But when i hear things like using blockchain for contracts or for keeping track of supply chain... it always seems like what people really want is just a well organized and reasonably trustworthy third party who can handle this stuff. Does anyone have any specific examples where blockchain would be a better solution?
But the part you can't trust is in the physical realm. The fanciest blockchain won't tell you if the package's contents have been tampered with or pilfered.
The anecdote I heard was that say you have a blockchain to keep track of your goods shipping on trucks. When the trucks leave and enter a facility their payload is entered into the blockchain. The idea is that it will make sure that every party along the supply chain can say "well I got the next person what they needed" so you can easily put blame on and correct for missing/failing items.
Sounds good, right? Well, not so fast. It turns out that some of the items were stolen from a truck (whether by an employee or otherwise). The truck arrives at the next facility, scans in and certifies that they have the proper items and none are the wiser!
Hold on, can't they just physically check at each stop to actually make sure that they have the right cargo?
Bingo! At that point, what problem does the blockchain actually solve? Blockchain works okay-ish for digital goods (cryptocurrency), but completely falls apart for physical goods.
Just the two? Because it has been a while since I heard anyone ask "Who is John Galt?"
Property rights are messy.
How do you create a new category of mineral rights a hundred years into the blockchain?
Also: Rule change! City is changing parcel sizes by narrowing sidewalks. Another rule change! Single-family home neighborhood rezoned to multi-family; two plots are mostly (but not completely) combining to create a multi-family plot with air rights bought from the church next door. Rule change! Everything east of this line of longitude in those two towns (but not unincorported county land as of the 2009 geological survey) is now federal property per eminent domain.
A partial log of property rights is no longer a property rights register. It's reference material. Annotations.
> How do you create a new category of mineral rights a hundred years into the blockchain?
Same way you add a category of mineral rights now - you pass a law and you add a category name. Then you start recording documents that track those rights.
I actually think blockchain would be an interesting model for media ownership. Buying movies or other things online is sketchy because your 'property' basically gets tied up in the fortunes of a particular company. 'Buy' a movie from StreamIt.com and they go under? No more movie. I'd love to see a consortium that agrees to use a blockchain system to issue movie rights - the media companies agrees that anyone who has control of a wallet with a 'moviecoin' minted by them has the right to watch that movie. Even if all the original companies go out of buisness, new companies could keep running the network and charge smaller fees for bandwidth to stream you the movie you already own.
https://en.wikipedia.org/wiki/Recording_(real_estate)
That doesn't necessarily mean that a blockchain would be preferable. If one thought the US system is actually better than a registry, then one might consider a blockchain is essentially a fancy central registry.
and btw look at Estonia - implemented blockchain for most of its govt stuff - including judiciary, and they are among the fastest in the world in terms of time to resolve matters once they reach the courts
ref: https://e-estonia.com/solutions/security-and-safety/e-justic...
Safe? There are many solutions to maintaining reliable records. Blockchains are one, but no better than many others
Scalable? I cannot understand how it is possible to think that scalability is a attribute of blockchains. A centralised blockchain is no less scalable than many other cryptographic solutions, but a lot more bother. Distributed blockchains are not scalable at all, are they?
Scalable: There are a few aspects of scalability. The one you are referring to and what most people think of is number of transactions which is indeed limited right now but for most data is good enough, especially with L2s like Optimism and zero knowledge rollups. The other aspect is social scalability. If you want a system of records to be available to more people then the organization running it is the ceiling for how widespread adoption will be. A birth records system for Peru will never be used by Brazil, the US, or anyone else. For a system to scale larger than a single country then it needs to be credibly neutral where no person or organization controls it and everyone can trust that the system is fair. That's the kind of scalability that smart contracts offer. Worldwide systems that scale to anyone who needs to use them.
There are plenty of cases where it's better to not have to trust on any particular entity. Examples:
- Marketing and advertisement campaigns. How much ad fraud exist and how much money is spent by advertisers without knowing if they are actually reaching their customers. Do you trust Google to actually mitigate these problems?
- Health care: remember Google Health and Microsoft Health Vault? Nowadays Apple/Google/Samsung wants to collect that data. Wouldn't you rather have it in a way that only doctors had access to it?
