So, I might be missing something, but why would people putting contracts on a block chain need to use a chain based token? One half of the contract (the Tesla, house, 1000 widgets delivered, or whatever) exists in meatspace, why can’t the other half be “I promise to send you $50,000 USD”?
It can be argued that in many contracts, they actually wouldn’t want use the native coin, because the unpredictable changes (or increases, even if it is always an increase) makes them unsuitable for most uses. For instance, say you’d made a bet with someone about something that’s only going to resolve a year later. You want to know how much you’re betting, but if you bet in a native coin, you really don’t know how much a given quantity of that is going to be worth. The problem also comes up for contracts that use fines or collateral. That covers most contracts. So there are stable coins, that peg to the price of metal, or mirror the USD. I also came across a coin that multiplies or winnows in your wallet depending on how much its value changed over the course of a day so that it’s always worth roughly one USD. I’m still not sure how to feel about that one.
But, ADA is mandatory for paying transaction fees, staking (which currently gets a return of 5% per annum), and voting in the governance processes. Generally, I’d guess that a lot of people will decide to trade in, or hold, ADA, just because converting would be mildly inconvenient.
Making the contract of selling would sell a Tesla for $50,000 USD works well when both parties trust each other. If I don’t trust a stranger to send me $50,000 the transaction likely isn’t going to happen.
If you live in a country with a functioning government you can make a contract that allows you to go to court in the event the other party doesn’t hold up their end of the transaction.
Legal cases are however expensive and take a while to get resolved. Besides, not everybody lives in a country where they trust the government to enforce contracts fairly.
Smart contracts allow the creation of systems where contracts can be resolved without relying on the government. For that it’s necessary for the smart contract to know something about the real world and the technology to tell smart contracts something about the real world is generally called “oracle”.
Depending on the usecase it’s easier or harder to provide a good oracle. For prediction markets Omen is one example. It uses a combination of two other blockchain projects Reality.eth and Kleros to resolve the prediction market is a trust-worthy way.
That combination generally gets you a good result when the result is publically verifiable.
Ok, ok, ok, ok, and… thread dropped. I’m still not seeing that “last mile” connection where the contract knows anything about what happened in meatspace except “verified agent 8675309 asserts side 2 of the contract has been fulfilled” times however many verifiers you’re willing to pay for.
And regarding crop insurance,
the article says “to develop” which means it does not yet exist probably due to some combination of:
taking some sort of external data inputs and outputting a result is vulnerable to hacks to in incoming data. For example, if all the relevant sources report heavy hail in one particular region, all those farmers would get paid, regardless of the actual meatspace weather.
medium term contracts, like insurance, need to pay out with a predictable value. Niche (and therefore volatile) currency isn’t suitable… especially for an insurance product that would flood a small geographic area with payouts at the same time.
paying out based on generalized reports rather than individual claims means that you are pushing risk from the insurer to the farmer—specifically, you are requiring the farmer to know what kinds of area weather might damage their crops, and how much, rather than being able to say “I should get X hundred bushels, if I get less and there was an obvious weather reason, pay for the difference”
paying out based on generalized reports rather than individual claims means that some farms will have no damage and get the same payout as the one “across the road” or “across the river” that was heavily damaged. Which means the premiums need to reflect the increased chance of a payout occurring. Does that compensate for hiring fewer people to verify claims? Maybe.
Every step made to disconnect insurance from actual suffering by a specific human increases the ability of people to buy it as a gamble, rather than a hedge. This is bad ref Financial Crisis (2008).
So, I might be missing something, but why would people putting contracts on a block chain need to use a chain based token? One half of the contract (the Tesla, house, 1000 widgets delivered, or whatever) exists in meatspace, why can’t the other half be “I promise to send you $50,000 USD”?
It can be argued that in many contracts, they actually wouldn’t want use the native coin, because the unpredictable changes (or increases, even if it is always an increase) makes them unsuitable for most uses. For instance, say you’d made a bet with someone about something that’s only going to resolve a year later. You want to know how much you’re betting, but if you bet in a native coin, you really don’t know how much a given quantity of that is going to be worth. The problem also comes up for contracts that use fines or collateral. That covers most contracts.
So there are stable coins, that peg to the price of metal, or mirror the USD. I also came across a coin that multiplies or winnows in your wallet depending on how much its value changed over the course of a day so that it’s always worth roughly one USD. I’m still not sure how to feel about that one.
But, ADA is mandatory for paying transaction fees, staking (which currently gets a return of 5% per annum), and voting in the governance processes. Generally, I’d guess that a lot of people will decide to trade in, or hold, ADA, just because converting would be mildly inconvenient.
Making the contract of selling would sell a Tesla for $50,000 USD works well when both parties trust each other. If I don’t trust a stranger to send me $50,000 the transaction likely isn’t going to happen.
If you live in a country with a functioning government you can make a contract that allows you to go to court in the event the other party doesn’t hold up their end of the transaction.
Legal cases are however expensive and take a while to get resolved. Besides, not everybody lives in a country where they trust the government to enforce contracts fairly.
Smart contracts allow the creation of systems where contracts can be resolved without relying on the government. For that it’s necessary for the smart contract to know something about the real world and the technology to tell smart contracts something about the real world is generally called “oracle”.
Depending on the usecase it’s easier or harder to provide a good oracle. For prediction markets Omen is one example. It uses a combination of two other blockchain projects Reality.eth and Kleros to resolve the prediction market is a trust-worthy way.
That combination generally gets you a good result when the result is publically verifiable.
When it comes to providing insurance, this allows new products. https://www.ledgerinsights.com/etherisc-blockchain-parametric-crop-insurance-kenya-chainlink/ for example explains how it’s possible to provide Crop insurance for Kenyian and Sri Lankian farmers in a cheaper, faster and more trustworthy way then existing insurance providers.
Ok, ok, ok, ok, and… thread dropped. I’m still not seeing that “last mile” connection where the contract knows anything about what happened in meatspace except “verified agent 8675309 asserts side 2 of the contract has been fulfilled” times however many verifiers you’re willing to pay for.
And regarding crop insurance,
the article says “to develop” which means it does not yet exist probably due to some combination of:
taking some sort of external data inputs and outputting a result is vulnerable to hacks to in incoming data. For example, if all the relevant sources report heavy hail in one particular region, all those farmers would get paid, regardless of the actual meatspace weather.
medium term contracts, like insurance, need to pay out with a predictable value. Niche (and therefore volatile) currency isn’t suitable… especially for an insurance product that would flood a small geographic area with payouts at the same time.
paying out based on generalized reports rather than individual claims means that you are pushing risk from the insurer to the farmer—specifically, you are requiring the farmer to know what kinds of area weather might damage their crops, and how much, rather than being able to say “I should get X hundred bushels, if I get less and there was an obvious weather reason, pay for the difference”
paying out based on generalized reports rather than individual claims means that some farms will have no damage and get the same payout as the one “across the road” or “across the river” that was heavily damaged. Which means the premiums need to reflect the increased chance of a payout occurring. Does that compensate for hiring fewer people to verify claims? Maybe.
Every step made to disconnect insurance from actual suffering by a specific human increases the ability of people to buy it as a gamble, rather than a hedge. This is bad ref Financial Crisis (2008).
I’m not sure either. Might only be needed for the operating fees.