[HN Gopher] Decentralized trust graph for online value exchange ...
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Decentralized trust graph for online value exchange without a
blockchain (2017)
Author : spolu
Score : 100 points
Date : 2021-05-07 12:26 UTC (10 hours ago)
(HTM) web link (web.archive.org)
(TXT) w3m dump (web.archive.org)
| AgentME wrote:
| >Conversely, cryptocurrencies such as Bitcoin or Ethereum have
| decentralized the process of issuing and managing a currency. But
| while the operations of such currencies, based on blockchains,
| have been fully decentralized, the trust graph of these
| cryptocurrencies have remained entirely centralized. Everyone
| need to trust Bitcoin to transact in Bitcoin, and everyone needs
| to trust Ethereum to transact in Ethereum or assets issued on the
| Ethereum blockchain. The centralized nature of the trust involved
| in these cryptocurrencies being actually at the core of how these
| currencies operate, as the only viable way to properly
| incentivize a proof-of-work system.
|
| I don't think it's useful to equivocate the trust one places in
| an open decentralized system with the trust someone puts in a
| custodian of their money to not run off with it. That's like
| equivocating trusting end-to-end encryption to keep your messages
| secure with trusting Facebook to keep your messages secure. Sure,
| in both cases there's a risk, but one is based on your
| understanding of an open system, and the other is based on a
| guess that the custodian you're trusting your data to won't
| expose it by choice or accident. Just because the word "trust"
| can be used for both doesn't mean there aren't significant
| differences between them.
|
| I think the system described is interesting, but for regular
| human commerce purposes, I think the downsides of it (managing
| IOUs from many different parties, needing to have a trust-path
| between users that could steal from you, needing to keep a node
| online always or trust your money to someone else who does so)
| make it less useful than cryptocurrencies. Having a common
| currency between many different parties is much easier to work
| with than trying to figure out a workable way to value IOUs from
| many different parties. Needing an established trust-path between
| users seems like a large obstacle in the internet age where I
| might suddenly want to transact with anyone on the planet.
|
| The scalability of this system seems interesting, but I think the
| scalability upgrades that cryptocurrency is getting from sharding
| and rollups will make cryptocurrency more than scalable enough
| for human commerce purposes. I wonder if details of this system
| would be more useful in some kind of scenario of machine swarms
| bartering with each other, maybe in a situation where a common
| currency specifically doesn't make sense and is undesirable, or
| where there's no reasonable-latency access to the common
| blockchain because of the isolation of the network. Or maybe
| there's a technique here that's useful for cross-currency or
| cross-blockchain transactions.
| [deleted]
| nomadiccoder wrote:
| That quoted paragraph also caught me up upon first read. After
| I thought about it I do agree that there is some level of trust
| in the protocol itself and actions of other actors using that
| protocol can influence that trust. But I suppose that the trust
| needs to be applied at some level. Trusting end-to-end
| encryption is a real trust. If someone comes along and finds a
| way to factor large prime integers the system would break and
| trust would dissipate.
|
| It seems to me that its about realigning trust in this case.
| And its easier to trust a process that uses mechanics that
| _force_ behavior to conform to the properties you desire than
| to trust a process that uses mechanics to _enable_ behavior to
| conform to the desired properties. You still have to place
| trust in both implementations nevertheless.
|
| In the case of Ethereum what is the trust? The protocol, the
| implementation? What is the trust in a bank? The same but with
| a bunch of human factors around the _enabling_ the bank to
| function as you desire.
|
| Settle appears to be a step back and try to solve the problem
| currency has in general by reverting to a barter system. The
| purpose of a currency however is to use a common valuation
| system.
| Ar-Curunir wrote:
| > factor large prime integers
|
| factoring large prime integers is very easy =P
| loceng wrote:
| Didn't Ethereum very early on push an update that undid a $50
| million hack?
| dcuthbertson wrote:
| Do you mean equate instead of equivocate?
| est31 wrote:
| Cryptocurrencies can still be subject to hard forks which allow
| seizure transactions. Likely in the future governments will
| demand such changes, if they don't outlaw cryptocurrencies
| entirely. Furthermore, bitcoin's value is highly volatile. So
| your initial investment of $100 might be worth $5000 or $0.10
| in 3 years. You might not have to trust the network itself, but
| you have to trust the value of the asset to remain stable
| enough. Which it isn't due to multiple factors.
