[horsawlarway]

But the alternative here is that you have to place all your trust in an unknown and untrusted 3rd party to ever actually make an exchange.

Even the silk-road used an escrow service that required that the seller trust the buyer, and both parties trust the silk-road. (a buyer places coins in escrow with the silk-road, the silk-road confirms it has the coins to the seller, the seller ships the product, the buyer unlocks the coins escrow upon receipt)

So the whole things boils down to "trust" and it turns out that the ledger can't actually provide any trust.

[CTDOCodebases]

After enough confirmations a transaction is final and I can trust that the transaction is final and my account balance on the ledger is correct.

Present forms of digital cash do not offer this. A payment can be reversed if the buyer claims the transaction was fraudulent and the banks involved agree to reverse the transaction. Money can be accidentally withdrawn from my account and I have to ask the bank to return it. In both these cases if the institutions involved refuse to return my money then I have to take the issue to court and I am deprived of using or investing this money in the meantime.

If consumer protections are your concern these laws exist in many countries regardless of the payment medium.

[horsawlarway]

But the trust that a bitcoin transaction is final isn't enough trust to make an exchange!

Lets say you and I decide right now that we're going to use these comments to make an exchange. I will give you $5 of bitcoin in exchange for you mailing me a postcard.

Now what? How do we proceed in a meaningful manner?

How do we go about making that exchange happen if we assume that either party is self-interested, and not interested in actually completing the deal?

If I send the bitcoin first? - the second it hits your account you know for sure it's yours: No need to bother sending the postcard - that's just cash out of your pocket.

If you mail the postcard first? - Well, job's done for me, no need to send any bitcoin at all.

What if we both agree that we trust Bob, and you send him the postcard, and I send him the bitcoin, and he only forwards them along after he gets both? - Oops, now Bob can do all those things you complained about letting the bank do! He can send that bitcoin back and I won't ever get a postcard. He can mail the postcard back and you won't ever get any bitcoin (Transaction reversed!). Worse, he can take anything you give him and do what he wants while he has it (like disappear!) - or hold them much longer than you'd like after he gets them. (Freeze it).

How do you get your stuff back from Bob? Same way you would from a bank - appeal to the government.

Basically - Bitcoin without enforcement is only a ledger. The thing that keeps it in check with reality is an appeal to an authority somewhere, who provides trust that both parties in an exchange aren't getting screwed.

[CTDOCodebases]

"But the trust that a bitcoin transaction is final isn't enough trust to make an exchange!"

Correct. Who said it was?

"How do we go about making that exchange happen if we assume that either party is self-interested, and not interested in actually completing the deal?"

We don't make that exchange in that case. Or like you mentioned we both acknowledge that we don't trust each other and get a trusted third party involved who we both trust more that the each other. No payment method is immune to this. Notice though that regardless of how much trust that we have or don't have for each other we can both trust that if you do send me $5 of Bitcoin I will receive it. Provided I've taken the necessary steps the transaction will not be reversed. Also note that if I wish I can also be certain that no one can erase whatever I rightfully claim is mine from the ledger or transfer it to another address once I have received it. This cannot be said for any non crypto digital payment system currently.

Bitcoin is a shared digital ledger hosted on a transaction network that is not controlled by a single trusted third party. The thing that keeps the ledger in check with reality is the correctness that it guarantees to those who are using the network to send and receive payments.

If you say you are going to send me a 1700 sats to post a postcard to you and I deliver as promised but in reality you don't perform your part of the deal the ledger is still correct. You still owe me 1700 sats according the deal we made and I can confirm this by checking the ledger. The ledger itself does not know about the deal we made but we both know we made a deal and according to that deal you still owe me 1700 sats. Now with a traditional bank what happens if you claim you sent it and the bank says you didn't. How can I verify that the transaction took place? I can't. I have to trust what you or the bank tell me and I don't know who is telling the truth. Maybe the transaction got lost. Maybe you didn't send it. There is no way to discover the reality of the situation without having to make an uninformed choice about who I trust.

At present Bitcoin is still clunky and has many issues both technical and non-technical to overcome. It is unknown whether these issues can or will be overcome. It has a far way to go if it is to realise the creators vision in a meaningful way by gaining mainstream adoption and use as "digital cash".

[horsawlarway]

> The ledger itself does not know about the deal we made but we both know we made a deal and according to that deal you still owe me 1700 sats. Now with a traditional bank what happens if you claim you sent it and the bank says you didn't. How can I verify that the transaction took place? I can't. I have to trust what you or the bank tell me and I don't know who is telling the truth. Maybe the transaction got lost. Maybe you didn't send it. There is no way to discover the reality of the situation without having to make an uninformed choice about who I trust.

