You trust your friend, but maybe not an anonymous online individual. So you might use the blockchain to accept payments from the anonymous individual whereas with your friend, you might accept a check or Venmo.
Trust is an inherent property of a functioning society, and hence why the bonafide use cases for blockchain and crypto are so few. If you live somewhere where the police, a judge, or government can make you whole in a dispute, not a lot of need for web3. If you live somewhere where that isn’t the case (failing nation states, authoritarian regimes), that’s a better product market fit for web3.
Crypto-skeptics talk like the legal system is currently equipped to robustly make you whole in those transactions. It is manifestly not. Those transactions do, in fact, depend on other means of establishing trust.
To be sure, a legal system is an important mechanism for facilitating trust. But also, be careful not to overstate its relevance either.
You're missing the point. If you create a system where you won't need to make use of the legal system because transactions execute correctly by default, your transaction costs are suddenly way lower.
Obviously your counterparty can still sue you after the fact, but thats a much better position to be in than needing the legal system to push the transaction through in the first place.
That's not what you get, because in practice you want some physical good for your BTC and a blockchain cannot enforce that you do get it, it can only enforce that the BTC are transferred from one address to another.
You can also tokenize a real world asset (for example a token representing an amount of gold). Then you have to trust the issuer of the token, but it's very possible you trust that issuer but don't trust your counterparty.
I meant that nothing is fully embedded within a blockchain (maybe physical was the wrong word).
I think we agree here. The question then is: how useful is this really?
For example, assume I have some USD that I want to trade for VT, and I want to decide between using a blockchain or not.
The counterparty risk solved by using a blockchain is:
1. No blockchain: the broker (who's between me and the person I want to trade with) can technically keep the USD and the VT.
2. Blockchain: this cannot happen because a smart contract prevents it.
But:
a. How often are you in a situation where you trust the entities backing the two assets (USD and VT here) but can't find a broker whose trustworthiness is implied by the trustworthiness of the two entities backing the two other assets?
b. Less trust is always better, but blockchain-based solutions bring their own problems (e.g. private key custody). Are there even cases in which this trade-off is worth it?
- Am not in a jurisdiction where there is a trustworthy broker for VT or USD?
- Want to loan someone my VT (for example for them to short)?
- Want to buy some derivative of VT (easy to do in the US for VT American-style options, but this isn't true for all derivatives on all assets in all markets)
- Need to buy a large amount of VT and using the open market isn't cost effective?
VT maybe isn't the best example in favor of crypto as it's probably already one of the easiest assets in the world to trade safely online. There's lots of other stuff that's way trickier in the current system.
2. the real hurdle is regulations rather than anything technical.
3. again, you don't need a technical solution, you need a legal one.
4. and this will be more effective thanks to a blockchain? How so? So far, blockchain-based solutions seem more costly rather than less.
The current system has a lot of limitations, but many (most?) of them are of regulatory rather than technical nature, and blockchains do not help in that regard.
Or where you don't want to share your identity... like maybe the internet?
Having the ability to implement a solution technically does not make it legal or without consequence (like Virgil Griffith, formerly of the Ethereum Foundation, who demonstrated to North Korea how to evade sanctions trading Ethereum and is going to jail for five years for doing so).
No, actually. Many people send crypto transactions all the time, and do so anonymously, and the vast majority of them don't get in trouble for it.
Descriptively, it is untrue that there is some sort of wide scale crack down on anonymous crypto transactions in the west.
And no, before you say it, it doesn't really matter if, hypothetically, a future government could become extremely authoritarian, and arrest all the crypto users, because for whatever reason, crypto has been around for a decade, and governments aren't doing that.
The reality, and facts on the ground, are that people making anonymous crypto transactions all the time, and don't get in trouble with that, no matter how much people will then respond to this post by saying "Well, what if the government started doing it tomorrow!". Its not happening. Therefore, it is a useful usecase.
Europe: https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220...
US Executive Order: https://www.whitehouse.gov/briefing-room/presidential-action...
UK: https://www.cnbc.com/2022/04/04/uk-to-mint-its-own-nft-and-p...
China: https://techcrunch.com/2021/09/24/china-says-all-cryptocurre...
South Korea: https://www.bbc.com/news/business-42784384
Japan: https://www.fxempire.com/news/article/financial-services-age...
Caveat being India and Japan, these are the top 10 economies in the world.
People send crypto transactions all the time and don't get arrested.
I know this. You know this. We don't have to pretend.
People use crypto all the time and don't get in trouble for it. We both know this.
I used crypto just this morning on chain. Nothing happened to me, even though I didn't send a KYC letter to the government about it.
The government isn't going to show up at my doorstep tomorrow because I used a smart contract.
Your feelings, are what is called "cope". People have been predicting for years and years that all the crypto people were going to be sent to jail, yet it keeps not happening.
Instead, the only thing that has happened, is that more and more of the entire tech industry has moved towards using more crypto.
I went to GDC a couple weeks ago, and I learned that a freaking 3rd of the video games industry is desperately trying to figure out how to add NFTs to their games.
I wonder what industry will be next? And will it ever been enough, to dismiss the constantly wrong people, who continue to be wrong about all the crypto people going to jail? Because I remember the same arguments a decade ago. Still hasn't happened yet.
I still go to crypto meetups every week, and I am not seeing the police raids, for all the illegal things that you think we are doing.
Or, in other words. Cope.
Being part of a "functioning society" is not a static property and even less so in this globalized world.
Try coordinating work with a team distributed around the world and you will see that your functioning institutions do not help your colleague in Venezuela, Argentina, Syria or Ukraine. And if you don't have/know people from these places, ask yourself why. Try helping a Brazilian immigrant living in the US that wants to get their savings to buy property back home, see how painful/inefficient it is to send anything over $2-3 thousand. Suddenly your appreciation of "web3" increases.
And even just in your own developed country, there is no guarantee that things will stay functional forever. Just look at the US and the events of January, Hong-Kong, or any country that was a former state of the USSR and needs to worry about Vlad.
A decentralized web that does not depend on the functional institutions is insurance: you pray that you will never use it, but you should be glad to know it is there if you need it.