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Comment by lazzlazzlazz | Hacker News Reader

Bruce's take can be summarized like this: with a blockchain, you're choosing to trust code and cryptography instead of a person. And when immutable code does the wrong thing, you can't trust them to fix it like you could a person.

This is a good take, and underappreciated - but there's a larger point being missed.

In high-social-trust situations, there are fewer benefits to blockchains. In low-social-trust situations, people aren't a good option. Bockchains provide an entirely new and welcome option for that scenario.

Relatedly, there are different kinds of distrust: mistakes and attacks are one, but platform risk is another that blockchains can alleviate. Putting it another way: I trust Twitter/YouTube/PayPal to generally work without issues, but I don't trust them not to change their offering in an exploitative way or become rent-seekers.

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> In high-social-trust situations, there are fewer benefits to blockchains. In low-social-trust situations, people aren't a good option. Bockchains provide an entirely new and welcome option for that scenario.

How does this actually work in practice? I've never seen an actual non-convoluted / non-far-fetched case where this would apply.

For one: irreversible payment. Dealing with lots of scammers as a seller? They can PayPal dispute. They can chargeback. But if they send you cryptocurrency, the money is guaranteed.

This doesn't prevent scams in the other direction, but it's something. This is a common problem many independent sellers face when doing legal and legit business.

> This doesn't prevent scams in the other direction

Which is probably the majority of the actual scam cases. Sellers scamming buyers.

So I don't think this is a good case at all.

I could not disagree more, as someone who operates a niche ecommerce business. The longer I exist, the more reputation I have. But every single customer I sell to is a new risk, and the credit card companies fob all the risk onto me. Crypto payments (which I accept as an option) are great because I have no risk of a charge back a month after I shipped. The risk of being scammed is so much more about anonymous customers than it is of businesses, who need repeat business and word of mouth.

The problem is that the risk is borne by honest business owners and honest customers. Scammers exist in both directions and the scammers typically bear none of the risk.

Regarding businesses specially, someone operating one or more scam online retailers is actively trying to suppress word of mouth. They also don't care about repeat business because their profit margin is so high. Their process may even specifically include periodically cutting ties with their previous name, websites, vendor accounts etc when victim ill becomes unmanageable.

If you choose to purchase from sketchy merchants, you have all sorts of risks regardless of what payment infrastructure is used.

As a business that wants to last a long time and attract customers, reputation is everything. People buy from large, established companies for this reason. Crypto payments help all sellers by eliminating an enormous problem of scam buyers using stolen credit cards.

Well, it is a good case for an honest merchant, that is dealing with people trying to scam them.

I don't know if that's true at all, and I suspect it's false. While both types are not uncommon, I think sellers being scammed is the more common scenario.

Even if it wasn't, though, how can you say this isn't useful? Even if 99% of scams were from sellers, the fact that this trivially and provably solves scamming from buyers is amazing. Saying this isn't a good case because cryptocurrency doesn't miraculously universally eliminate the possibility of any fraud from any party in any scenario is really setting a very high bar.

And with things like Ethereum smart contracts, you theoretically can prevent fraud from all parties in some cases, and defer all risk to the implementation of the contract. Or do you consider this a bad case as well, because a contract could possibly be flawed and "the majority of fraud isn't actually due to human deceit"?

I remember when eBay operated on people sending checks to each other. Good times.

So it solves this by superseding consumer protections? What does blockchain add here over direct payments, or cash, or even some payment broker with more seller friendly terms? I can't help but assume that regulation will reinforce these protections.

Essentially, crypto's major benefit is skirting regulation because its new and that can't last forever.

How do you propose a direct payment or cash without giving a buyer your bank account number or address, which you may not necessarily want to do for privacy and security reasons? And mailing cash isn't very efficient or practical.

Payment brokers are always going to be a point of failure. But also, it's about pragmatism: can you name an existing payment broker that fits the criteria? If not, what option are they left with other than to use cryptography as their broker?

