Via Decentralize, I have just discovered the Ledra Capital blog. This might very well be one of those places where future is being shaped.
One LC post puts words on something I have tried to make understandable (for myself as well as for others) for a long time is: Bitcoin Series 26: the Polemitis Impossible Trinity »
This explains why crypto-currencies such as Bitcoin are just as good as the dollar or the euro. Or rather, it’s not worse than fiat currencies. It’s just a dog with different fleas. Kind of like… gold.
Then, let’s move on to the post: Bitcoin Series 27: Bitcoin – a 6-sided Market and Network Effect »
It’s about Bitcoins “superb setup of market incentives for the first currency to hit escape velocity”. It’s smart. It’s intuitive. It’s plausible. And it’s arousing, kind of.
What first lead me to the Ledra Capital blog was the Decentralize blog post about all the stuff LC has listed as possible to decentralize with Blockchain technology: Anything you can do I can Decentralize! »
Birth certificates, gun permits, wills, contracts, accounting records, car keys, betting records, coupons, trademarks, licenses, vehicle registries, spam control, nuclear launch codes… You name it.
I guess this is what happens when spontaneous order and a truly free market (politicians don’t know about it yet, and they will never understand it) meets with new and disruptive technology. I like it. I like it very much.
/ HAX
The big problem with all of these schemes is that the founding principle – no government control – is also what makes the system untrustworthy. This is because there are no legal remedies to handle wrongdoing and mistakes. Ultimately, such a system would cause distrust, and distrust is the economy’s worst enemy.
Bitcoin hasn’t reached the critical user volume to make this problem apparent yet, but the problems are probably appearing already. People that transfer assets to the wrong account and can’t get it back; fraudulent behavior by not delivering goods or services for which payments been received or by not paying for goods or servivces thereby creating a debt which is not collectable; fines can not be collected; neither can damages, and so on.
The s
The problems you mention are in no way limited to cryptocurrency, and the solution is just as easy – introduce a third party that holds the money until the buyer has received his or her package.
An escrow would indeed be possible solution for simple contractual debt relationships. However, this fails to recognize the complexity of contractual transactions. What if the contract were to be declared retroactively void after the transaction has been completed? The law would require that the transaction be undone. That requires both parties to abide by the law and cooperate to undo the contract. A game theoretic analysis of this situation would show that in absence of regulation the desired outcome (undoing of all transactions) would not occur. The debtor would not pay his debt. The same situation would occur in non-contractual debt relationships, such as those arising from unjust enrichment, or tort.
In absence of agreement, it is only through regulation and (the threat of) government enforcement that the desired outcome will occur, i.e. the debtor paying his debt. Government’s primary function is the guarantee of ownership/property. Sometimes that means that government exercises (legal) violence and takes from the debtor to recoup money for the creditor. This would not be possible in a fully crypto-decentralized world.
I dare say that there is merit in Johan’s remarks and I cannot say you managed to address the concerns he brought forward. Cryptocurrency has advantages, but disadvantages as well and the cryptocurrency-community would do well to acknowledge them and try to find solutions instead of pretending as if there were no problems.
The good stuff isn’t that blockchain technology “can do” some of these things. For the real disruptive part, look at Ethereum, which has self-arbitrating contracts.
This means that blockchain technology has the potential to take over civil arbitration – the very first reason for the nation-state to exist in the first place. All the other reasons have built on that one.
The power of the nation-state government lies not just in maintaining the public ledgers, but also – since it is an arbiter – in having the power of deciding what’s in them. Yank that power away, and we’re in a different world altogether.
If you want another teaser, consider Counterparty’s crypto-equity and incorporation. Issuing 1,000,000 shares in a new organization can be done in a few minutes (I did that twice last week). The followup question from oldworlders is usually a snicker about which courts would possibly acknowledge such shares as authentic – but remember, these incorporations are already using self-arbitrating contracts; they don’t go to the old world’s courts.
The future is happening. Now. Rapidly.