How is a blockchain the answer here? The "distribute all data" and "keep history forever" attributes seem actively bad for healthcare use cases.
Indeed, for example "John Smith went to see a HIV specialist on Monday" is protected information and would be a HIPAA violation if leaked. Its much simpler to throw it in a relational database and only let the HIV specialist and staff see the appointment.
Anyway, both the example of advertisement and health care data need to also provide privacy. In both cases the data should be considered sensitive and not public. In both cases, the data can be protected through blind signatures.
I'm interested in if that data is useful to anyone?
Also, why not trust a central entity with that data?
I.E. blockchain does nothing to solve this potential issue
Without a blockchain, if the shipping company and banana producers were colluding to skim you of 2,000 bananas, it's much easier for them to do.
I mention about the producer saying they have a receipt indicating 10 bananas. Whoever produced that receipt signed a message saying "I got 10 bananas from the producer" is now on record responsible for it.
What in the world does the use of blockchain enable in this case?
What if the manager of the central database wants to block one of the producers to favor another one?
"What does the blockchain enable in this case?"
To get rid of the central database and all the potential sources of conflict?
I suspect there is a lot more trust involved in every day things than maybe Blockchain assumes.
Not often precisely because of the risks but if those risks are minimized it can expand your range of potential business partners.
Do you know always who is on the other side of a purchase that you do online? I can bet you don't, yet you still do business because you trust the intermediary (credit card provider, Amazon, whoever) to ensure that both parties are getting what they want.
Blockchain and "trustless" systems are there for people who want to make business but do not have these intermediaries, or when the intermediaries themselves are not trustworthy (corrupt governments, inefficient companies, etc).
Are you in production? Or just think this is a good idea?
Until last year, I haven't seen anyone so investing in derivatives without a bunch of capital and access to a reliable brokerage. Today, you can do it without even having a bank account on your name.
> Are you in production? Or just think this is a good idea?
I am not in production, but the thought of creating business and opportunities that do not require trust between parties seems amazing to me.
I have manufactured a lot of electronic and physical products, and have had a lot of supply chain issues, but not one of them would have been solved with a blockchain.
It's a lot like all the hype over NoSQL, when the principles underlying traditional relational databases have already been a solved problem since the 70's and work for 99% of use cases.
How many of those friends would you put to invest in a house with you?
Hell, how many of those friends do you trust to give you a backup key to your house for emergencies?
Trust is not binary.
I think the level of trust at the point you do business may in fact mostly be binary. The scale of 'so little trust I need to use blockchain' is pretty high, I'm not sure there are that many reasons to do so.
> The scale of 'so little trust I need to use blockchain' is pretty high.
Let's say a family member comes to you and say: "hey duxup, I have some medical bills to pay but I am short of a couple of grand. If I go on my credit card they will charge me 10% interest/year. So I was thinking of borrowing it from you and pay you 5% interest. By the way, here is the key to my car which is worth double the debt, the car is yours if I don't pay in time. It's a good deal for me, it's a good deal for you and you have no risk of losing your money"
You might say "Oh, it's a family member, so I trust you. You can have the money, pay back whenever you can". Which is fine. Or you can actually say "Alright, I will take the deal" and just hope that he gets to pay you back without any incident. In any case, no legal entities involved (every one is just going by the word) and the cost of settling a dispute is more of social capital (family troubles) than actual money.
Now, suppose that instead of a family member, it is a co-worker that you know for just a short while. You don't know if the person really had medical issues and you have no personal reason to be connected to the person. But you can get the keys for the car and you got some kind of legally-binding document regarding the conditions of the loan. It seems like a good deal, so why not take it? Not to mention the social capital, is a couple of hundred dollars "profit" worth the risk of having to deal with an someone you don't really know and all the potential troubles?
