Topic: At what level do you need 100% trustless (Read 439 times)
Another example that people will trust non-blockchain solution is that they are not IT expert. I have friends who don't even know how to run a bitcoin client, but they trust me to handle it for them, it is enough
generally when you know that the money you're spend cannot be redone easily you need a high level of trust, at least this is how i see it with my money
Trust is not always a bad thing, it increases the efficiency and reduce the cost
For example, when you purchase a cup of coffee, you would simply trust the organization that handles the transaction, since they have no reason to fool you and destroy their reputation just for a cup of coffee. It will be absurd to write a contract for each coffee purchase
However, when you purchase a house, the trust of the dealer must be ensured and there must be a legal document behind that purchase. So the required trust raises when the transaction value increases. But still, you don't need all the people from the world to make sure your purchase is valid, a signed contract that have legal status is enough
However, when it comes to money creation, you need all the people from the world to make sure the money creation is honest. If you rely on any single entity, and this entity go rougue, you will have no way to avoid a loss, and that loss is imposed on every user of that money
The genesis block indicated that bitcoin is created to solve the problem at the money creation level, e.g. central banks bailing out commercial banks using money out of thin air. There is a built in payment mechanism in bitcoin to do the initial coin distribution, but user level traffic is not typically a monetary system's task. In above examples, you just need a little bit regulation/insurance on those institutions so that they can be trusted by average consumer
Bitcoin is first a monetary system, then a settlement system, and last a payment system. The amount of trust involved at all these different levels are different, and should be treated differently. Trying to apply the same trust-less model on all these different transactions would result in large waste of resource and extremely low efficiency
For example, when you purchase a cup of coffee, you would simply trust the organization that handles the transaction, since they have no reason to fool you and destroy their reputation just for a cup of coffee. It will be absurd to write a contract for each coffee purchase
However, when you purchase a house, the trust of the dealer must be ensured and there must be a legal document behind that purchase. So the required trust raises when the transaction value increases. But still, you don't need all the people from the world to make sure your purchase is valid, a signed contract that have legal status is enough
However, when it comes to money creation, you need all the people from the world to make sure the money creation is honest. If you rely on any single entity, and this entity go rougue, you will have no way to avoid a loss, and that loss is imposed on every user of that money
The genesis block indicated that bitcoin is created to solve the problem at the money creation level, e.g. central banks bailing out commercial banks using money out of thin air. There is a built in payment mechanism in bitcoin to do the initial coin distribution, but user level traffic is not typically a monetary system's task. In above examples, you just need a little bit regulation/insurance on those institutions so that they can be trusted by average consumer
Bitcoin is first a monetary system, then a settlement system, and last a payment system. The amount of trust involved at all these different levels are different, and should be treated differently. Trying to apply the same trust-less model on all these different transactions would result in large waste of resource and extremely low efficiency
I guess you got a point there. Fortunately Satoshi presented us with the perfect soution for money creation and finally we can gat rid of this corrupted financial system!
At money creation and initial distribution level, 100% trust-less model is a must. e.g. decentralized hash power handles coins generation and payout to pooled miners
At settlement level, large institutions can also use bitcoin blockchain to make sure the settlement is risk free, similar to banks using Fedwire system to do large settlements. But this is not top priority. If there are millions of miners out there constantly asking for mining payout, then the system should prioritize the money distribution over settlement. In reality, mining nodes can prioritize their own transactions towards pooled miners, this is already a fact. Mining nodes are decentralized central banks, their major task is money creation and initial distribution
At payment level between institutions and companies/private consumers, there are huge amount of small transactions. These transactions do not require same amount of trust as money creation or settlement. People in fact simply trust the institutions like web wallets and exchanges to handle their bitcoins
Currently the biggest problem is that those institutions have not established their own clearing and settlement channel, thus they bypass all the consumer level traffic on to the blockchain, make the blockchain much less efficient. This is similar to paypal trying to use the Fedwire system for their millions of transactions daily, sounds very strange
At settlement level, large institutions can also use bitcoin blockchain to make sure the settlement is risk free, similar to banks using Fedwire system to do large settlements. But this is not top priority. If there are millions of miners out there constantly asking for mining payout, then the system should prioritize the money distribution over settlement. In reality, mining nodes can prioritize their own transactions towards pooled miners, this is already a fact. Mining nodes are decentralized central banks, their major task is money creation and initial distribution
At payment level between institutions and companies/private consumers, there are huge amount of small transactions. These transactions do not require same amount of trust as money creation or settlement. People in fact simply trust the institutions like web wallets and exchanges to handle their bitcoins
Currently the biggest problem is that those institutions have not established their own clearing and settlement channel, thus they bypass all the consumer level traffic on to the blockchain, make the blockchain much less efficient. This is similar to paypal trying to use the Fedwire system for their millions of transactions daily, sounds very strange
Trust is not always a bad thing, it increases the efficiency and reduce the cost
For example, when you purchase a cup of coffee, you would simply trust the organization that handles the transaction, since they have no reason to fool you and destroy their reputation just for a cup of coffee. It will be absurd to write a contract for each coffee purchase
However, when you purchase a house, the trust of the dealer must be ensured and there must be a legal document behind that purchase. So the required trust raises when the transaction value increases. But still, you don't need all the people from the world to make sure your purchase is valid, a signed contract that have legal status is enough
However, when it comes to money creation, you need all the people from the world to make sure the money creation is honest. If you rely on any single entity, and this entity go rougue, you will have no way to avoid a loss, and that loss is imposed on every user of that money
The genesis block indicated that bitcoin is created to solve the problem at the money creation level, e.g. central banks bailing out commercial banks using money out of thin air. There is a built in payment mechanism in bitcoin to do the initial coin distribution, but user level traffic is not typically a monetary system's task. In above examples, you just need a little bit regulation/insurance on those institutions so that they can be trusted by average consumer
Bitcoin is first a monetary system, then a settlement system, and last a payment system. The amount of trust involved at all these different levels are different, and should be treated differently. Trying to apply the same trust-less model on all these different transactions would result in large waste of resource and extremely low efficiency
For example, when you purchase a cup of coffee, you would simply trust the organization that handles the transaction, since they have no reason to fool you and destroy their reputation just for a cup of coffee. It will be absurd to write a contract for each coffee purchase
However, when you purchase a house, the trust of the dealer must be ensured and there must be a legal document behind that purchase. So the required trust raises when the transaction value increases. But still, you don't need all the people from the world to make sure your purchase is valid, a signed contract that have legal status is enough
However, when it comes to money creation, you need all the people from the world to make sure the money creation is honest. If you rely on any single entity, and this entity go rougue, you will have no way to avoid a loss, and that loss is imposed on every user of that money
The genesis block indicated that bitcoin is created to solve the problem at the money creation level, e.g. central banks bailing out commercial banks using money out of thin air. There is a built in payment mechanism in bitcoin to do the initial coin distribution, but user level traffic is not typically a monetary system's task. In above examples, you just need a little bit regulation/insurance on those institutions so that they can be trusted by average consumer
Bitcoin is first a monetary system, then a settlement system, and last a payment system. The amount of trust involved at all these different levels are different, and should be treated differently. Trying to apply the same trust-less model on all these different transactions would result in large waste of resource and extremely low efficiency
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