[austenallred]

The blockchain keeps track of who owns what, even as those things change hands, without requiring some central body to keep track of it all. The easiest way to think of it is an instant, incorruptible market that somehow magically just works.

To know why that matters you have to understand the problem(s) it's solving - it's something people have been working on since the beginning of money, but there are so many edge cases we usually ended up just going back to a centralized authority. In the past you've needed something like a bank or a government or a company to have the authority to declare, with authority, "Person x owns the title to that house."

There are a few problems with that: They could do things to screw everything up (a government printing currency and causing inflation), be corrupt (countless examples), or perhaps not even exist because it's too much effort to create, set up, and monitor some body.

With the blockchain, the software everyone runs keeps track for everyone else in an incorruptible way (yes this is a simplification), so you're free to make changes (or transact) without having someone in the middle to wait for, and with no one that can really screw things up. Just boom, instant marketplace.

The most obvious thing you'd trade on a blockchain is some kind of asset - a cryptocurrency is the main example, or titles or stocks or something valuable.

Say, for example, I have some loans that people owe me on. I can throw those loans on the blockchain, and without a clearing house somebody else can buy them, and when the loan payment comes due you can easily see who owns the right to be paid.

It seems trivial, but allowing people to seamlessly make transactions of any kind without the overhead of a bank or clearing house is a big deal, and has a ton of applications.

[tommorris]

> magically just works

If we use Bitcoin as an example, it magically just works by consuming a pretty extravagant amount of electricity for the miners/nodes to run.

[austenallred]

There are 95,000 physical bank branches in the US and 500,000 employees at the 3 biggest banks alone.

Of course bitcoin doesn't do everything those banks do yet, but on a per-transaction basis it uses orders of magnitude less resources than the current system

[agentdrtran]

What? Can bitcoin count cash and provide a human face to a person whenever they want?

[austenallred]

> Of course bitcoin doesn't do everything those banks do

You don't have to replace 100% of what something does to disrupt it

[CyberDildonics]

Do you want a human face in person to deal give you permission to use your own money (from 9 to 5 with an hour for lunch) or do you just want to be able to use your own money electronically without having to hand it over to someone first?

[bmcusick]

The bank I work at employees 70,000 people and has ginormous computers too. You should see our resource usage.

[kasey_junk]

> The easiest way to think of it is an instant, incorruptible market that somehow magically just works

Are any of those adjectives true? Its no where near instant, it can be "corrupted" by an entity with enough hashing power and there isn't any magic to its operation.

[austenallred]

No, that's a wild oversimplification. That's what a blockchain strives to be, though practically it should be close-ish to instant, it would be incredibly rare for someone to corrupt it with enough hashing power, and "magic" was there to compensate for the obvious lack of explanation as to how it works.

[nikkwong]

Care to enlighten me on how you place a 'loan' on the blockchain? Isn't a loan issued from a bank -> borrower? My assumption in this case would be that the ETH contract would be written to change the legal owner of the loan? How is that then reflected in the real world?

[bostik]

Quoting myself from https://news.ycombinator.com/item?id=14775416 :

Cutting through all the [templated] legalese, we can say: "Contract A, between parties K and L, concerning transaction T: T shall be considered done and legally binding once Coloured Coin X has been paid from address [foo] to address [bar], and has been verified by no less than 20 subsequent blocks."

The idea of a Coloured Coins is that you use something uniquely identifiable to make a transaction in globally verifiable transaction log. (Iow: blockchain.) Real-world contracts can reference the binary result of "has this transaction happened?" to verify that a contract has been completed and an off-blockchain transaction is valid.

[austenallred]

Perhaps that's not the best example, but in this case the loan is securitized, so you're basically just trading a piece of paper (or digital representation) that represents who "owns" the loan. That's the way the vast majority of assets are traded these days - stocks, bonds, even cash are usually just numbers in some account somewhere.

[mshanu]

In Ethereum, you write contract (its the terminology but it does not mean in literal sense), where you can implement a logic of loan as code.