What Problem Blockchains Solve

https://solutionspace.blog/2021/12/21/what-problem-blockchains-actually-solve/

by colinarms • 5 years ago

61 137 5 years ago

solutionspace.blog

marcodiego• 5 years ago

Basically it allows demonstrability of ownership.

dragontamer3• 5 years ago

So if I made an NFT of the Constitution, does that make me the owner of the Constitution?

xboxnolifes2• 5 years ago

Can we quit beating this straw horse?

Karunamon4• 5 years ago

Provenance is a thing, so no. You're just some rando and nobody would care about your NFT.

The same way you can buy or even make replicas of nearly any artwork out there. The one blessed by the creator has value that the illegitimate copies do not.

bee_rider2• 5 years ago

NFT's are pretty dumb IMO. But I think there is something interesting in this question.

What's the Constitution? It is a piece of paper with ink on it. The paper and ink aren't that valuable, actually I have many better pieces of paper and some better ink. So that isn't where the real value is.

I could also buy a modern copy of the Constitution which would be, practically, much better than the original (in the sense that it would be made of modern materials and more durable as a result), so the value must not be there either.

I guess it could be in the investment value of the Constitution. I mean, I bet if I had the Constitution and held onto it for a couple decades, I could sell it to some collector for more that I bought it for. But that's not really a satisfying answer -- clearly the investment value is derived from some other underlying belief that the thing is important.

Anyway, if I was really good at writing I could string you along indefinitely and keep cutting away aspects of the Constitution that clearly don't provide the value, but I'm just a programmer so let's get to the point: I think the value of the Constitution is actually completely divorced from the physical thing itself. It comes from the history that it represents -- which is actually an intangible idea.

So, if someone were to mint an NFT of the Constitution and we decided that it also represented that idea, I guess it would be just as valuable? Good luck convincing other people! But I don't really see why the physical piece of paper is fundamentally a better representation of the idea, other than that's just the way we've always done it. Maybe you can mint an NFT of the Constitution for yourself, and convince yourself it represents the idea better than the piece of paper did. I think this would be a pretty silly thing to do, but no more so than trying to own the paper representation.

These are all just ways of satisfying our irrational desire to own part of an idea, the problem comes from our belief that ideas are ownable, not the shape of the token.

PeterCorless4• 5 years ago

Blockchain is not a grammar for intellectual property rights.

You literally need to create a grammar for that, and an application layer, which is not part nor parcel to the blockchain architecture.

Nor should it be.

You should be able to make an assertion of rights, and then provide proof of those rights, based on multiple computing paradigms, whether from a SQL or NoSQL database, or embedded within a computer file itself, or so on.

There's a whole body of work in my life associated with this idea, and no, blockchain doesn't automagically solve for many or any of the problems I saw looming back in the 1990s:

https://patents.google.com/?inventor=Peter+P.+Corless

edgyquant3• 5 years ago

Could it potentially be used to keep a distributed database of information collected by a large array of satellites orbiting something like the sun? I know I’m reaching here, and I’m pretty anti-cryptocurrency so I’m not looking for a nail really, but I just think distributed stuff is cool and the way blockchains work surely has some purpose when light lag is in play.

Like couldn’t it be used across a dyson swarm of rotating habitats or something as the transaction currency between them?

beambot• 5 years ago

Crypto transactions featured heavily in Stross' Neptune's Brood for synchronizing transactions over interstellar distances:

https://en.m.wikipedia.org/wiki/Neptune%27s_Brood

Money was split into slow, medium, and fast variants -- the former of which was subject to speed of light limitations in the key signing for verification.

andreskytt• 5 years ago

AFAIK Indian telecoms are using blockchain tech to maintain a distributed database of do-not-call numbers. Lag of up to 24 hours is ok and the relatively small number of parties is quite trustworthy. Basically they just use the bc for consensus and mirror it to a rdbms for read queries. That’s the only bc implementation I know that is both in production and is not speculation- or crime-fed.

lmm5• 5 years ago

Blockchain in the sense of proof-of-work mining? A Merkle tree might make sense, signed updates might make sense, but I don't see that mining adds value in that use case.

