You know, there is a reason why crypto people chant "Not your keys, not your coins".
People usually want to trade stored value in exchange for goods and services (at least in a functioning value store - I don't really believe bitcoin serves that purpose at the moment).
So lets say we agree that I pay you 10k in bitcoin in exchange for you remodeling my bathroom (and ignore how unlikely this scenario is with real crypto currencies). I pay you 50% up front (to purchase materials), and 50% on completion.
Then you run off with my initial 50%.
Now what?
----
Every solution I've seen is riddled with pitfalls and gotchas
- Use escrow? Wait - now we're just trusting a central authority again.
- Use Eth contracts? Well, maybe - but it requires a perfectly written contract or you're open to all sorts of strange edge behavior and side effects.
- Sue over the theft? Now the central authority is just the government again, and we're back at square one!
You see the disconnect I'm getting at? Eventually, if disagreements occur about how value was traded, there has to be a reconciliation mechanism. Right now, even in modern crypto - that reconciliation mechanism is still a central authority: Your government.
Bitcoin is not designed to solve the counterparty risk, it's just a digital cash that has a fixed emission schedule. It can be stolen just like regular physical cash can be.
Smart Contracts try to solve the counterparty risk issue, but it's just an extra layer around cryptocurrencies, that has it's pros and cons.
Fraud is not going anywhere anytime soon. If you have no proposed mechanism to reconcile fraud, I'd argue there's not any true value stored.
If the proposed mechanism is "just use the existing government" then the whole house of cards in built on the back of that central authority enforcing ownership for you anyways in which case why not just use the currency that authority already sponsors and has a proven track record of enforcing?
It was designed to solve a specific set of frauds related with having a central authority though: censoring people from financial system, seizing your savings from your bank account and debasing the currency for the benefit of the political elite.
Counterparty risk is real, but there are other ways to solve it, besides having a central authority that has the power to revert transactions, which comes with it's own risks.
We started with:
"Anyone who says blockchain-driven assets don't have intrinsic value seems to ignore the value of trust - the ability to trust that the ledger is accurate seems extremely valuable."
Except the ledger doesn't actually provide any remedy to counter-party risk at all - I still have to trust a 3rd party at the time of exchange.
So the value of bitcoin is entirely dependent on the risk of the counter-party (because I have to pay to offset that risk, whether that's insurance, a private militia, legal contract enforced by a gov that I pay taxes to, simply eating the lost coins, etc)
Which means the intrinsic value of bitcoin is dependent on my ability to offset that risk - which I realistically (as a law abiding citizen) have to rely on the government to do, because the government has a monopoly on violence and imprisonment.
Which means the intrinsic value of a bitcoin is entirely at the whim of government control anyways. (which we already have an intuitive understanding of - this is why the price will fluctuate so much when news about government regulation or enforcement breaks).
Sure, the state can declare that the Bitcoin you own is not legitimate. It might do so because you're unable to prove the source of funds or maybe because it doesn't like your race or something else about you.
The cool thing about Bitcoin is that it is money that is separated from the state, the same way like Gold is. So as long as you can find a jurisdiction that considers your funds valid, you can escape your state violence. Of course this has it's pros and cons, but that's how it works when you separate money from the state.
This is the 5th comment that I'm making with this throwaway account, after which, I believe, I'm going to be rate-limited and unable to reply for a day. So, sorry for not being able continue this conversation :D
But this is true of all assets!
Bitcoin's only tangible value is that it weighs nothing (which is actually a nice property if you're fleeing your current government - gold is heavy!). But I don't think that's enough to make it a good long term value store for the amount of capital pouring into it.
And just like other assets - I believe its value is entirely based on having a government somewhere that will enforce a code of conduct around exchanges of that asset, and a definition of ownership.
The government issues the currency because the government is able & willing to do absolutely anything in order to resolve disputes between parties that involve real assets - up to and including killing people, killing corporations, or even trying to kill other governments.
Without that commitment, bitcoin sits in a really strange place. I don't believe it will hold value if the governments of more major economies stop supporting it.
Either way - Appreciate the conversation! Thanks for helping fill some time on an otherwise boring afternoon before the holidays!
If I'm understanding this thread, you're saying that bit coin is simultaneously designed to allow for this kind of seizure and not.
Swap the mtGox hacker with the government.
It's useful keeping the two problems connected though, since both are features of competing payment methods
You hinted that somehow a general user of bitcoin might have the power to influence or extort a third party to offset risk - but the reality of the situation is that the only entity I'm in contact with that can provide the resources to influence or extort a 3rd party is my government (doubly so if we assume I'm still bound by my local laws and rote violence isn't an answer).