Now, supposed that instead of a co-worker, it is a total stranger online. You have no clue if the person needs the money for medical bills or if the money is for cosmetic surgery. In fact, it could be just for them to spend on drugs. Still, whoever is proposing the deal has placed a token that controls ownership of a car under a smart contract. If the loan is not paid, you get the token and you can easily sell the car on a distributed marketplace. And by the way, the token keeps a verifiable record of the car history, so any potential buyer can be sure of its value. All of this (giving the loan, checking the car value, signing on the deal, enforcing the rules and resolving potential conflict) can be done on a web3-enabled browser and costs maybe ~$10 in transaction fees. Why wouldn't you take such a deal?
Say you have a consortium of five banks: 5 copies of the database is not a crazy price to pay for a high level of resilience.
Make that 5000 banks and you are paying 1000x as much but not getting 1000x the resilience.
So many people are obsessed with peer-to-peer solutions, I could also see a blockchain as an answer to (say) having a book lending database for a few friends.
Speaking from my experience, the records are being kept horribly over here, there were many projects to cenralize it but the original data is in such sorry state that it is basically impossible. Not to mention that it is very profitable for some that it is in such sorry state.
They key idea is that you are unable to modify who owned what in the past, only change ownership in the current time, and the records, as per current system, are spread all over the local government entities.
Same thing for financial ledgers - immutable record of transactions to which only banks can write to.
I think that stocks are too volatile, but it is a such shock to me that you can only find out who actually owns a specific stock at T-2 ..
In both cases there is no competition for who solves the next block faster, so costs of computation costs can be kept low. I'm more attached to immutability of such databases, than distributed trust, but one cannot exist without other in blockchain.
So we throw out the entire body of law around fraudulent conveyance?
People will go decentralized, then centralized, then decentralized, etc.
We built centralized government bodies for a reason.
The aspect of blockchain + bitcoin that's pretty appealing is limited supply & formulated inflation & cryptographic guarantees.
Applying this to all other domains is stretching it a bit.
Whatever gets there, input by trusted and certified notary, IS the current legal standard of law. No exceptions.
If legal proceeding happens that wants to restore ownership, a new state is written into that book - it does not return to the previous state.
if fraud happens you can clearly see who, when did it, and can do another change restoring it to proper current state.
While also recording who fixed that mistake.
Pet peeve: posts in a global forum that mention "here". Which one did you mean?
We, thankfully, do not operate under Common Law.
How does Blockchain solve that problem?
It's the same issue with using it for supply chain verification, it's dependent upon the point of initial data entry. The Central American farmer enters the tomatoes that he just received via container ship from China into the Blockchain application as "organically grown domestic produce" and from that point forward consumers can rest assured about the tomatoes' authenticity and provenance. Or not.
And this immutability can arguably be a detriment. Laws and rules are messy and can be exploited, not having any recourse if you get scammed is not necessarily a huge pro.
The whole idea that you could import all the rules, laws and regulations of the real world into a computer program without any bug or unforeseen issue is probably one of the most ridiculous aspect of that whole blockchain industry. Especially since we already have a fairly consequential list of "smart contracts" that have been exploited in the wild despite being fairly basic compared to IRL regulations.
"Oh you lost your house because somebody found a weird edge case between two smart contracts that let them buy it for $1? Ah man, that sucks, but then THE CODE IS LAW so... Tough luck. Maybe try buying DOGE coins? I hear it's gonna moon soon. They used rocket emojis, so you know it's serious."
Yes, many times things like T+2 settlements on trades or taking three days for a transfer to fully clear are a feature, not a bug.
You start with Bitcoin being like cash, where once it's gone it's gone, unless a court can find the person and get it back. Then you don't want grandma to get scammed, so you build bank-like entities on top of the blockchain who re-create the three day window for transfers. In theory you could have different entities that have different settlement times as a tradeoff, but the modern system could do that now. The reason they don't is you need both parties to have the same rules or else your bank will get bogged down trying to figure out the rules of every other bank. Maybe you add an instant, non-revocable transfer like a SWIFT equivalent to go along with your 3-day ACH equivalent and, congrats, you've recreated the modern banking system.
But it would work for securities that have no distinguishable attributes from one another, especially if the extant problem with trading those securities is market access.
It enforces you to input it properly, and not do half assed job due to immutability, because whatever you input in there will stay there, attached with credentials/metadata of whoever entered it.