ChymeraXYZ• 5 years ago

Hey, I have a few serious questions, as I have really been trying to understand the benefits of using blockchain over "classic" stuff. They may sound like I'm questioning things, and that's because I am but with the goal to further my understanding.

Lag of up to 24 hours is ok

So you could use any eventually consistent DB? Or a pub-sub type queue that you process at your leisure?

and the relatively small number of parties is quite trustworthy.

I'm assuming this parties need to apply/be invited? How is that different than needing an API key?

Basically they just use the bc for consensus

Consensus of what exactly? AFAIU the consensus is about the state of the data on the blockchain, with sanity checking against itself, not about if many parties agree if "this number should be blocked"

and mirror it to a rdbms for read queries.

I was always under the impression that it's quite fast to read the data off the blockchain if you are a node. Am I misunderstanding something or is what they are doing just overkill?

lmm5• 5 years ago

Only if the setup needs to be zero-trust. Systems of correspondent banks etc. worked very well even in times where worldwide communication took weeks, and even today there are e.g. traditional Islamic money-transmission networks that operate extremely efficiently because they rely on trust.

edgyquant3• 5 years ago

True I’ve been reading the culture series lately so my vision was off a truly decentralized series of habitats. I could see a trustless ledger being a solution to them all wanting to trade currency etc but not necessarily being a single coherent group. Then again as I said I may just be reaching.

m3nu• 5 years ago

The very mechanical understanding of a contract means that we cannot tell the difference between a transaction that abides by the rules and one that exploits a bug in the system, respecting the letter of the law but not its spirit.

This is really the key issue, which is difficult to change. I can't think of many important systems where we wouldn't expect human intervention if something goes wrong.

fastball• 5 years ago

I'm not sure having humans in the pipeline ameliorates this issue as much as you think it does.

Take the existing legal system in the US – laws are interpreted by courts/judges/etc, who AFAICT generally choose to interpret laws by their letter rather than their spirit.

As an example, you can look at the recent Kyle Rittenhouse trial with regards to whether or not it was legal for Rittenhouse to be carrying his firearm. The way the law was written, it basically carved out an exception so that 17 year olds can open carry, even though that was unlikely to be the intent of the law's drafters. But of course the judge found Rittenhouse to be not in violation because that's how the law was written. Smart contracts don't seem much different, except you're removing the inefficiency of someone having to judge what the letter of the law is.

meheleventyone2• 5 years ago

That sort of law and a business contract are quite different though. But if the legal system was immutable code we couldn’t fix that law whereas with a softer humans in the loop system we can.

For contracts you don’t know what you want up front. Same issue in a lot of programming where you don’t know all the requirements up front. You horse trade towards mutual agreement but things are usually always open for renegotiation. There was a very dry article published yesterday that had this great insight:

“A key tenet of economic analysis is that enterprises are unable to devise contracts that cover all possible eventualities, eg in terms of interactions with staff or suppliers. Centralisation allows firms to deal with this "contract incompleteness" (Coase (1937) and Grossman and Hart (1986)). In DeFi, the equivalent concept is "algorithm incompleteness", whereby it is impossible to write code spelling out what actions to take in all contingencies.”

https://www.bis.org/publ/qtrpdf/r_qt2112b.htm

arcticbull10• 5 years ago

Take the existing legal system in the US – laws are interpreted by courts/judges/etc, who AFAICT generally choose to interpret laws by their letter rather than their spirit.

The US legal system is based on English Common Law, where precedent and interpretation by a judge have force of law. This is in contrast with Civil Law where the law must be executed as written and judges have very little room for interpretation. Note that in North America, both Quebec and to an extent Louisiana continue to follow the Napoleonic code.

aeternum• 5 years ago

There still is human intervention and we've already seen it. The ETH vs. eth classic fork was one example where humans stepped in and decided to follow the spirit rather than the letter of the law. Both chains are still going but it's pretty clear which won the majority consensus and lions-share of the value.

