Hacker News Reader

Comment by lamontcg | Hacker News Reader

What's the fundamental difference between VISA, an escrow agent and a bank?

Isn't VISA just an escrow agent between every transaction who also lends money and charges interest to the purchaser?

Actually, isn't a bank an escrow agent? As in, historically it was a banks jobs to escrow your money. Then to act as an escrow agent for transactions/etc.

At least for buying a house no. The bank is not the escrow. The escrow is a separate entity that is used by both parties. Before the transaction they setup the rules of the transaction (steps and what ifs) and once the transaction starts escrow just follow those rules. The key thing is that escrow receives a fee and after that they have no skin in the game.

So in a sense, the escrow is sort of like a smart contract on the block chain. The disconnect happens between the physical and the virtual world (how would you know activity X took place in the physical world to advance the transaction through its lifecycle?)

The way I would put it is, escrow is a workaround for the property system's inability to support smartcontract-like functionality. Because you can't have property conditionally transfer on certain triggers, you have to give it to a trusted escrow to actually execute the appropriate transfers, conditional on those triggers.

An escrow is a smart contract

My point there was that the key aspect that makes something a smartcontract is that it automatically causes the property transfer when certain triggers are met, in a sense that is just as real as in the system's normal property-transfer primitives.

Escrow, as it has conventionally existed, tries to accomplish that same thing, but isn't quite that thing. In the moment, the escrow agent must themself manually initiate the "triggered" property transfers, and is capable of violating the rules, hence why they have to be a trustworthy party. Sure, they can be sued later, but in the moment they can effect the transfer.

This is substantively different from a smartcontract where that all happens automatically.

VISA is a payments network. It's a way for banks to connect to each other. They don't have any skin in the game and ultimately it's the issuing bank that gives you all those nice things that you believe come from VISA (like chargebacks, fraud protection, etc).

VISA does not lend any money. They just provide the service of moving money for a fee.

That makes VISA even more of an escrow agent and less of a bank.

Escrow, pretty much by definition, involves holding funds. That’s not what visa does.

Visa is none of those things, it's a payments network. It doesn't lend money, it doesn't charge interest.

You card issuer, which is usually a bank, lends the money and deals with the account.

Reply on news.ycombinator.com