I don't think it's useful to equivocate the trust one places in an open decentralized system with the trust someone puts in a custodian of their money to not run off with it. That's like equivocating trusting end-to-end encryption to keep your messages secure with trusting Facebook to keep your messages secure. Sure, in both cases there's a risk, but one is based on your understanding of an open system, and the other is based on a guess that the custodian you're trusting your data to won't expose it by choice or accident. Just because the word "trust" can be used for both doesn't mean there aren't significant differences between them.
I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet.
The scalability of this system seems interesting, but I think the scalability upgrades that cryptocurrency is getting from sharding and rollups will make cryptocurrency more than scalable enough for human commerce purposes. I wonder if details of this system would be more useful in some kind of scenario of machine swarms bartering with each other, maybe in a situation where a common currency specifically doesn't make sense and is undesirable, or where there's no reasonable-latency access to the common blockchain because of the isolation of the network. Or maybe there's a technique here that's useful for cross-currency or cross-blockchain transactions.
It seems to me that its about realigning trust in this case. And its easier to trust a process that uses mechanics that force behavior to conform to the properties you desire than to trust a process that uses mechanics to enable behavior to conform to the desired properties. You still have to place trust in both implementations nevertheless.
In the case of Ethereum what is the trust? The protocol, the implementation? What is the trust in a bank? The same but with a bunch of human factors around the enabling the bank to function as you desire.
Settle appears to be a step back and try to solve the problem currency has in general by reverting to a barter system. The purpose of a currency however is to use a common valuation system.
factoring large prime integers is very easy =P
> I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet.
You are right, these are disadvantages but other than "trust paths" the complexity can be mitigated with:
1. Market makers who buy IOUs at a discount and swap them for _their_ IOU which can be more trusted. Essentially you want a little bit of centralisation around parties which are known to always make good on their liabilities. These parties could be fully automated (think like Ethereum DAO) and transparent. In some ways these market makers are like banks of today but instead of lending their credit into existence, like banks do, they require people to buy it (usually) at a premium.
2. Insurance or a credit derivatives market so people can hedge against counterparts defaults.
3. If everyone agrees on a common numeraire and wallets are sophisticated to show an aggregate balance in that numeraire taking into account credit risk then that could remove much of the complexity for users. Integrated with market makers, you could "auto swap" IOUs to issuers which you prefer. Wallets can also provide a credit risk break down on all counterparts. Agree this is more complicated than current notions of money.
4. Securitisation markets. Package up IOUs into tranches. Traders can speculate on various levels of credit quality.
5. Sensible reputation management. Non-invasive performance tracking of debtors. Did they meet margin requirements? Did they meet all coupon payments? Etc. Can also take into account degree of co-operation with other users, for example do they accommodate restructuring and help others meet their liabilities?
I don't like crypto because there's essentially zero accountability for issuers and that kind of environment is optimal for scammers. Crypto behaves like synthetic equity/commodity instruments with no accountable issuers. In contrast, with a credit based system, issuers are responsible for their issued liabilities and are expected to make good on them. In crypto, no-one thinks in terms of liabilities and so you get ridiculous projects like "Synthentix" who are collateralising a USD Stablecoins with their own issued tokens. For anyone with a basic understanding of financial risk and accounting, their approach is mad.
A credit based system is fairer because anyone can issue credit and the onus in on issuers to ensure they have the necessary reputation for others to accept their credit. Furthermore, credit-like instruments are natural Stablecoins - providing all agree on a numeraire, the value of credit is a function of credit risk which can be successfully managed in most cases.
Doesn't this go against decentralization? Why would anyone want rojeee IOUs when they can instead trade US federal government IOUs (aka. US dollars)? What's the advantage in managing IOUs from a bunch of different entities and having to pay market makers every time you transact?
>These parties could be fully automated (think like Ethereum DAO) and transparent
This is a bit handwavy. How does the system know how much rojeee IOUs are worth? Your ability to repay is based off a multitude of factors that can't be captured on the blockchain.
>2. Insurance or a credit derivatives market so people can hedge against counterparts defaults.
>4. Securitisation markets. Package up IOUs into tranches. Traders can speculate on various levels of credit quality.
All of this is going to increase complexity exponentially, and for what benefit?
Please expand on this as I'm almost certain this doesn't apply to BTC, ETH, and other reputable chains.
Volatility is ameliorated by stablecoins pegged to fiat currencies. Furthermore, the long-term goal is to not need an "interface to the real world", because you will be paid in crypto and you will pay for things in crypto. Even then, who exactly do you mean when you say "the people providing the interface"? I don't need a middle-man to agree to exchange crypto for fiat with someone. You can use one, sure, but it's not required.
I am not sure whether https://settlenetwork.com is actually affiliated with the original settle.network written by spolu.
So it's not quite that the original founder felt pressure to create the token, but he did feel some pressure to make money, and eventually that led to a token.
All this thing does is limit potential losses from fraud. Not eliminating.
The main value proposition of a blockchain is to solve the "principal-agent" problem [1] and gis simply reduces the risk but doesn't remove it entirely.
Plus some of the requirements on a node having to be online (in a decentalized, byzantine environment) all the time are unrealistic.
This seems more like ripple.
Stellar uses a more sophisticated notion of "quorum slices" and is resistant to byzantine faults [2]
[0]: https://trustlines.foundation/faq.html
[1]:https://as1ndu.xyz/2021/04/clarifying-the-blockchain-proposi...
Edit: one similarity is that token issuers in Stellar can remain authoritative on their token.
https://github.com/spolu/settle
https://settlenetwork.com/settle-network/ (Scroll to bottom for the mug shots)
You can get around that with culture and using existing systems as settlement layer (for the time being).
Even then there is only one cryptocurrency that has a proper mechanism design for oracles (amoveo) - which you need if you want a trustless layer 2.
Datalisp (@ for telegram .is for binge-written PDF) is this project (that I just started) it's basically a vector clock for wrapping interfaces in authenticated data structures and Bayesian inference with logic programming for estimating / inferring trust.
By giving a useful framework for refining reproducibility we can build trust. Trust we need if we want a system to serve as a foundation for digital societies.
Francis Bacon said knowledge was possible and science could establish trust. Now we need that, automated.