Basically while code is law for these blockchains, human attention and usage still dictates the value.

dangus2• 5 years ago

I think a good resource to give you an idea of what blockchain can actually do comes from the "Blockchain use cases " and "Blockchain solutions" sections of IBM's Blockchain marketing page:

https://www.ibm.com/blockchain

This gives you an idea of some real world business problems that have been solved with the technology. Still, personally, I find the question of "when do I decide to consider using a blockchain as an implementation choice?" a difficult one to answer.

bydlocoder• 5 years ago

You do know that IBM essentially shut down its blockchain division? https://finance.yahoo.com/news/ibm-blockchain-shell-former-s....

arcticbull10• 5 years ago

Azure Blockchain followed suit, shutting down in September 2021. [1]

[1] https://cointelegraph.com/news/microsoft-quietly-closing-dow...

dangus2• 5 years ago

No. I don’t really follow them closely, I just thought their marketing page was a good list of possible use cases.

The article did a good job explaining what general problem blockchain solves, but didn’t give me a very good idea of what problems one might try to solve beyond existing implementations.

PeterCorless4• 5 years ago

1. If you need to share all the data and the data distribution methods across multiple legal entities — there's no one 'owner' of the data like a company. If you are doing a blockchain implementation for an internal project... why? Why are you not just using a regular database like Postgres or MongoDB or Oracle or ScyllaDB? But if you are going to be sharing all this data across 50-100 companies, and no one themselves wants to "own" the project and host it, and if everyone wants to be participating as a near equal partner in a solution? Okay. Maybe distributed ledger is warranted.

2. If you need to be able to add more entities who want to participate in the distributed ledger. Or, conversely, drop out entities that are no longer participating, but everyone else still wants to preserve the history of their transactions. If you do deploy to a centrally-owned databsase, if the managing entity ever wants, for any reason, they can pull the plug on the whole operation. A distributed ledger ensures you can add people at any time — no one can lock you out from joining. And also it ensures that if you ever want to leave, the data and the work continue.

3. If you need strongly-consistent views of data, and you don't care about transactional limits. Most distributed ledger technologies are greatly bottlenecked in terms of transactions per second. And I mean some are limited to less than 10 transactions per second. Others can scale to thousands of operations per second. But many centrally-managed and even distributed databases can operate at millions of operations per second. So blockchain is not going to do anything like "eventual consistency." It just won't. And because of that, you'll have these strong throughput (ops per second) limits.

Zanfa• 5 years ago

4. It can’t involve anything off the chain (physical assets or items) or your data integrity will require some sort of a centralized trusted oracle that defeats the trustless nature of the blockchain.

This basically means most of the examples in IBMs marketing (supply chain management, vaccine rollouts etc) don’t actually make any sense to do on blockchain vs using a regular database.

arcticbull10• 5 years ago

Still, personally, I find the question of "when do I decide to consider using a blockchain as an implementation choice?" a difficult one to answer.

Luckily, there's a helpful guide available, if you hit Learn More on the first "most probably NO." [1] It's based on this paper. [2]

[1] http://doyouneedablockchain.com

[2] https://eprint.iacr.org/2017/375.pdf

pengwing4• 5 years ago

Ethereum has only been around since 2015. Naturally smart contracts, DAos and NFTs are somewhat newer technology, still exhibiting flaws.

Block chain as a concept with the single use case of store of value has been around since 2009 in the form of Bitcoin. So let me only pick one battle here: The problem is federally-issued inflationary currency. Bitcoin solves it.

PeterCorless4• 5 years ago

"we find no evidence of any positive links between inflation and either Bitcoin or Ethereum during times of increasing forward inflation expectations. This raises significant doubts over the ability of cryptocurrencies to hedge expected inflation in the short- or long-run."

https://www.sciencedirect.com/science/article/pii/S016517652...

trevyn• 5 years ago

Are “inflation expectations” different than measured inflation?

pengwing4• 5 years ago

A really great study, albeit of a completely different topic. Let me explain the it in layman's terms: Can expectation of inflation be used as a trading signal to profit from a rising price of Bitcoin and Ethereum? Result: Not really, it was only briefly possible during Covid19 and does not hold as a general relationship.