| fastball wrote:
| Not sure how you think governments could demand changes from
| major cryptos. They're not currently beholden to governments,
| and it seems unlikely they'll become _more_ beholden as they
| grow _larger_.
|
| Volatility is ameliorated by stablecoins pegged to fiat
| currencies. Furthermore, the long-term goal is to not need an
| "interface to the real world", because you will be paid in
| crypto and you will pay for things in crypto. _Even then_ ,
| who exactly do you mean when you say "the people providing
| the interface"? I don't need a middle-man to agree to
| exchange crypto for fiat with someone. You can use one, sure,
| but it's not required.
| est31 wrote:
| Cryptocurrencies are in the process of becoming more
| beholden, or at least more outlawed:
| https://www.trtworld.com/magazine/what-do-turkey-s-
| cryptocur...
|
| Governments have the guns. I doubt that cryptocurrencies
| will win in the long run, unless they provide hooks for
| governments to project their power, which includes asset
| seizure transactions.
|
| As for the people providing the interface, I've since
| edited my comment. My point used to be that exchanges like
| coinbase engage in massive market manipulation to aid their
| own goals, but it's not the only cause for the volatility
| of cryptocurrencies like bitcoin, so I edited it out.
| meltedcapacitor wrote:
| Several governments can trivially do a 51% attack and take
| over Bitcoin if they so wish, for example:
|
| - The Chinese government can get all the main pool/farm
| owners (all self-doxed) in a room, offer them the choice
| between being executed or send all blocks their way for
| central validation. If they choose execution, send
| government employees to reboot the farms with new code.
|
| - The Taiwanese government can cease the next batch of
| mining kit as it comes out of TSMC and lol all the way to
| the (central) bank.
|
| - The US government can tell Coinbase "regulate this thing
| as told or die". Then all the suits who now own crypto via
| suit-friendly custodians will in a panic coordinate and
| fund a 51% attack to save their "investment".
|
| Just a few ideas :-).
| aaronax wrote:
| A government could easily mandate block lists. All
| legitimate businesses dealing with cryptocurrencies would
| be required to not consider "blocked" coins as valid. I can
| even realistically envision broad support for such a
| change, when some "character" who is sufficiently evil
| becomes known (via non-stop media targeting I suspect) to
| be empowered by a certain cryptocurrency.
|
| I suppose there are some blockchains where it is not
| possible to follow balances between transactions. I'm not
| sure what would happen with those.
| rojeee wrote:
| I think the idea of money as credit is very interesting (look
| at my HN comment history for my ramblings on the topic!).
|
| > I think the system described is interesting, but for regular
| human commerce purposes, I think the downsides of it (managing
| IOUs from many different parties, needing to have a trust-path
| between users that could steal from you, needing to keep a node
| online always or trust your money to someone else who does so)
| make it less useful than cryptocurrencies. Having a common
| currency between many different parties is much easier to work
| with than trying to figure out a workable way to value IOUs
| from many different parties. Needing an established trust-path
| between users seems like a large obstacle in the internet age
| where I might suddenly want to transact with anyone on the
| planet.
|
| You are right, these are disadvantages but other than "trust
| paths" the complexity can be mitigated with:
|
| 1. Market makers who buy IOUs at a discount and swap them for
| _their_ IOU which can be more trusted. Essentially you want a
| little bit of centralisation around parties which are known to
| always make good on their liabilities. These parties could be
| fully automated (think like Ethereum DAO) and transparent. In
| some ways these market makers are like banks of today but
| instead of lending their credit into existence, like banks do,
| they require people to buy it (usually) at a premium.
|
| 2. Insurance or a credit derivatives market so people can hedge
| against counterparts defaults.
|
| 3. If everyone agrees on a common numeraire and wallets are
| sophisticated to show an aggregate balance in that numeraire
| taking into account credit risk then that could remove much of
| the complexity for users. Integrated with market makers, you
| could "auto swap" IOUs to issuers which you prefer. Wallets can
| also provide a credit risk break down on all counterparts.
| Agree this is more complicated than current notions of money.
|
| 4. Securitisation markets. Package up IOUs into tranches.
| Traders can speculate on various levels of credit quality.
