[kang]

I have looking deeply into lending smart contract protocols - dharma, ethlend, salt, paypie, etc. My biggest complaint is all of them are so-called 'blockchain' products but not only can they be done better without blockchain, but that despite their product being all about decentralization, none of these projects are decentralised!

[DennisP]

In theory, they can be done just fine without blockchains, but in practice, it doesn't always work out that well, especially when the borrowers don't have much money. Matt Taibbi's recent book The Divide described all sorts of abuses, in which loans are sold and resold, the loans' owners swear they have records they don't actually have, courts trust them because they don't have the resources to check, and borrowers lose to default judgements because they weren't properly served, and in some cases didn't owe the money in the first place or had already paid it off.

Whereas if the loan and payment data were on a public blockchain (with personal details hashed), records wouldn't get lost and courts could easily verify them.

You could argue that we should reform our centralized systems, but that's hard to actually do, which is sorta the point of removing the need to trust them in the first place.

http://www.blunderingcode.com/ethereum-credit-cards/

[adrianratnapala]

This is an interesting point, until now I thought blockchains were only useful for decentralisers, which in turn were only useful for people who wanted something like censorship resistance.

But here is a different use-case -- keep records well. Traditional systems are actually pretty bad because of the incentives. My bank statements for example are often very confusing, and online data only goes back 18 months, because the bank has little incentive to do better.

And that is in a relatively benign market. Title deeds, and the kind of loan documentation you are talking about create positive incentives for abuse.

[gbhn]

While some important records are public, many are not. It isn't obvious that all debtors want the details of their debt made world-readable, for instance.

[DennisP]

Right, which is why in the article I linked, I describe a system that stores only the hash of the debtor's personal data on chain. A lender with the preimage can still use that to prove its case.

For stronger privacy we'd need ring signatures or zksnarks, so a person can't be identified by the flow of payments, but those technologies exist on various blockchains already.

[tehlike]

you can use zeroknowledge proofs for things you don't want to reveal. it's called zk-snarks

[Quiark]

Yes but I can also imagine all kinds of problems coming from keeping private keys. Stolen, lost, hacked (see Estonian id card)(well all right, secp256k1 is much less susceptible to it than RSA).

[arcticfox]

Every time blockchain has had a hype cycle over the years I start thinking of ideas to build on it. Then I realize all of my ideas would just be simpler, better, and more monetizable (minus Ponzi hype) if I just built them on traditional technologies.

[splintercell]

I think the problem here is that you're attacking the wrong part of the problem. Otherwise, why did you even get excited by the original idea being built on the blockchain, to begin with?

Imagine if you thought that it would be a great idea to create decentralized payment system on the internet where people can accept and make payments in a peer to peer manner.

Except, this is 2001. There is no such thing as a blockchain. You face the problem of double spend, and soon enough, you come to the realization that you could create a peer to peer accept/send online payment system much better if it is centralized.

Thus, Paypal is born.

But does that mean a blockchain based decentralized payment system was completely useless? Not really, it is clearly demonstrated by the popularity of bitcoin in a world with capital controls, WikiLeaks payment sanctions etc.

The real reason behind this effect is that the tech world is excited about decentralization, but it doesn't fully understand that there are a lot of missing components required to create say "a censorship-resistant online forum" or "decentralized blah blah service".

On the top of that, nobody except for the people who are being actively censored or prevented from doing things by the centralized institutions truly need the decentralization.

Most SV technologists would be really excited by the idea of a decentralized, censorship proof forum. Except, you will only attract the alt-right (as of now) to it. Why? Because the non-alt-right is perfectly fine with the censorship, as it favors them currently.

[arcticfox]

> Not really, it is clearly demonstrated by the popularity of bitcoin in a world with capital controls, WikiLeaks payment sanctions etc.

Everyone I know that is remotely interested in Bitcoin is interested because it may increase in value, it's not popular at all as a payment mechanism outside of illegal circles.

> Most SV technologists would be really excited by the idea of a decentralized, censorship proof forum

Is this really exciting? It sounds like a formula for a cesspool. It seems to me that the challenge in getting anything interesting to happen there is not in the technology, but in the design of the service. There are already tons of places where you can discuss anything that's not actually illegal, including being alt-right. It's just that they're seedy, so nobody normal goes there.