But, yes, it's often about avoiding certain kinds of regulation. Regulation isn't inherently good or bad. Some regulation is good in some contexts and some is bad in some contexts. Cryptocurrency lets you enforce your own absolute regulation for cases where legal regulation isn't able to easily help you (like in this scenario).

Blockchain partially solves the problem of laundering illicit funds. The most popular use case I’ve seen is receiving ransoms.

My bad. I've should have added non-criminal. I'm sorry.

A criminal use is still a use. Some percent of gun sales are for criminal purposes. This counts as market demand just the same as any other sale. Precisely measuring how valuable this is to criminal enterprise is an interesting question.

My main area of skepticism regarding this proposed use case is that a blockchain is an immutable public ledger, and thus with enough sleuthing, it is probably quite traceable. Indeed many criminals have later been apprehended through monitoring bitcoin transactions.

If it is a non criminal situation, you can generally use traditional methods to establish trust, such as using courts to sue people who rip you off, or using escrow agents, etc.

The world has had thousands of years to come up with solutions to trust problems during transactions. They are solutions that work. They work for criminals too, but its a lot harder to use them, especially over the internet, because everyone providing the services goes to jail if they are transacting with criminals.

> such as using courts to sue people who rip you off,

Unless the whole transaction is anonymous, you can do the same with bitcoin.

> or using escrow agents

Which costs you extra.

Not making a value judgement, just pointing things out.

> you can do the same with bitcoin.

Yes of course - but the question was what value does bitcoin add over normal money, not /name things you cannot do with bitcoin/.

In Belarus, it is criminal to donate to the opposition party or to the wounded protesters.

A fucked society is not fixed with bitcoin

Lol! That is suspiciously specific.

You didn't need to say illicit funds. It's useful to move money without having to use a bank or government money.

It may be useful, but the generic case of transfering money is generally (but not always) not an example of a low trust situation.

Paying off ransomware software is.

And we can see this in the fact that buying goods and services from traditional (not darknet) vendors is still very hard with bitcoin. Paying randsomware in bitcoin is standard.

For most goods and services there are desirable properties to intermediaries in terms of fraud detection, refunds, etc. But it is ultimately reliant on the ultimate source of trust deriving from governments and banks.

If you are a bank or government you have to look out for yourself, and so a fair amount of blockchain hype specifically addresses the low-trust transactions they encounter. There is some quiet adoption happening globally, and mostly invisibly to consumers.

The side effect, of course, is that it's easy for anyone to do bank-like things with the tech, including ransomware.

Voting and currency are 2 real world situations.

Bitcoin isn't convoluted or far fetched even if you really want to disagree.

It's nuclear chemistry proof (unlike gold), and outside the reach of government.

Its no more outside the reach of government than you are.

Voting sounds like a terrible use case for traditional bitcoin style blickchain. Am i missing something?

I believe he’s saying the opposite - that people like to think of blockchain as trust in technology, but in reality you are still trusting in people.

Any evaluation of the security of the system has to take the whole socio-technical system into account. Too many blockchain enthusiasts focus on the technology and ignore the rest.

Spot on.

> In low-social-trust situations, people aren't a good option. Bockchains provide an entirely new and welcome option for that scenario.

We've been handling these set-ups very well for millennia. You find a trusted intermediary. These days, for better or worse, globalization has created more and more of them.

There is even a word for it: escrow

Indeed, the process is quite simple.

You want to do business with Steve, but you don't trust Steve. Cool. Do you and Steve mutually trust someone? Awesome, you've found an escrow. If you can't find someone who trusts both you and Steve, that's a great sign you shouldn't do business with Steve.

No amount of magic Blockchain pixie dust is going to change that there are bad actors out there.

It’s more for when you already trust Steve, but you don’t trust your national currency, the credit card companies, and other available “escrows”. Why force use of an escrow when you trust your counterparty ?

> Why force use of an escrow when you trust your counterparty ?

