Let's dig in to this idea of escrow a bit. I disliked Mike Hearn's
talk because it just skips over the biggest problems here.

First of all, escrow in its current mainstream use is a financial
service that falls under regulation. So you can hire a licensed
professional escrow agent and sue them if you don't like how they
behave. These are expensive and uncommon for this reason.

Absent the licensed public escrow professionals, how would two
strangers be able to find a mutually trustworthy agent to act as the
mediator? I anticipate you'll suggest something like that they can
choose a third party based on some public reputation. The problem is
that it's impossible for public reputations to distinguish between an
effective escrow and one that sometimes colludes with one of the
parties to rip-off the other. The reason again is that if two parties
accuse each other of lying, the mediator has to piss off one or the
other. So any escrow's reputation is going to consist of good reviews
from whoever it favors, and bad reviews from whoever it doesn't.

So there's no reason to think that escrow transactions solve anything
in theory. Nor is there any evidence that anyone has practically
utilized escrow. Multisig has been around for a year yet transactions
using it so far have almost entirely been spam:
http://webbtc.com/scripts/multisig

On Mon, Jul 1, 2013 at 4:57 AM, Mihai Alisie
<mihai@???> wrote:
> 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
>
>

--
Andrew Miller