Currently the main problem is that docs are in sorry state, it was a rush job - and that state is very profitable for some people making dubious claims to old property.
It would be easy to notice fraud, and all real estate deals need to go through proper notary anyways - would they risk their license if their failures would be visible - for ever?
Mind you I'm not trying to propose a global solution, I'm proposing blockchain use for government entities and entities that work closely with them.
It is just that governments aren't centralized on modern world, and you can leverage decentralized nature of blockchain to have a common dataset and standard available to all of those entities.
Plus there are lots of situations in real estate law (like ground rent where the freeholder is not identifiable) which don't fit into cute little data structures. This isn't a problem with documentation being a rush job, it's a problem with some of the records of ownership being hundreds of years old. Seeing as how I would have to hire a special archivist just to access data on an 8" floppy disk, I'm not confident that the blockchain is a long-term (i.e. centuries) solution to any of these problems.
This is an unrealistic level of infallibility to ask of people. Like taking the backspace key off a keyboard to enforce people not making typos.
I don't know if you are American or familiar with how real estate works here. It is decentralized in a way that most countries are not, and there is insurance that people buy against mistakes and problems with transferring property. In a way, you could argue that a single blockchain to track real property would be more centralized than the current system.
"the vast majority of U.S. states have opted for a system of document recording in which no governmental official makes any determination of who owns the title or whether the instruments transferring it are valid"
https://en.wikipedia.org/wiki/Title_insurance
"A recording system combined with title insurance decentralizes records, creating redundancy. For example, when many records were destroyed in San Francisco's 1906 earthquake, out-of-town title companies maintained records that allowed landowners to prove ownership of their property."
There is a central record for each separate local government(located at the regional judicial office), with copies being sent to up the chain.
But the thing is - over here whatever is in that local deed book is the current legal state of the property.
Licensed notary is obliged by law to check the current legal state of the property, verify identity of the ones making the change, and do the change itself - but due to sorry state of the books first part isn't always reliable.
I am also not proposing a solution for USA problems, but for my country.
People say a blockchain is decentralized, but maybe it's more accurate to say it's a centralized system without anyone being in control. Which might in fact not be preferred to an actual decentralized system.
Because in most cases, speaking from experience, after model change they will be using a new model without doing proper conversion of old data. This happened to cadastral data over here - new schema required some fields explicitly, while old data did not have them digitized, and country-wide system was made with such assumptions. It does not work to this day properly.
Archive the old chain, deploy the new one with migrated latest state from the old chain transformed to new model. keep working.
Inherently, this cuts most use cases off at the knees. Some small country your route your shipment through changes requirements? Broken.
Apparently there has already been 51% attacks: https://btcmanager.com/privacy-coin-firo-51-attack/
In the case of such attacks the victims will find themselves in a situation that can be described as "shadow ban" - their transactions are not accepted or accepted too late, etc.
You can keep compute systems down - i'm more interested in immutability and distributed nature than the trust issue of blockchain.
Reducing stock settlement times below 2 days wouldn't impact volatility. Those are orthogonal issues. And current blockchain technology isn't scalable enough to handle even a fraction of stock transactions.
Real estate broker and former software developer here... I recall having this conversation with an investor type about three years ago. We could find no scenario where Blockchain was a meaningful improvement over a generic database. Same goes for every asset management scenario I've discussed with similar people over the years. This is not to say there aren't tons of opportunities to fix many of these real-world problems, just that Blockchain doesn't appear to add anything but does add to the complexity of the solution.
The deeds that matter are the ones stored by the people who will send around men with guns to kick you out if your name isn't on the deed that they have.
Currency, payment processing and banking are definitely the primary use cases - which is nothing short of revolutionary, in my opinion. In less stable/poorer societies, access to banking, trustless payments, and an immutable ledger are immensely valuable.
Even here in the west, I would kill for an alternative to PayPal for international payments. I was recently forced to receive payment via PayPal. Between their 'generous' exchange rates and fees, I lost out on hundreds of dollars. Shortly after, they locked my funds for 25 days while they reviewed my account. I had zero recourse and just had to wait them out. The same transaction on Cardano would've cost 7c plus the cost of exchanging it back to fiat.