Because the bank is acting as the (government approved) escrow service! Basically - The bank is arbitrating the dispute to resolve it (whether you like how the bank resolves that dispute is mostly irrelevant here).

Let me ask you to follow up, given what you've said:

> If you say you are going to send me a 1700 sats to post a postcard to you and I deliver as promised but in reality you don't perform your part of the deal the ledger is still correct. You still owe me 1700 sats according the deal we made and I can confirm this by checking the ledger. The ledger itself does not know about the deal we made but we both know we made a deal and according to that deal you still owe me 1700 sats.

Now what? Fill me in on how we resolve this situation in your mind, once we've reached this point.

[CTDOCodebases]

"Now what? Fill me in on how we resolve this situation in your mind, once we've reached this point."

In the example you gave whether we chose to transact in cash, wire-transfer or bitcoin the result would be the same. I would have to rely on layers, civil or criminal courts, police, insurance companies, debt collectors, thugs or myself to physically retrieve the funds (or equivalent) if possible. If that was not possible some form of fair physical or financial punishment would be dealt to you or not. Honestly for that amount of Bitcoin I wouldn't be bothered and wouldn't follow it up. I would just never do business with you again and from that point forward never relinquish physical custody of goods for sale prior to receiving payment.

"Because the bank is acting as the (government approved) escrow service! Basically - The bank is arbitrating the dispute to resolve it (whether you like how the bank resolves that dispute is mostly irrelevant here)."

Trusted third parties will always be an issue where there is no trust between the buyer and seller. Sure multisig helps but the difference is Bitcoin gives us power to choose who we involve in the transaction. I and the other party I am transacting with combined are not forced to involve any one individual, company or nation state in the transaction if we do not wish them to be part of it.

I think you are conflating trust in the Bitcoin network with trust in the humans transacting over the network. Regardless of the medium of exchange in order for transactions to occur we as humans need some level of trust in the party we are transacting with, trust in the network we are using to perform the transaction and trust that other humans are going to continue to value the medium being exchanged. Not everyone's level of trust in these aspects are going to be the same and people are going to value some aspects more than others.

Personally I think if bitcoin doesn't overcome some of its hurdles soon it will probably just turn into a form of the existing banking network through legislation. It's already beginning to look like that with most individuals storing their Bitcoin on exchanges. Private wallets will be banned, transacting with non KYCd entities will become impossible using regulated custodians and any Bitcoin received from (or linked to) non KYCd addresses will be automatically seized by the government. At that point the supply can be artificially inflated. The number of Bitcoins in your account doesn't actually have to reflect the amount of bitcoin the custodian holds for you. The surveillance apparatus will become hyper focused on the Bitcoin network and everyone interacting with it. Like Ross Ulbricht you may be able to resist seizure of your Bitcoin but it will just result in a lengthy prison sentence. It may not stay like this forever though.

So do you want a postcard? :)

[horsawlarway]

> Personally I think if bitcoin doesn't overcome some of its hurdles soon it will probably just turn into a form of the existing banking network through legislation.

Ok - I think we're pretty closely aligned here.

I'm further along that trajectory than you, mainly because I think this isn't really an optional outcome that might be avoided, but rather the only functional end state of a currency: The currency is only as good as the government that mediates its exchange.

If mediating that exchange incurs costs, then the government will take steps to either stop mediating those exchanges (ex: China - where all crypto exchanges are illegal by default, so the legal system can no longer be used to offset the cost of those exchanges at cost to itself) or it will bring that currency under control so that it can make those costs predictable and acceptable (ex: The US - where crypto is getting "all the bad bits" added back through legislation)

Which means the original intent of crypto only works in this honeymoon period (which I actually think ended not too long after the silk road went down) where it happens to get treated as an asset by a government that hasn't yet found out that they're essentially mediating exchanges in a foreign currency for free (not something most governments want to do).

[pcthrowaway]

You're overlooking defi, this is the thing being revolutionized right now; you can make all the transactions you can afford to pay transaction fees for, trade hundreds of assets, swap tokenized USD for tokenized EUR, all without an intermediary.

To be candid, you are generally trusting the contracts you're interacting with to be bug free, but you are able to audit the code just as easily as anyone else, and verify that the contracts are as advertised. Unlike dealing with a bank portal, all the logic running on the blockchain is visible and verifiable.

[chillacy]

Afaik markets use multisig now, so the facilitator never has access to the funds unilaterally.