Why use a trustless payment method when you trust your counterparty and waste a month's worth of electricity?

Because my counterparty may not be able to spend my IOU elsewhere.

This situation feels pretty contrived, do you have a concrete example, especially one which you've seen personally or been personally involved with?

not personally. but imagine you are the king of island A, and want to engage in a transaction with king of island B. Or you want to split up your estate amongst your children.

I get that, but I firmly believe that solutions, certainly ones as highly touted here, should operated in the problem domain. We've yet to identify, in 11 years, a concrete problem that blockchains are better at solving than any other solution.

But what if your business is ransomware or selling narcotics, and it's hard to find a trusted intermediary?

For everything else, there's wire transfers MasterCard jingle plays.

Those intermediaries can be moderately to very expensive. Look at how much value credit-card interchange skims.

Blockchains offer a technological solution to a social problem- and threaten many "trusted brokers" with replacement with near-zero marginal cost software.

The fact that a single Bitcoin transaction requires 561kWh of power (enough to power an average US household for 19 days) -- and produces 94g of e-waste -- means that classical intermediaries are a lot less expensive in the majority of cases. [1]

Using the world average of $0.14/kWh means that a Bitcoin payment costs (or rather extracts in welfare) $79. This fee is socialized across all users in the form of block rewards, and as they diminish, end-users will have to bear the whole cost or the hash rate will drop off precipitously eliminating the security guarantees. This is on top of the $3.392 fee for processing the transaction on-chain.

At a break-even of $82.39 per BTC payment, a credit card transaction would have to be at least $27,500 in Europe (based on their 0.3% interchange cap) and $4,551 in the US (based on the average interchange rate of 1.81%). ACH payments cost banks $0.11 US.

Trusted brokers aren't going anywhere, and IMO, there's no such thing as a technological solution to a social problem.

[1] https://digiconomist.net/bitcoin-energy-consumption/

These things are true at present but are they true in the limit? Bitcoin is the first blockchain technology to see adoption and has a present market cap of over $200B despite scaling incredibly poorly.

Trusted brokers won't disappear but there's a big difference between being the only game in town and filling a niche in an ecosystem.

Technology makes social solutions irrelevant all the time. How many interactions intermediated by people no longer exist because they are now intermediated by software and platforms?

We've had 11 years of innovation in blockchain technology and so far, nothing has improved on the status quo. 11 years ago was right around when the first iPhone came out, for reference. In my opinion, that's because you can't solve trust with magic pixie dust. No matter what, trust represents a huge optimization. That means anything you try and do to reduce trust will introduce massive quantities of friction. Trust is good and should be embraced.

If something better comes along, great, but I've seen no evidence in the last 11 years that would indicate anything's at risk of coming down the pike. I've got no interest in championing a technology that hasn't budged a single iota (heh) in 11 years. If it does, I'll eat my... well. You get the joke.

[edit] note that market cap doesn't mean anything for a currency. There's no market cap of US dollars, because dollars have a fixed value relative to dollars. If I exchange my dollar for a dollar, the market cap of dollars is equal to the number of dollars in circulation. End of story. You value other things relative to currency to obtain their market cap.

The market cap of BTC is 21MM BTC. Less, given the huge quantities that go missing all the time.

Proof of stake vs proof of work?

> These things are true at present but are they true in the limit?

In the limit no more BTC can be obtained by mining, so transactions will be more expensive, because the computational cost will have to paid for by the transactor.

And the computation required will be much larger than now, requiring more energy, and, given the end of Moore’s law, will likely be vastly more expensive.

It is doomed to fail.

It may be doomed to fail, but it might be useful until it’s failed by something better. And that may be a long time.

Right, but it isn't. We've yet to find a single use case better served by crypto than traditional means, in 11 years, that is legal.

It's useful at burning incredible amounts of energy doing essentially nothing useful.

It currently uses about 0.25% of the world's electricity, which, for a market cap of ~100B, is an astounding waste.

