Valid uses cases for Smart Contracts, Dapps, and DAOs?

[iamnotback]

Forum please help me.

Originally I couldn't envision many valid use cases for this new craze building on top of more powerful block chain scripting and the block chain as a generalized state transition database, i,e. the block chain + scripting as a Turing complete machine.

And that was to a large extent because data feeds on external events break consensus algorithms. But then I realized that external events can be voted on.

Any contract that requires an external data feed breaks the ability to have a valid consensus algorithm. So this limits us to scripting which refers to data that is already on the block chain, i.e. the only thing that a block chain can validate are state transitions from an initial set of data, i.e. the genesis block.

So this basically limits what block chains can do, to financial contracts that involve how value is transferred over time and voting. Our contract logic can't refer to events that occur external to the block chain, except by voting. So this means external data feeds (events external to the block chain) can only be accommodated as voters, i.e. if one reporter of the event is authorized then it is a 1-of-1 quorum and if there are 5 reporters of an external event, then say our contract requires 3-of-5 to agree on the report, and then of course the contract has to have logic for what to do in the case that the quorum on an external event can't be achieved.

So with those technological ground rules in place, please help me to enumerate valid uses cases for this new craze.

1. Decentralized crowd funding. This definitely seems to be a valid use case. The funds can be refunded if minimum threshold is not met in time. The funds can be distributed based on milestones which are voted on by the crowd funders.  All these parameters can be preset when the contract is formed.

2. Legal contracts. This only works if the parties can agree on who will vote on the external events that the contract enforces. And the parties could still go to court after the fact if any party felt the contract was not executed faithfully. The restitution from any court decision would come in the form of compelling the parties to do something which the smart contract could no longer enforce. I don't discuss the option of giving courts master keys to override past contract outcomes as this a "can of worms" in many facets.

3. Internet-Of-Things (IoT). This is like Slock.it where we want the contract to control some external devices, such as a paywall for a parking meter. This seems to be a very weak use case, because there is really no advantage at all gained here over simply sending payment to the parking meter API. There is no gains from the oversight of recording the data on a block chain, because there is no way for either party to prove if the service was delivered or not, other than each voting on it and thus they cancel each other's vote out and either they both agree or there is no quorum. IoT is more about block chain performance of instant micropayments, low transaction fees, and cloud databases but not about decentralized consensus on state transitions.

4. Prediction Markets. Such as Augur and Gnosis, the participants to the bet (or all the participants on the network) vote on the external events. This seems to have some seriously bad game theory concerns. Refer to the discussion of game theory issues for DAOs as a hint.

5. Decentralized Autonomous Organizations (DAO). Technically the idea that investors buy a colored coin which enables them to vote on how the funds (denominated in which every token was exchanged for the colored tokens) are spent, and to sell this colored coin at-will on the market. Issues:

• Game theory appears to be insolubly broken in that "No" votes are more expensive/risky than selling your vestment. There doesn't appear to be any remedy because even holding up funds for a grace period doesn't stop the run on the price after the "Yes" on a stupid proposal. However, I thought of a possible mitigation is to limit the value of proposals that can be voted on simultaneously, so that no bad outcome can't drastically impact the price. But this doesn't mitigate the game theory that there is an incentive for those who want to steal the funds to buy up the colored tokens so they can influence the outcome of the votes and those who see it has been infiltrated have more incentive to just sell than to fight, thus the infiltrators get to buy the tokens at cheaper and cheaper prices and yet the funds they control does not diminish in value. The game theory seems insolubly broken.
  
  Eric S. Raymond wrote about the Iron Law of Political Economics, and it is always a power vacuum. When pooling funds, the game theory is a mess.
• Organization is the antithesis of decentralization. Business projects require cohesion and continuity with fluidity of decision making. There is no way to make this into a decentralized structure which doesn't destroy the essence of efficiency of production. Production is highly interactive and collaborative. The time lag in the communication overload of the Mythical Man Month can render a project into gridlock oscillation between competing options. Top-down voting is top-down governance, which is the antithesis of decentralized production. Decentralized version control open source (DVCS) solves this discord to obtain resonance by allowing every participant to have their own perspective on changesets. DAO is entirely wrong model for decentralized production. It fights against everything we learned with decentralized open source development, which is that the individual should be empowered to act independently.
• Note I could envision tracking investment, decentralizing the trading of the shares (colored tokens), voting on a board, and distribution of dividends. But this voting on each proposal as a flat democracy does not work. But then this would model a centralized corporation and thus be subject to investment securities regulation.

