the carrot box and then puts the code into the blockchain as I shipped this thing to the carrot juice guy. Carrot juice guy receives carrot juice, makes carrot juice with carrots in box and then says, I used these carrots to make this juice in these 300 bottles. <Blockchain> Ships it to distributor. Distributor says I received these carrot juice shipments. <Blockchain> I then sold 1-30 to convenience store A <Blockchain>. End consumer bought one at 3:30pm and got sick. You have the record of how it got there and how much time it spent everywhere, etc. The thing here is there is no centralized supply chain company who controls everything, everyone just puts it on the blockchain that NO ONE OWNS. This is a net gain for everybody in the network, but there is no centralized profit there, except for maybe some systems integrators working at the edges.

This is why blockchain will probably be this kind of subtle thing that doesn't make anybody a lot of money, but just seeps into industry over time. It's a bit like containerization in a way. Huge global impact, but not really any one company who made their fortune on the container technology itself, but all the companies around it benefited.

This is solvable without blockchain though. Supply chain tracking already happens at the moment without Blockchain.

Indeed. And more to the point blockchain doesn't do a damm thing to improve trust. If someone in step three tosses the carrots out the window and uses a different batch the blockchain isn't going to get that information.

The blockchain in this example doesn't add or reduce trust at all it's just a time stamped database of stuff people said. We have those already.

Bingo. I still don’t follow how blockchain solves current problems. If the problem in your country is a lack of good record keeping, that’s not a technological problem. It’s a political problem. Cheap solutions have existed for centuries. The real question is why haven’t they been adopted? Why would those in power allow blockchain to be adopted but not existing technologies?

In most cases it seems that the existing technologies have been adopted and the people advocating for blockchain-based solutions just aren't aware that it's a solved problem.

I completely agree. It's naiveté. Technically, my local county recorder's office is a blockchain that has existed for centuries. It's cheap, reliable, correctable, enforceable, etc. It has all of the features without the downside.

People lying has always been a problem with grand internet visions. Remember the semantic web? It never went anywhere because people lie in metadata. There would have to be some sort of reputation system for participants, but with that comes an independent adjudication system to determine who is telling the truth. This brings back centralization.

I was talking with some people I know who work on HyperLedger, which is really lightweight blockchain stuff connected to the Linux foundation, and they say the most used blockchain is the one used for tracking where diamonds came from. I guess they are unique enough, or identifiable enough that they can't be easily replaced by diamonds that came from outside the system.

The blockchain solves the problem of trust. Without the blockchain, you need to trust some monopolistic middle-man that became monopolistic because he was the winner in the 'race of acquiring trust' from its consumers.

With a blockchain to track phisical goods, any third-party can consult or print a new transaction into the blockchain, it we wont need to deposit our faith in a company or a government.

We managed to solve the problem of trust, the best way we could, with the tools we had as a society, but if you analize all the paperwork, the bureocracy, the taxes and time taken to make the same system work in the classical way, there's a clear advantage in the new way od doing things.

Blockchain solves nothing.

How do I indelibly serialize my carrots? What stops me from eating the carrots I said I sent to the juice dude, and then just sending him some carrots I picked up from Loblaws?

In this particular case it doesnt solve this problem.

It solves the problem of the tracker.. Before you needed to trust the middleman by using another authority for trust, like your government given permissions and making inspections.

With the blockchain you can transfer that to the peers participating in the activities themselves.

It's the descentralization of trust. Right now we have to trust several databases from different peers, that no one have access to, and make a big effort if we need for instance know the state of something tracked by those systems.

Blockchain is a hype in a lot of situations, but that doesnt mean it doesnt have some problem domains it can be used to solve..

For me is just a algorithmic tool, like a hash, binary tree or a merkle tree. There are some problem domains where you might consider it as something to be used to solve some particular sort of problems.

Maybe for tracking physical goods it might not even be the best tool, according to the circustances, but it is something to be take into consideration, to solve this particular problem domain.

> With the blockchain you can transfer that to the peers participating in the activities themselves.

Assuming you can trust them, which kind of defeats the point. If you trust your supply chain, why do you need a computationally expensive trustless system?

Honestly the bigger problem is that it DESTROYS value for middle men so badly that there are a ton of reasons not to do it. In any consumer product that sells a story or a history the idea of checking ones work has only potential destroy value.