Global currency trading, at $6+T per day, at that scale, would use 15% of global world electricity usage, which is more than any country besides US and China.

Probably more, because it's designed to be actively anti-efficient. The more you try and use it the less efficient it gets. It might well require more than Earth's total power generation capacity to do so.

Anti efficiency is a feature in other places as well: password complexity, safety procedures, memory safety, functional programming (immutability), checks and balances in government.

Electricity is renewable. Waste is unused supply. there is more demand for bitcoin than supply.

I usually agree with most of your analysis on economics, except on bitcoin. Hopefully you will come around on this topic as well.

>Electricity is renewable.

That makes no sense. Electricity is almost always turned into some other energy form upon use, and once there, it's forever lost energy. This is basic physics. Even transmission loses energy. Electricity is not "renewable". That statement makes no sense.

Electricity can be generated by renewable resources, but used electricity usage ultimately becomes heat. That entropy increase cannot be undone without a larger expenditure of energy to recapture. Basic physics. It's lost.

Next, the majority of electricity is generated by burning fossil fuels. "Renewable" also has externalities: solar cells produce very toxic waste on construction and decommission, nuclear produces spent fuel that is highly radioactive for thousands of years, hydro requires massive cement outlays which has serious environmental costs, and even wind farms create a decent amount of waste on construction and decommission.

>there is more demand for bitcoin than supply.

This means nothing. There is more demand for nearly everything on the planet than supply. That does not mean doing inefficient things is suddenly wise.

>I usually agree with most of your analysis on economics, except on bitcoin.

Thanks. The problem is I won't come around, since BTC is one of the dumbest solutions economically created in modern times. Man spent millennia making errors on how to deal with money, currency, and macro economies, and BTC has skipped those painful millennia and recreated about the worst features in every aspect. It's what you'd expect from a programmer detached from economics and history.

It's deflationary, it cannot account for shocks, it's about the most volatile and speculative place to put money over the past decade, it's not useful as a currency due to volatility, it's not useful as a store of value since it's unpredictable, it allows incredible theft and loss (check what % of BTC has been stolen or lost over time - it's astounding), it's still subject to all sorts of bad actor problems, and on and on.

It's hacker cool, but economically absolutely retarded. There is no question about that.

You may have drank the kool-aid, but economists have not, and for good reason - they know how money, economies, and exchange works, and are aware of all the errors that mankind has grown out of that BTC blissfully embraces.

You should trust a money system created by a hacker as much as you'd trust a cryptosystem created by a painter. They're both as well designed.

Edit: after I wrote this, I googled to check if there's a good page on the terrible economics of BTC. As usual, Wikipedia did not disappoint. Check the section labeled "Views of Economists" [1] to see how many Nobel prize winning economists have called it basically crap. Not one in that list had a good thing to say on BTC.

This is the point where BTC zealots apply Dunning-Krueger and view themselves as economically wiser than this many real experts.

Edit 2: There is a neat poll of a decent chunk of the world's top economists, and I never looked there to see what they have been asked about BTC. There are hundreds (thousands?) of cool questions put to this panel, and quite often when I want a feel of how a large group of the world's top economists think on a topic, I search here to see if that topic is covered. Most importantly, when they all lean one way or another, it's a pretty solid sign that is the best knowledge mankind has on that econ topic.

I searched for bitcoin, found four topics, and ouch! I guess my understanding of econ and BTC was not far off. Check out these [2,3,4,5]. It's worse than even I guessed.

After this much expert evidence, I don't even have to question my understanding of it much more. The crappiness of BTC except for scams and bubbles is not much of a question any more.

[1] https://en.wikipedia.org/wiki/Economics_of_bitcoin#Views_of_...

[2] http://www.igmchicago.org/surveys/bitcoins/

[3] http://www.igmchicago.org/surveys/bitcoin-ii/

[4] http://www.igmchicago.org/surveys/bitcoin/

[5] http://www.igmchicago.org/surveys/cryptocurrencies/

What would have to happen for you to change your mind ?