My point was: BTC is more deflationary than USD. A relationship between the topic of the study and my statement does not exist. But if you read chart 1 of Figure 1 carefully, you will find that its data in fact supports my statement.

da-x2• 5 years ago

However so far it's not proving to be a currency (short term stability, long term deprecation or preservation) but only an asset class (short term instability, long term preservation).

So far it is only proving that it cannot be both.

For assets, one can choose to invest in already existing inflation resistant assets, and many investors and even unsophisticated laypeople did that across the ages before Bitcoin was invented. So essentially federally-issued inflationary currency is not really a problem of investment because there are other alternatives to it when investment is concerned.

pengwing4• 5 years ago

BTC is already a de-facto currency in El Salvador and somewhat short term stable.

As an asset class BTC solves yet another problem: It is a better version of gold due to the hard supply cap.

jagger273• 5 years ago

I don't want to live in a society where some unknown shadowy figure(s) may or may not still hold the keys to the greatest fortune in human history.

pengwing4• 5 years ago

You don't have to. Inventing BTC and being rewarded for it is very much based on merit. You are free to live in a society based on other values if you want to.

mrjin• 5 years ago

IMO, nothing. Regarding security/integrity of records, block chain is not better but with more complexity. And for the so claimed decentralization, it is a catch 22: centralized organizations are there for reasons, and block chain resolved none of them. So now you can see a funny situation that so called decentralized transactions are through centralized exchanges. But if you do need exchanges, why not simply go for banks?

jayd165• 5 years ago

Solves the problem of getting money out of the country, legality be damned. I assume this contributes a lot to its popularity.

wtsnz3• 5 years ago

They also allow for micro transactions in a way we’ve not been able to do so far.

You can use the original Bitcoin protocol to stream (and pay) for each packet of data. We can now make a pay-to-use netflix, something we haven’t done yet. https://xiaohuiliu.medium.com/netflix-over-bitcoin-payment-c...

Tepix• 5 years ago

David Chaum's Digicoin enabled this back in the mid 90s. He has the (expired) patents to prove it.

dmitriid8• 5 years ago

They also allow for micro transactions in a way we’ve not been able to do so far.

Yes. Extremely slow, inefficient and expensive. We really haven't been able to do micro transactions this way before.

wtsnz3• 5 years ago

They don’t have to be what you described. The BSV network does more transactions each day than any other network at a magnitude less cost. Less cost in both user end and CO2.

https://coincarboncap.com/

arcticbull10• 5 years ago

Microtransactions have been something we could take advantage of since the dawn of custodial wallets - at least since PayPal came into existence in 1998. However, microtransactions aren't something humans actually like. It's something technocrats think people want, but when they get it, well - let's just say there's piles of carcasses of dead startups littering the field.

As Nick Szabo will attest, each transaction you make consciously carries with it a mental cost. It sucks. People would much rather a Netflix model to a pay-as-you-go model even if it ends up costing them more money in the long run. [1]

We can now make a pay-to-use netflix, something we haven’t done yet.

[edit] I hate to break this to you, but you just described the Apple Music, TV and Movie stores, the first of which (music) has existed since the dawn of the iPod in 2001. Also the Amazon equivalents. And a pile of others.

[1] https://nakamotoinstitute.org/static/docs/micropayments-and-...

wtsnz3• 5 years ago

The mental cost of a transaction is a really interesting point.

However, why couldn’t we have both options be available?

If there is one film on a streaming service that I know I’d like to watch, but don’t want to commit to $10 a month just to watch the first 30 mins of, why can’t I pay for the minutes of the media I watch instead?

This also could be an interesting monetization method for creators who make videos on YouTube who dislike adverts. I’d be more happy to pay to support the creators directly, if I knew they’d get a good cut.

I don’t think it’s fair to say that humans don’t like micro transactions as we’ve never been able to try it in the real world. Sure, they might not work for everything, but they may allow for new things to flourish. Things that cost $0.001 cents for example.

jayd165• 5 years ago

Why couldn't this be done with traditional electronic transactions?

malthaus• 5 years ago

There is not one actual practical problem blockchains solve. It's a get rich quick / pyramid scheme built on top of a theoretical concept that appeals to nerds but doesn't work in the world we live in.