You hit the nail on the head. In the US we can trust our third parties. Europe too. But that's not always the case elsewhere.
I am reminded of a friend who told me he wanted to sell some stock held in a bank in his country in Latin America, but the bank refused to process his transaction for a few weeks. By the time he was finally able to sell, the price had fallen greatly. It later turned out that the owner of the bank was selling his own shares during that time.
Blockchain is good for systems where there are few transactions and energy is cheap, but there is no one single trustworthy actor. That's often the case in the third world.
Third world equities exchanges (not places like Brazil and Chile but other countries with very undeveloped financial markets) would benefit from blockchain. There's not much liquidity there and the individual investor ends up getting pushed to the side when the large players want to trade. Even if you have a central clearinghouse and a liquid exchange, corruption is a factor.
I don't pretend to know how best to implement blockchain for electronic exchanges, but I suppose the starting point would be to build a settlement system that has the imprimatur of a coalition of different governments (like Mercosur or Comunidad Andina), hold the shares in trust somewhere, and use the settlement system to process exchange-traded transactions from the constituent countries. Eventually, exchanges don't have to be the origination points of transactions, and you could presumably just get bids and offers directly from other participants over the internet. No guarantees that you are getting the best ones, but that doesn't matter as much for third world markets because the prices are wide and slow-moving anyway.
OK well I can't speak for Asia or Africa but I am familiar with the Americas...
Aside from the fact that governments always look for PR campaigns that make them look fair, they also know they aren't going to be in power forever, and they suffer (get fired, thrown in jail, you name it) when power changes hands. If you can insulate the financial system from those shocks then it's beneficial for both parties because they each protect their financial downside. Also, the country as a whole grows when markets get healthier and can attract more investment. That's good for everyone.
It's not that you can't get the government to set up and use a particular system. It's that individual corporations within the country affiliate with a particular faction/party and try to bend the system to take advantage of other participants. The corruption happens under the skin. You can establish a competent central actor but you can't trust him not to bend the rules, like a horny professor when an attractive student with a B asks for a low A. The third world is one big hackathon for the misuse of institutions. Look at Morales' successful efforts to wriggle out from the grasp of term limits; he went to the Supreme Court and asked his buddies there to declare him eligible due to "human rights." He didn't say "I don't care about the Constitution," even though he wanted to violate its rules. They don't want the institution to look like it's crumbling, even when they're the ones chipping away at it.
If you elevate the exchange to a multinational blockchain then you have competing factions, lots of ebb and flow, and the potential for outside participants. And you get the "i don't have to trust the others" aspect of blockchain.
The whole point of developing robust systems is to make them failure tolerant in the face of perturbations, so we should apply them to the perturbed applications instead of building blockchain for rideshare/dildoes/whatever that helps nobody with an actual problem.
Money is a lot of things, but one of these things is it is a web of trust.
What a currency needs is a central bank. Historically we have tried a lot of things, and the most stable, reliable, and trustworthy turns out to be fiat currency with a central bank.
The "crypto currency", using blockchains, experiment has been a colossal failure. Trust matters, and it needs a source.
Volatility. Currency must be vaguely stable. Bitcoin is all over the place, most of the others have very low liquidity.
The waste of energy.
Scams galore. What in this space is not a scam? There have been so many scams.
Enough?
Better to think as "signing messages". also better to think as offline on some steps.
And also a third party to sue when things go south, or to correct errors (at scale, humans always make errors!), or to be subpoenaed to provide information, etc.
These are all advantages in some contexts, and disadvantages in others.
But those specific examples of when blockchain is better should probably also be better because there's no one to sue, no changes to make ever, and an information-hiding advantage.
Very few people are arguing that blockchain has no benefit. But it also has costs and in many cases the costs outweigh the benefits. Tracking the provenance of your tomatoes on a blockchain has real costs over putting the data in a database, and you still need to have someone you trust who can vouch that the tomatoes were grown where they said they were. If you're already trusting someone to say "these tomatoes are authentic, Nebraska-grown tomatoes" then you might as well have them manage the whole supply chain.