What if bitcoin passes gold in market cap ?

What if central banks start holding bitcoin like they hold gold rn?

What if a future Nobel winning economist says something nice about bitcoin ?

Or is it impossible for any new information to change your mind on this ?

Popularity != sanity, and popularity != value, and popularity != efficiency.

See: beanie babies, furbies, tulips, leaded gasoline, leaded paint, the rise of fascism in Europe in the 1900s and so on. A lot of people using something doesn’t make it at all valuable, efficient, effective or good — anything, really. It has to do that on its own merits.

You can’t escape the fundamental economics here. It’s bad. Rather it’s great at separating people from their money, and allowing the trafficking of illicit narcotics and money laundering.

[edit] let’s look at it the other way. Why isn’t the popularity of the dollar enough to convince you the dollar is better? Who would have to adopt the dollar to change your mind?

You are right, dollar is still better for facilitating most illegal behavior. I like the dollar.

I’ll tell you what would convince me bitcoin is bad: discovery of a bug that allows double spending retrospectively and someone corrupts the entire ledger to date. China taking over and re-educating me it’s bad. God addending the Old Testament or the Koran that it’s bad.

>What would have to happen for you to change your mind ?

It's not about changing minds - it's about evidence. There's ample evidence BTC is simply repeating the flaws of discarded money systems, and they were discarded because they are terrible. Unless BTC addresses these flaws there is little sense in painting a pig.

Mankind has learned that a money system that cannot adjust to shocks is a terrible idea. So first BTC needs this ability, which would make it not BTC. If it cannot at least meet minimum requirements, then it fails. You might as well argue we should trade tulip bulbs as currency if you're going to ignore modern evidence.

The real question is why do you clutch BTC given centuries of evidence and widespread professional opinion that it fails at the things a money system needs to be modern? Why do you insist on repeating flaws that have been conclusively demonstrated to fail?

I gave you ample phrases to google and learn from. If you still claim BTC is somehow immune from all its flaws that is your choice.

So, no Plausible scenario Of new evidence for you to change your mind then ?

Those trusted intermediaries require a lot of identity information, usually by law. It’s nice to be able to transact privately sometimes.

Iran and Venezuela would disagree, or any country the US government has banned from the international banking network. The fact that one country can unilaterally block bank transfers between third parties solidifies the need for non-politically centralized banking.

Because allowing the transfers enriched those in power, helping keep the leadership in place and the people down. For the record this is something you can vote on and change, because it’s a group decision. Unlike all those poor scammers who keep getting blacklisted from exchanges and such.

Secondarily, crypto is no panacea here. You can’t solve the initial distribution problem. How do you decide which individual gets how many coins to start?

If you ignore that issue, and if you can only trade within the country the total amount of crypto and the total amount of local currency remains the same meaning the total net welfare has not improved. If you can trade outside the country a myriad better options exist.

Crypto doesn’t help here either, it just purports to through magic of the blockchain. What’s necessary isn’t magic beans that live in computers but for the locals to rise up and overthrow their local governments and institute proper monetary and fiscal policy.

Concrete example: why don’t people use bitcoin in Venezuela (separate from the fact a single transaction costs a few weeks wages)? It’s been 11 years and were still waiting like skeletons for op to deliver. How did the Petro change the situation there?

People actually use Bitcoin in Venezuela [0], not en mass, but still, it provides some very useful escape hatches for a part of the population.

0. https://www.bbc.com/news/business-47553048

Part of the population solves none of the problem, as I outlined. The monthly minimum wage is 1 bitcoin transaction fee. It's only the wealthy that can afford to use it in the first place. It's doing nothing to increase the total welfare of the system.

I never disputed that a select few couldn't benefit from it, it's not a good general solution, though.

Then use dai? Much lower fee. When ethereum scales to thousands of transactions a second, it will be the top solution.

That does not solve the initial distribution problem.