[benthach]

it is hype for scam purpose only

[iamnotback]

it is hype for scam purpose only

In the case of DAO, Slock.it, and Augur, then that seems to be the case. There is no valid use case which isn't game theory broken for those. Expect The DAO to eventually collapse in a massive clusterfuck of theft and waste with most losing their money. Wise people would get the hell out of The DAO as fast as they can, because the DAO is broken in the sense that you can be jammed from exiting.

Decentralized crowd funding might be viable.

[gustav]

I see the DAO as a game of who can compromise it first and cash out the funds to themselves.

[iamnotback]

I see the DAO as a game of who can compromise it first and cash out the funds to themselves.

Yup that is what it appears to be. But can you fathom what this is going to do to all the bagholders and to ETH.

I got your point that maybe there is some game theory to how long you stay vested. You like Russian Roulette I guess.

The SEC will be coming... this is the event that will start the SEC's involvement in actively regulating CC. Thanks to Vitalik and Tual.

I don't consider DAO as fail, give it few more months it will surely come back stronger and better after all known issues have been fixed.

The game theory issues appear to be fundamental. Meaning they can not be fixed.

It is analogous to wanting to build a skyscaper to the moon. We can't do it. No matter how good our technology is.

Some things are truly impossible.

Yet, to keep The DAO from capsizing, Tual said he thinks members need to accomplish three objectives – rounding out its list of curators, amending its governance model to see after the concerns of voting members and investing in sound business ideas.

Bribe the curators.

This is just the corruption of government we are all fighting to remove with block chains and then we bring it right back again and place this $150+ million UNREGULATED honeypot to attract the flies.

Since it is unregulated, the criminal mindsets will be drawn to this like flies to honey.

It is just a matter of time before The DAO is in political bickering and probably worse with the power vacuum being always a "winner take all" phenomenon.

[gustav]

I see the DAO as a game of who can compromise it first and cash out the funds to themselves.

Yup that is what it appears to be. But can you fathom what this is going to do to all the bagholders and to ETH.

I got your point that maybe there is some game theory to how long you stay vested. You like Russian Roulette I guess.

I wouldn't touch the DAO or ETH. All the hype-promises will be broken. Things should drop a lot from here. Just a matter of when. Could be a shitcoin by next year ...
Hope polo enables shorting DAO soon so i can make some gains on this before it goes up in flames.
It certainly will be an epic show with that much money involved.

[iamnotback]

Note the edit in bold at the end:

5. Decentralized Autonomous Organizations (DAO). Technically the idea that investors buy a colored coin which enables them to vote on how the funds (denominated in which every token was exchanged for the colored tokens) are spent, and to sell this colored coin at-will on the market. Issues:

• Note I could envision tracking investment, decentralizing the trading of the shares (colored tokens), voting on a board, and distribution of dividends. But this voting on each proposal as a flat democracy does not work. But then this would model a centralized corporation and thus be subject to investment securities regulation.

Can anyone think of any use cases for smart block chains that has any wide adoption potential  

So far, I can't think of any killer app that is enabled by smart block chains.

An OpenBazaar market place? Do we need a smart block chain for that? It seems that for example CounterParty and OpenBazaar could benefit from some custom scripting so their hashed data (e.g. reputation updates for OpenBazaar and contract validity for CounterParty) is verified by the block chain they are running on.

[gustav]

Can anyone think of any use cases for smart block chains that has any wide adoption potential  

So far, I can't think of any killer app that is enabled by smart block chains.

An OpenBazaar market place? Do we need a smart block chain for that?

It will enable touring complete and fully automated ponzis. It will be a new era for pyramid schemes.
The everyday person does not have demand for smart contracts actually. It's a tool for scammers and a toy for geeks. Nothing else.
No banker or businessman in their right mind would run contracts on that chain for financial purposes.

[iamnotback]

gustav, I think OpenBazaar may be a valid wide adoption use case, and off the top of my head (without thinking deeply about it), appears we need the block chain to validate each state transition around transactions and listings, so that rules about reputation are enforced and validated by the block chain. Otherwise, the criticisms I levied against CounterParty will seem to apply to OpenBazaar.

I do agree those investing in the smart block chain schemes aren't really interesting in mass adoption. They want get-rich-quick money pooling schemes.

[qwik2learn]

Are "virtual corporations" really a great idea?

Could creating such autonomous entities actually make the world an even worse place?