The same issues persist, they're just packaged/framed differently - and, due to lack of regulation and norms to mitigate them in the real world, can still be exploited.

People were complaining that Google eats up so many engineers to solve ad-problems but the whole blockchain space is much worse - what a colossal waste of human and ecological resources.

mekster• 5 years ago

I'm amazed at the end of 2021, I still get to see these responses about blockchain on hacker news.

Somehow Reddit looks smarter when it comes to blockchain topics.

lmm5• 5 years ago

I'm amazed that the whole thing has somehow kept going despite the same lack of legitimate use cases that it's had from the start.

ews• 5 years ago

99% of times, the top comment for anything related to crypto on HN will have a comment like this. Some people just don't get it.

Unfortunately, HN became /r/buttcoin long ago, and it looks like it's not the place to have a nuanced and rational conversation about blockchain or anything crypto. There is such a wide array of rich conversation about very interesting topics happening elsewhere (monetary policy being my favorite topic after reading The Bitcoin Standard) that is just routing around HN into subreddits/discords/twitter.

wellthisisgreat• 5 years ago

What are the uses cases of blockchain that have been deployed outside of financial schemes, where the blockchain solves a problem in a unique way that could not have been addressed with non-blockchain?

Sure there were probably blockchain projects that got traction and use blockchain, but the only reason it’s blockchain was that it’s easier to get funding for that.

Genuinely curious.

john_alan3• 5 years ago

Private, self sovereign money for the internet. I think that’s a use case.

sofixa6• 5 years ago

Is it really private when all transactions are recorded forever and publicly visible, and one needs to pass through an on/off-ramp which follows KYC regulations anyway?

mrkramer2• 5 years ago

There is not one actual practical problem blockchains solve.

Read the whitepaper; Bitcoin solves the problem of centralization of trust, fraud and it enables transparency. No more creative accounting and cooking the books. On top of that it enables microtransactions as small as faction of the cent. It is quite big innovation.

mrkramer2• 5 years ago

Late edit: fraction*

dang• 5 years ago

Please don't post generic flamewar comments to HN. It leads to generic flamewars, which are the most tedious and predictable (and usually nastiest) format of discussion. We want just the opposite here.

Arguably the greater problem is that people upvote this stuff; this subthread was at the top of the page when I saw it (I've downweighted it now—which we try to do whenever we see a generic subthread at the top of a page). But it's harder to tackle the problem at that level.

https://news.ycombinator.com/newsguidelines.html

neiman• 5 years ago

The comments here show, again, that this is maybe the most charged topic in hackernews.

Why is this topic so charged? Is it because the environmental damage (but then PoS should change it)? or because there's money involved (but then ENS+IPFS are poor, so should be good)? Or is it just because it's complex and takes a lot of effort to understand?

kkjjkgjjgg3• 5 years ago

Could be envy of people who saw other people get rich.

john_alan3• 5 years ago

Precisely, it upsets the pseudo-intellectuals.

jagger273• 5 years ago

It's because of the non-stop barrage of bullshit projects that don't solve actual problems besides "I wish I bought Bitcoin at $100 so here's my attempt to recreate that magic".

TFA makes a solid argument about the limited problem space where blockchain tech is useful.

Or is it just because it's complex and takes a lot of effort to understand?

Look, I see that you're deep into the ecosystem and you're excited about it. The core ideas of blockchain are not that complex. It's the human factors surrounding all of it that make it so fucking tiresome thread after thread.

kkjjkgjjgg3• 5 years ago

"It's the human factors surrounding all of it that make it so fucking tiresome thread after thread."

But that is also what makes it so interesting. Nobody forces people to use and assign value to Bitcoin. It all happens only because people want it. No government mandates, nothing.

magicjosh• 5 years ago

I would like to read a more thorough and thoughtful analysis of this perspective.

Am I indeed inside the bubble of a giant pyramid scheme? If so, what does that say about me and my judgement?

On the flip side, what if all this blockchain/Bitcoin/web3 stuff is the next big thing? Does it mean HN has passed its prime and innovative people at the cutting edge move elsewhere? I wonder what someone like Brian Armstrong from Coinbase would say, being in both worlds.