> Bruce's take can be summarized like this: with a blockchain, you're choosing to trust code and cryptography instead of a person. And when immutable code does the wrong thing, you can't trust them to fix it like you could a person.

Maybe Bruce hasn't heard of the Ethernum DAO fork [0], or the two subsequent forks. The immutable block chain seals a bad decision, then suddenly it wasn't so immutable any more. Just like someone paying you via direct bank transfer is irreversible, right up the money they are transferring was stolen from the bank - then it turns out it's real easy to reverse.

Crypto currencies are the tools of people, not the other way round. If we, or in the particular case the miners decide they want the block chain to be mutable, then that is what happens.

[0] https://en.wikipedia.org/wiki/Ethereum#The_DAO_event

"the people" don't kid yourself for a second that cryptocurrencies aren't the purest form of plutarchy. Who owns all the mining power?

Bruce's take can be summarized like this: with a blockchain, you're choosing to trust code and cryptography instead of a person

It can't be summarised like that. He explicitly says: "Any evaluation of the security of the system has to take the whole socio-technical system into account".

His issues revolve around the fact that blockchain ecosystems have become centralised: "Just about everyone using bitcoin has to trust one of the few available wallets and use one of the few available exchanges. People have to trust the software and the operating systems and the computers everything is running on. And we've seen attacks against wallets and exchanges. We’ve seen Trojans and phishing and password guessing. Criminals have even used flaws in the system that people use to repair their cell phones to steal bitcoin".

While I agree with Bruce assessment that a lot of Blockchain evangelists push the whole "decentralized trust" or "trustless" or "in code we trust" ideas, I actually think you don't need to buy these ideas to see some hope in how things may work "better" if the promises of Blockchain materialize:

I agree entirely that we would need still be trusting humans even with Blockchain (shifting trust around). But I do see us gaining something with Blockchain: standardization. Rather than having multi-national and multi-lingual team of lawyers and diplomats to establish contracts and rules and how to interpret it and enforce them we can (try to) standardize all in code.

We would all still need to trust our lawyer/engineers, but now they don't need to trust some intermediary, translator/etc to get things done.

People think lawyers are just about making sure there are no loop holes, but its really not that. Lots of it is about making sure that two parties really agree on something including in the fine details.

Blockchain isn't going to magically solve the problem of having to figure out what the two sides actually want.

It won't, I agree. but won't it help auditing compliance and enforcement after agreement has reached?

Maybe if everything the agreement is about is on the blockchain.

However i cant think of a non-contrived example where that is true. Real agreements involve real things in the real world, outside of the reach of automated compliance checking, and you're back at square one.

Perhaps you could say that the formalized computer language helps disagreements, but lawyers already have formalized language for this, and i suspect legaleze is better for making human-agreements than some turing complete language ever would be.

This is why the Stellar blockchain looks promising. On the Stellar blockchain, you put your trust in anchors and issuers (human entities) and each blockchain-subset (roughly the trust-union of specific-token issuers and specific-token anchors you choose) can create a highly distributed / decentralized blockchain from each users perspective, depending on how many anchors and issuers you are willing to trust.

It's a wonderful hybrid of "high-social-trust" networks run by humans (banks, governments) and distributed trust via code / your choice.

No one ever seems to address the fact that Blockchain still doesn't magically provide trust at all. It still needs people to participate for that and provide their resources (miners).

And for people to participate they need some incentive or reward. So how do you ever motivate enough people to participate in your distributed ledger?

You can give them blockchain tokens of course, but now you've created a new currency again with all its associated problems. Hardly a solution for your original problem of low trust.

> with a blockchain, you're choosing to trust code and cryptography instead of a person. And when immutable code does the wrong thing, you can't trust them to fix it like you could a person.

There are soft and hard forks that do change the behavior of blockchains so I'm not sure I entirely agree with the premise of this argument. Help me out, what am I missing?

I found the value of blockchain in a low trust setting easier to understand after reading up on the Byzantine Generals Problem fault tolerant distributed systems.

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