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How does Bitcoin solve the "can't trust the other party" problem? If you send bitcoin to someone to buy some fine pharmaceuticals and they just don't send the product, what recourse do you have?

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I believe this is why ethereum was so popular, as it introduced the idea of "Smart contracts". So the transaction is dependent on something occurring in the real world. Obviously there have been a ton of developments since then with newer crypto currencies, including increased privacy, anonymity, linking to applications, etc. For instance, I think Chainlink rewards people for hosting datasets (like ML datasets, or waybackmachine) on ipfs, and also inherits the smart contracts from ETH. Additionally, I think Monero has made developments in smart contracts as well, and the price seems to be more steady, since people actually seem to be utilizing it more for buying things in the real world, like computer services and such.

Smart contracts can only depend on something happening in the real world if it's accurately reported by an oracle - ie. a trusted third party / middleman.

I’m genuinely curious, how would that solve the problem? The real world event - say, delivery a purchased good - would still have to be flagged by both parties as “delivered” before the smart contract can execute. If you only allow the receiver to flag, then the problem inverts! Now the receiver can just deny the item was delivered.

Middlemen are useful, as annoying as they may be. I’d love to be proven wrong here.

Markets on darknet solve this problem.

You mean a trusted third party / middleman?

Nope. An account with good reviews.

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