The OP article itself is banal, it reads like a high school book report. How is this at the top of the ranks?

From "Hacker News: Welcome" [0]: "HN is an experiment. As a rule, a community site that becomes popular will decline in quality. Our hypothesis is that this is not inevitable—that by making a conscious effort to resist decline, we can keep it from happening."

[0] https://news.ycombinator.com/newswelcome.html

_xnmw• 5 years ago

What blockchains solve is the whole pesky problem of following the law and paying taxes, and being a normal member of society. No wonder that much of the early crypto literature was all about anarchy. To this day, the only useful thing that crypto has enabled (on a very small scale) international asset transfer that bypasses mainstream financial systems. As Diehl[1] wrote, decentralized trustless systems are only useful to criminals -- every other social system on the planet has "trust" embedded in it, because that is more efficient, socially constructive, and powerful. Oh, and crypto isn't actually decentralized or trustless either, as you still need to trust the developers that wrote the code, and the people that run your exchanges, because otherwise you will get robbed by them, as it happens on a regular basis in the crypto world.

[1] https://www.stephendiehl.com/blog/nothing-burger.html

ur-whale2• 5 years ago

The problem with statist thinking like this is that it never ever takes into account what happens when the state fails.

This is a typical way of looking at the world from people who were lucky enough to grow up in a society that sort of works, unfortunately not the norm for a large fraction of the human race.

I suspect that - had you lived under German occupation in 39-45 - you would have a very different take on things.

arcticbull10• 5 years ago

If your state fails you have much, much bigger problems than your hard currency.

So much so, that your hard currency is kind of a rounding error in this situation.

If the state loses its monopoly on violence, well, someone can just beat you until you're dead or you give up your private keys. Either one should be fine.

I don't optimize my life for some hypothetical dystopian failed state situation in any other aspect of my life. I don't have a fallout shelter in my back yard. I don't have bricks of gold. I don't have Kalashnikovs. I don't have bullets. I don't keep a stash of canned peaches. I don't have gas masks or iodine pills. This isn't Metro Exodus. It's massively inefficient to plan for such a situation in any aspect of my life.

The risk-reward profile is just flat out nuts. I can't know ahead of time beyond these key resources what I'd actually need. And I know I can't count on the internet being up for me to trade spreadsheet cells for gasoline in the apocalypse - nor can I count on good actors to have 51% control of the network.

Why on earth would we force our currency to operate as though there was a German occupation at all times, and take on all the massive inefficiency that goes along with it? Especially when its climate implications are pushing us towards this dystopian future.

sofixa6• 5 years ago

But very few people in the world today are under the risk of having to live in such a situation.

jayd165• 5 years ago

I suspect that - had you lived under German occupation in 39-45 - you would have a very different take on things.

What does this mean exactly? I don't think I would want to live through a Nazi regime that could inspect all transactions by scraping the block chain.

omnimus• 5 years ago

I dont know if by anarchy you mean anarchism but crypto has always been about libertarianism. Anarchism is generaly social and left leaning. At some ofcourse crypto libertarians wanted to coopt cool word and invented cryptoanarchism. But thats what they love to do (web3).

jayd165• 5 years ago

Possibly means anarchy in the game theory sense. Rules are not enforced by a superior authority.

foxes• 5 years ago

The profile picture of the author sums up the whole thing. Emotional outburst. I understand blockchains perfectly. Aiding crime and being a pyramid scheme are the only things they have been shown to solve so far.

bartaxyz• 5 years ago

It solves the double spending problem in a decentralised network. Whether that has an application is another question.

gmays• 5 years ago

Great writeup. I don't know how big crypto/blockchains will get, but I do know 1) a lot of smart people are betting on it, and 2) I've learned not to confuse the limits of my imagination with the limits of reality.

So I've made a relatively small investment in crypto across a couple of dozen coins as an experiment. I am cautiously optimistic in the future, assuming it'll be 5-10 years until viability at any practical level for a mainstream audience.

What Problem Blockchains Solve

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