[watoc]

That's usually the issue I have when selecting a technology before knowing what problem I want to solve.

[unabridged]

Blockchain is not going to make some traditional company rich. Its going to be used to build things like a decentralized, public web of trust that can be used for open, public uber & airbnb clones.

[arcticfox]

> Its going to be used to build things like a decentralized, public web of trust that can be used for open, public uber & airbnb clones.

It's already trivial to build those clones without blockchain if users give up a small amount of trust, and that amount of trust is basically irrelevant to the overhelming majority of users. And the advantages of non-blockchain development, in return, are huge.

[Daishiman]

All those things are laughably far away from being actually useful business ideas.

[tehlike]

can you provide an example for how uber & airbnb clones be built on blockchain? What would you store, how would it help?

[nahollander]

@kang -- while I don't disagree that there's no shortage of snake oil and hand-waving in the blockchain industry ("Blockchain for X! Huzzah!"), I do disagree with your point about whether there is an efficiency gain to be had from representing debt agreements on a blockchain. The primary benefits are:

1. An ability to trustlessly hold and release digital collateral on an entirely peer-to-peer basis. This entirely removes the necessity for a whole class of middlemen that seek rent for existing lending agreements. 2. An ability to trade one's ownership in a loan as a cryptographic token -- again, something that necessitates various paying agents / clearing houses / intermediaries in the traditional capital markets ecosystem.

Re: decentralization -- that's a fair point. Right now, Dharma is functionally a centralized code base controlled by a centralized set of contributors. In the future, however, we hope to transition to a decentralized governance model so that the protocol can serve as a piece of common, shared public infrastructure -- unfortunately, we don't have robust enough decentralized governance models quite yet in the crypto community.

[jnordwick]

#2 is actually useful.

Now just waiting for the smart contract that bundles a bunch of your tokens and sells structured tranche tokens :)

[kang]

Both the points and your third point about a centralized system being able to decentralize itself - I am saying all of them are impossible (given current knowledge - unless you have secret protocols...).

[nahollander]

For points 1 and 2, it's no secret :) See for yourself: https://whitepaper.dharma.io

For point ,: you're correct in that we (as in the crypto community in general) have yet to come up with good on-chain governance mechanisms, so its likely that robust decentralized governance systems are at least a few years away.

[kang]

The 'underwriter' in dharma protocol is essentially current day middleman. You contradicted yourself by saying "trustlessly" in point 1 and then admitting to point 3. Point 2 is unenforceable without current legal system.

[nahollander]

Debt agreements aren't required to be underwritten in every instance -- it's an entirely optional addition. If you want to see an example of a debt agreement in which there is no underwriter or middleman and collateral is trustlessly secured -- well, it's linked as OP :)

[sandGorgon]

Oh this is interesting. In India, debt agreements have to be underwritten. Moreover, this right is a hard-to-get license that is granted by the central bank - Reserve Bank of India. Not sure what the regulations are in other countries.

Underwriting is a heavily regulated process in most countries with licensing requirements. You could claim that you do not underwrite yourself,so don't fall under regulatory purview. Interestingly your model will fall under the P2P regulations of India and China - where there are specific models where the marketplace does not underwrite, but risk is assumed by lender. Or - you have to make sure that the underwriters are regulated entities.

P.S. I run a lending startup in India. We primarily look at the Blockchain as a means to solve the credit history problem in India.

[mtgx]

I'm not really a fan of crypto landing platforms, but one thing many forget about cryptocurrencies is that they do have one intrinsic value = extreme liquidity.

How fast can you get lending users to put $100 million to a billion into your non-blockchain platform? Maybe 5 years, with VC money for marketing?

Now compare that with how fast you can do it with a blockchain crypto platform. And it's still very early days = "small" amounts of money being put into crypto compared to what it's going to be 5 years from now.

[ucaetano]

> How fast can you get lending users to put $100 million to a billion into your non-blockchain platform?

Do you mean a stock sale? Once it's passed all SEC certifications and so on for going public and done your IPO, a company can do that in as simply as filing a form with the SEC and directing the sale of the stocks.

[CryptoPunk]

I don't understand how you would have self-executing loan contracts and a permissionless platform for trading of debt instruments without blockchains. I see this as an ideal use of the blockchain.