Also, I don't think many people would complain about a monopoly that had open data access and open protocols and allowed interoperability. If your tomato-supply-chain-management company told you that you couldn't export the data about your tomatoes or you could only access it via their terrible app then THAT would be the argument for moving to a blockchain. If at any time they could inflate the supply of Nebraska-grown tomatoes by clicking a button then that would be an argument for blockchain.
The need for trust is a necessary but not sufficient requirement for putting something on a blockchain. Too often it's presented as sufficient.
Blockchain's only real advantage is that it eliminates the need for trust. If your system doesn't need to be trustless, there are far more efficient (energy and otherwise) tools that already exist and accomplish everything else that blockchain does.
So far the only use case that I can really find for this are digital identity systems where the blockchain itself serves a double purpose as both a highly redundant system, and a byzantine fault tolerant distributed storage system. I can see the value in being able to maintain a strong ledger of ID uses. The EU looked into this from what I understand, and I think they stood up a system for this kind of thing.
My big TLDR from working on chaincode and stuff like that is this: if your goal is to have a high security digital asset (eg: tokens and ID certs), then a blockchain might be useful. If your goal is to interface with the real world, then you're just going to be chaining yourself to a bulky inelegant solution that won't even address your core problem.
Currently, there are various parties that try to collect this info, but it's still full of holes. Plus, it's not a single party, even for the same area (eg EU). It gets more complicated for import/export.
Let's say you can "solve" this by having a single worldwide party that handles it. Do you really want such a monopoly? How much will you pay then to get the data?
Why not solve it with a ledger protocol?
In this specific example: are car dealers not participating because they don't trust the central party (case for blockchain) or because (lazy|not in their interest|inconvenient|...)? If the latter, then blockchain is not solving the actual problem.
Right now, selling a car with an official maintenance book is always a benefit.
The real benefit is of course on the buyer side, who wants to verify what he is buying. So a car with an "official" log would be more valuable than without. When this is the case, it of course is better for the seller to have such a log.
I've been in this space for a short while, and I can definitely see it working.
When you buy a car right now, you expect it to come with at least a maintenance log. So that part is not an unknown.
Everything I mention already exists, it's just that it would be way easier and more complete when it would be handled by a 'standard protocol', ie a blockchain.
The same can be said for supply chain applications. But the second hand car industry has even more trust issues. Selling a car for $8000 and getting around $2000 extra because you can prove it has a proper history is not fantasy.
Sales people in this case meaning the entire community. Bitcoin’s design meant that anyone who buys in later will be making money for early adopters, and that gave everyone a strong conflict of interest clouding their technical judgement. Subsequent blockchains might not have copied the exact deflationary model but the get-rich-quick-without-contributing-anything mentality has become universal.
> Sales people in this case meaning the entire community.
Not the Bitcoin community, but certainly most of the others. The Bitcoin community has been pretty clear about Bitcoin's use case since the beginning - inflation-proof digital money - and as long as it remains constrained to that scope then that's actually something it can do.
Bitcoin's programmability was deliberately limited to prevent overloading the network and compromising or diluting its core use case. That also prevented the community from advertising it as a general purpose computing platform and panacea for all the world's ills. That's something all the other blockchain communities have been doing, not Bitcoin's.
There are lessons to be learnt who try to put everyth to a blockchain https://ruky.me/2020/12/23/somethings-are-never-meant-to-be-...
A blockchain / distributed ledger can be easily flooded with spam. The only way around that is to make access expensive. That works for the "actual" blockchain because the effort to put something in the chain is the money.
In applications where you don't have want expensive writes, a central gatekeeper (or at least a cabal of power-nodes) is needed to restrict access to prevent spamming.
It's great to be able to say "here is the list of changes, and I can re-run them and come up with the same hash, so nothing was tampered with"
The "here is a random key that took a lot of work to find and when you add it to the hash chain we get X number of zeroes" part is really not that useful in most cases.
When run at a large enough scale that 51% attacks are infeasible.
The chains can only really enforce protection on their own currencies, no?
So user centric programming abstractions where users can execute queries and directly put data in the database is interesting concept. Of course you can also do this without a blockchain too if you can deal with a trusted party.