What? For this system to be truely trustless, the blockchain needs to be owned and maintained by all the people who use it. That means farmer, carrot juice guy, distributor, and retailer need to all have beefy computers with large hard drives to hold the entire blockchain and keep mining it.

Sure, it's great that you don't have to trust Amazon or Wal-Mart to trace the links back, but you could do just as well way more cheaply with a well-maintained independent 3rd-party with an AJAX API on top of a Postgres database. (Well, except for the part where said 3rd-party gets bought out by Twitter...)

>For this system to be truely trustless, the blockchain needs to be owned and maintained by all the people who use it. That means farmer, carrot juice guy, distributor, and retailer need to all have beefy computers with large hard drives to hold the entire blockchain and keep mining it.

Trustless isn't a well defined term so it is hard to disagree directly with what you are saying. However I would argue that most relying parties do not need to have the full state of the system to ensure they aren't cheated. In that they don't need information about other assets to track the assets they care about. For instance the carrot juice guy only needs to validate the chain of custody of the carrots. You could put a merkle proof for each custody change on a QR code on the side of the carrot box. The block headers are 70MB, the chain of custody is probably less than 10KB.

>Sure, it's great that you don't have to trust Amazon or Wal-Mart to trace the links back, but you could do just as well way more cheaply with a well-maintained independent 3rd-party with an AJAX API on top of a Postgres database.

I agree that a running PoW blockchain may be overkill for supply chain tracking. However a BFT distributed database maintained by several trustworthy institutions is probably better a Postgres database. Often blockchain is used as shorthand for "BFT distributed database maintained by several trustworthy institutions".

How is this being solved by a block-chain?

You still need to trust all the people in the production line (Farmer, Juicer, Seller and not to mention that transportation guys) that brought the bottle of juice to market to actually record things correctly into the used block-chain.

The trust required in the data entry "Link/Step" basically results in the use of a block-chain to be pointless, as trust is already a requirement in this particular chain of custody.

This is also why the block-chain only really works in Digital Only assets, as you link the asset it self in the block-chain itself.

The blockchain makes it extraordinarily difficult to tamper with post facto. As the ledger is distributed with multiple parties and each block is hashed, it’s exponentially difficult to change later. This means that no centralized entity can cook the books if a situation arises.

But that's the point blockchain is missing. You don't need to tamper with the data in the ledger because there is no way to put a carrot in it, how would you prove that the carrot in the juice is the same carrot picked? Technology isn't going to solve for that without some magical way to identity specific carrots (or beef, or whatever) that have been transformed into something else... or even just from another carrot in the next box. Blockchain is interesting but trust is still required in the system, and in many cases it is in fact blind trust.

There are various projects developing solutions for hardware and sensor integration

You're right, but that isn't the problem being solved. That problem would be present in a centralized solution as well.

This solution allows the same benefit of having a MONOPOLIZED SOLUTION for tracking supply chain, without the negatives of Monopoly taking monopoly profits.

Do you get it now?

>Blockchains may be good for bootstrapping new network effects by giving early participants in a network (in a Metcalfe's Law sense of network) an incentive to participate.

Unless I'm being extra dense today, this is the un-clearest answer I've read yet.

The 'may' qualifier also does not inspire confidence.

If the tokens provide utility, e.g. this token is 500gb of storage and adoption, network activity, or technology productivity increases, the value of these utility tokens will go up in value on the market.

So it’s basically like a new commodity. Ether is compared to gas on the Ethereum network for distributed compute for instance.

SpankChain - it's porn on the blockchain, check it out - beta.spankchain.com.

If you accept the premise that blockchains are coordination platforms, because they dramatically reduce the cost of making credible commitments to future cooperation, then you should accept that the most disruptive opportunities will require unprecedented levels of coordination - coordination at a scale that most people think is impossible or infeasibly expensive, but that those who have mastered cryptoeconomics know is now feasible.

Imagine the differences in coordination potential of two societies where only one has mastered time, and you start to get a sense of why this technology is so powerful.

The problem with that approach, is it also destroys the network. You can never revoke the bribery once it becomes a core component of how the system functions and what drives it. The hyper contributor actions on the platform, which always make up a very large share of total contribution, ultimately drifts toward maximizing the gain of tokens and away from creating / contributing content solely based on quality.

Simply put, the quality of contribution when monetary consideration isn't the primary, is going to be higher.

For those merely wanting to earn money from blockchain it is an instrument to convert electrical energy into money. All the other attached bells and whistles are a by-product.

Thanks for this!

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