|
| 5. Sensible reputation management. Non-invasive performance
| tracking of debtors. Did they meet margin requirements? Did
| they meet all coupon payments? Etc. Can also take into account
| degree of co-operation with other users, for example do they
| accommodate restructuring and help others meet their
| liabilities?
|
| I don't like crypto because there's essentially zero
| accountability for issuers and that kind of environment is
| optimal for scammers. Crypto behaves like synthetic
| equity/commodity instruments with no accountable issuers. In
| contrast, with a credit based system, issuers are responsible
| for their issued liabilities and are expected to make good on
| them. In crypto, no-one thinks in terms of liabilities and so
| you get ridiculous projects like "Synthentix" who are
| collateralising a USD Stablecoins with their own issued tokens.
| For anyone with a basic understanding of financial risk and
| accounting, their approach is mad.
|
| A credit based system is fairer because anyone can issue credit
| and the onus in on issuers to ensure they have the necessary
| reputation for others to accept their credit. Furthermore,
| credit-like instruments are natural Stablecoins - providing all
| agree on a numeraire, the value of credit is a function of
| credit risk which can be successfully managed in most cases.
| gruez wrote:
| >1. Market makers who buy IOUs at a discount and swap them
| for _their_ IOU which can be more trusted.
|
| Doesn't this go against decentralization? Why would anyone
| want rojeee IOUs when they can instead trade US federal
| government IOUs (aka. US dollars)? What's the advantage in
| managing IOUs from a bunch of different entities and having
| to pay market makers every time you transact?
|
| >These parties could be fully automated (think like Ethereum
| DAO) and transparent
|
| This is a bit handwavy. How does the system know how much
| rojeee IOUs are worth? Your ability to repay is based off a
| multitude of factors that can't be captured on the
| blockchain.
|
| >2. Insurance or a credit derivatives market so people can
| hedge against counterparts defaults.
|
| >4. Securitisation markets. Package up IOUs into tranches.
| Traders can speculate on various levels of credit quality.
|
| All of this is going to increase complexity exponentially,
| and for what benefit?
| hanniabu wrote:
| > I don't like crypto because there's essentially zero
| accountability for issuers and that kind of environment is
| optimal for scammers.
|
| Please expand on this as I'm almost certain this doesn't
| apply to BTC, ETH, and other reputable chains.
| rojeee wrote:
| Sure, it's more an observation of the mechanics
| underpinning cryptocurrencies. My statement was actually
| incorrect in that there are not actually "issuers" per se
| in crypto and that can be a problem.
|
| Cryptocurrencies like BTC, ETH and whatever else are not
| "money" in the sense that we generally understand. This
| money is either a credit on a commercial bank or a credit
| on a central bank. These entities are responsible for
| managing the liquidity and solvency of their balance sheet
| such that the credit you hold retains value (Yes, I know
| there is inflation but that's an orthogonal concern, I
| would argue). There is a governance and legal framework
| underpinning how money works in this "mundane World".
| Everything in the mundane world is a legal agreement.
| Financial agreements are always someone's liability and
| that's a good thing because someone is always accountable
| if something goes wrong.
|
| Cryptocurrency behaves more like some kind of synthetic
| commodity. By that I mean that it inherently has no value
| and has no use for anything other than being a "token".
| When cryptocurrency is created, it has no issuer. There's
| no accepted legal framework or explicit governance
| framework for holding people accountable if something goes
| wrong (other than code is law) and things go wrong all the
| time. There are rug pulls, exchange rate crashes and
| project failures are ten a penny etc... and this is all
| happening while the crypto world is in a mega bull market!
| What happens when the next bear market comes around? All
| the projects that _seem_ viable now will suddenly become
| unviable. All the debt positions collateralised with
| sketchy crypto will unwind en masse. I suspect the tokens
| for many projects out there will trade close to zero.
| People who invested in various projects from algo
| stablecoins to lending protocols will suddenly find that
| they hold worthless tokens with zero recourse. By this
| point the insiders would have exited into BTC/ETH/fiat
| ready to start the next round of "projects".
|
| Maybe this is OK. I mean, it is what it is and clearly some
| people are fine with that. I think we can do better though.
