On 7/1/2013 5:47 AM, Andrew Miller wrote:
> I want to suggest a different (and heretical?) point of view.... what
> we are observing with the Foundation is actually a structural flaw of
> the Bitcoin technology itself. The novel parts of Bitcoin (blockchain,
> computational lotteries) may be the right answer, but *Money* or
> *Payments* is the wrong question. The significance of this statement,
> for those who wish to build a better steering organization, is that it
> won't be enough just to maintain the source-code if you want to enjoy
> the social benefits of a robust, decentralized, self-regulating free
> economy - instead you'll have to substantially change its scope and
> goals.
>
> My argument is the following: decentralized *Money* is insufficient to
> enable what we want, which is decentralized *Exchange*. Here is a
> simple illustration: if you want to buy something from a Bitcoin
> merchant, you have to FIRST send them your bitcoins, and THEN they
> will send you what you ordered - if they're honest. But if they send
> you a lemon, what's your recourse? Perhaps you make an alternate
> arrangement where FIRST they send your item, and THEN you send
> payment. Now the buyer can pretend he didn't get the item and not pay
> - what's the seller's recourse? In the Bitcoin community it's common
> to use a weak form of escrow, for example Bitmit.net and the silk road
> - however this only moves the dilemma to a central party who can't
> solve it either. An online escrow agent cannot tell the difference
> between a lying buyer and a lying seller!
>
> This is a fundamental problem. Yet it's ignored in most economic
> theory, which was written without the internet in mind. Money is a
> technology - ask any economist what problem Money solves, and they'll
> say something like "in the beginning there was barter, but barter is
> inefficient because of double-coincidence-of-wants, so money is
> introduced as a medium of exchange, etc.". But this is bogus. On the
> internet, *barter* is UNREALIZABLE, not just inefficient. Even if two
> strangers have the opportunity to trade, it would be unwise for them
> to do so because of a lack of trustworthiness.
>
> There are only two approaches to addressing this, and both are
> troubling. The first is reputation aggregation systems, like on
> Bitmit, Silkroad and bitcoin-otc; the second is government regulation.
> The reputation systems are troubling because a) so far all
> implementations are *centralized* and b) public ones are vulnerable to
> sybil attacks. No one seems to rely on these systems for very much.
> The second mechanism is pervasive. Anyone who uses Bitcoin to pay a
> commercial business, e.g., Bitpay or MtGox etc., has more than just
> reputation to fall back on - their trustworthiness is increased by the
> environment of *commercial regulation*... if Bitpay steals your money,
> you can *sue* them, just as you can any business.
>
> This is the hidden assumption underlying the "barter" story of money.
> Police power is the difference between an environment where two
> strangers can exchange goods in mutual agreement, and an environment
> where one stranger beats up the other and takes his lunch money.
> Governments put a lot of effort into promoting "consumer trust" by
> maintaining regulate markets, enforcing business contracts, and the
> like. This regulation is expensive, and if a government wants to
> demand you use traceable and taxable currency in exchange for this
> public service, then they'll be able to do so. So the Bitcoin story is
> incomplete, like a table with two legs... *secure/anonymous payments*
> are not enough to break way from reliance on powerful states and enjoy
> *secure/anonymous economic exchange*.
>
> I think the solution may be as simple as implementing a better
> decentralized reputation system within the blockchain itself. However
> this is nontrivial. We don't understand Bitcoin's limits that well yet
> - no alternate applications besides digital gold (e.g., namecoin,
> bitmessage, etc) have gotten very far or withstood any sort of
> adversity the way Bitcoin has. When I've told this idea to Bitcoin
> folk, a common response is that this simply isn't part of Bitcoin's
> scope - but what I'm trying to argue is that it *should* be. Bitcoin's
> scope is too limited if we want to enjoy any long term social benefit
> from it.
>
> tl;dr: Until the Bitcoin community broadens it's scope from just
> *payments* to *exchange,* it will be implicitly reliant on state
> regulation of commerce and will therefore continue to make concessions
> to government control out of weakness. Going from *payments* to
> *exchange* means at a minimum including something like a
> reputation/insurance system within the blockchain itself.
>
Hi Andrew,

> Here is a
> simple illustration: if you want to buy something from a Bitcoin
> merchant, you have to FIRST send them your bitcoins, and THEN they
> will send you what you ordered - if they're honest. But if they send
> you a lemon, what's your recourse? Perhaps you make an alternate
> arrangement where FIRST they send your item, and THEN you send
> payment. Now the buyer can pretend he didn't get the item and not pay
> - what's the seller's recourse? In the Bitcoin community it's common
> to use a weak form of escrow, for example Bitmit.net and the silk road
> - however this only moves the dilemma to a central party who can't
> solve it either. An online escrow agent cannot tell the difference
> between a lying buyer and a lying seller!
I think this problem can be solved with multi signature escrow. There
are wallets that already integrate that feature as
https://blockchain.info/wallet/escrow and some other wallets that are
working on integrating it. Basically the money are not in the buyer's
account or the seller's account and you can have a third party (a
mediator that has knowledge regarding the item that has been sold) that
can unlock the funds and solve the dispute. Mike Hearn had a good talk
about dispute mediation with a specialist third party + multi sig escrow
at the London 2012 Bitcoin conference:
https://www.youtube.com/watch?feature=player_detailpage&v=mD4L7xDNCmA#t=303s
.


Regards,
Mihai