| That's why I'm interested in credit based monetary systems
| because reputation is a key part, so participants are
| accountable for their actions. This is fundamental for any
| significant real world adoption. Furthermore, credit based
| instruments do have intrinsic value which is a function of
| issuer credit risk. Such instruments are more stable than
| "synthetic commodities" and have more utility for real
| world uses.
|
| Having said all that. I work in the crypto world and quite
| enjoy it. I just don't think it's as good as some would
| have you believe.
| eternalban wrote:
| This is a curious post. There is apparently a Settle Network and
| a github repo. But S. Spolu is not listed among the execs running
| it.
|
| https://settlenetwork.com/
|
| https://github.com/spolu/settle
|
| https://settlenetwork.com/settle-network/ (Scroll to bottom for
| the mug shots)
| tyingq wrote:
| "settlenetwork.com" seems to be unrelated to this, other than
| having the words "settle" and "network" in it.
| eternalban wrote:
| github repo points to it. and the archive.org page footer
| points to the repo.
| tyingq wrote:
| Where?
|
| I see a link to https://settle.network which isn't the same
| as https://settlenetwork.com
| randomopining wrote:
| Aren't gas fees and decentralization _inversely_ correlated?
| Ar-Curunir wrote:
| Aspects of this sound similar to Stellar and Ripple. Could folks
| with more knowledge elaborate on the differences?
| max_ wrote:
| It seems so. Its the notion of "Trust Lines"[0]
|
| All this thing does is limit potential losses from fraud. Not
| eliminating.
|
| The main value proposition of a blockchain is to solve the
| "principal-agent" problem [1] and gis simply reduces the risk
| but doesn't remove it entirely.
|
| Plus some of the requirements on a node having to be online (in
| a decentalized, byzantine environment) all the time are
| unrealistic.
|
| This seems more like ripple.
|
| Stellar uses a more sophisticated notion of "quorum slices" and
| is resistant to byzantine faults [2]
|
| [0]: https://trustlines.foundation/faq.html
|
| [1]:https://as1ndu.xyz/2021/04/clarifying-the-blockchain-
| proposi...
|
| [2]: https://youtu.be/vmwnhZmEZjc
| nano_o wrote:
| The Stellar Network relies on nodes declaring quorum slices,
| which can be understood as trust relationships, but it
| implements a single global blockchain. So I don't think it's
| very similar.
|
| Edit: one similarity is that token issuers in Stellar can
| remain authoritative on their token.
| _def wrote:
| I didn't know this project but if you visit their website today
| you can see that Stellar is listed there as a reference.
| openfuture wrote:
| I am working on something like this. Having a money in the system
| is a pretty hard problem (quantitative type theory-ish / lifted
| inference).
|
| You can get around that with culture and using existing systems
| as settlement layer (for the time being).
|
| Even then there is only one cryptocurrency that has a proper
| mechanism design for oracles (amoveo) - which you need if you
| want a trustless layer 2.
|
| Datalisp (@ for telegram .is for binge-written PDF) is this
| project (that I just started) it's basically a vector clock for
| wrapping interfaces in authenticated data structures and Bayesian
| inference with logic programming for estimating / inferring
| trust.
|
| By giving a useful framework for refining reproducibility we can
| build trust. Trust we need if we want a system to serve as a
| foundation for digital societies.
|
| Francis Bacon said knowledge was possible and science could
| establish trust. Now we need that, automated.
| Geee wrote:
| I think this idea has been implemented in Offset
| https://www.offsetcredit.org
|
| HN thread: https://news.ycombinator.com/item?id=23438241
| realcr wrote:
| It's true. In addition, spolu gave some very useful pieces of
| advice during the design of Offset. Too bad settle.network is
| not live anymore.
|
| I am not sure whether https://settlenetwork.com is actually
| affiliated with the original settle.network written by spolu.
| jl2718 wrote:
| Read early versions of the Ripple white paper, before they
| decided to make XRP a store of value. The compulsion to cash in
| on a settlement layer by establishing your own scarce medium of
| exchange is too great.
| toomim wrote:
| Just to be pedantic, what happened is the original founder sold
| it to some skeezy guys who wanted to cash in on the digital
| currency crazy, and those skeezy guys added XRP as a way to
| cash in.
|
| So it's not quite that the original founder felt pressure to
| create the token, but he did feel some pressure to make money,
| and eventually that led to a token.
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