There has been a lot of talk (and excitement) in recent months about the possibility of creating some sort of "virtual corporation" that will be completely automonous and whose existence would simply be to fulfill the wishes of its share holders. Whilst I can see the attraction of having trustless systems for decision making (such as general voting) I think we need to keep in mind that the "blind greed" of many modern corporations (especially of the multi-national variety) has lead to the "neo-slavery" of thousands of people that work 7 days per week and often more than 12 hours per day for "sweat shops" in developing countries.


So could a "virtual corporation" improve things? I think that is going to be a big "it depends" because if it has been hard-coded to *only to benefit the share holders* (and especially if those share holders themselves are actually other such virtual corporations) then you should fully expect to see such a beast to behave with no conscience at all (i.e. to be the most extreme implementation of capitalism).


Whilst I think being rewarded for useful contributions is a *fundamental* right we should want for our "digital workforce" I am not so sure that we want to end up with the Skynet situation of the world being taken over by one or more all powerful virtual corporations. To some this may seem a little "overly paranoid" but in my opinion it is best to carefully consider our digital future before just "leaping in".



So what other approach to consider if not wanting to create a "virtual corporation". One approach that I think should be given serious thought is that of a "community one". Rather than a bunch of strangers whose only concern is the returns that they can get from their investment you instead would have a group of like-minded individuals working to improve their community in a way that reflects their shared beliefs and morals.


Is this overly idealistic? Maybe so, but in general people can and do form communities for reasons of common beliefs and interests, and such communities are certainly capable of producing products or providing valuable services, and this is the direction that I would prefer to see our digital future moving towards.

http://ciyam.org/open/?cmd=view&data=20140611150753590000_P&ident=M100V112&chksum=049897de

[gustav]

gustav, I think OpenBazaar may be a valid wide adoption use case, and off the top of my head (without thinking deeply about it), appears we need the block chain to validate each state transition around transactions and listings, so that rules about reputation are enforced and validated by the block chain. Otherwise, the criticisms I levied against CounterParty will seem to apply to OpenBazaar.

I do agree those investing in the smart block chain schemes aren't really interesting in mass adoption. They want get-rich-quick money pooling schemes.

So some dope-dealers on a tiny black market is your "massadoption", huh? I think they'll choose a more decentralized token than ETH for making their contracts. ETH won't even get the black market usecase. A competitor will snatch that up eventually.

[iamnotback]

Thanks for sharing that epistle from CIYAM (community can be decentralized with DVCS open source):

Are "virtual corporations" really a great idea?

Could creating such autonomous entities actually make the world an even worse place?

It doesn't matter, because as I explained in the OP, a decentralized management structure by mass voting is a dysfunctional structure. It will simply blow up and fail to produce anything but redistribution of the money pool. I enumerated two reasons:

1. Organization is the antithesis of decentralization.

2. Money pools + voting = power vacuum

The DAO is nonsense except as a game around money pool power structure and politics. I am not even interested in discussing it further as it is a waste of time. Investors are doing that because they are deluded into thinking they can get rich want to lose their money. I think n00bs feel more comfortable with politics, than technology. They understand are familiar with politics. The DAO is taking technology that n00bs don't understand and packaging it in something the n00bs think is fair— democracy. Yet democracy is a power vacuum that always leads to totalitarianism. Since n00bs have never figured this out in 6000 years, then this can be reused to enslave them over and over again.

Vitalik, Tual, Larimars, etc.. seem to have wild fantasies that have no grounding in reality. I don't understand those dudes. Don't they know what they are building is crap. Or are they really deluded by their naive fantasies. Or maybe subconsciously the money is enough to motivate them, i.e. they are clever marketers, since it is obviously much easier to sell the fantasies to n00bs than to build mass adoption. Any way, I don't have time to worry or wonder about the way their thinking operates. And I don't want to go back into criticizing people. I will stand aside and observe them crash and burn. Unfortunately, those guys probably walk away with $millions and the n00bs lose. Boohoo that has been life for 6000 years.

I am just trying to ascertain if there are any valid use cases that I need to be aware of.


Edit: others are pointing out that investors better get the fuck out of the DAO and accept the -33% loss else they are going to end up losing everything:

https://bitcointalk.org/index.php?topic=1494333.msg15157775#msg15157775

Who ever invested in the DAO deserves the -33% instant loss to teach them a lesson. Those who hold on, will lose more.

I do expect the SEC will be coming after Tual et al, or who ever ends up capturing the power vacuum and keeping all the ETH wealth as it is extracted from the system by n00bs selling out as they realize it is fucked and by forcing "Yes" votes that pay to themselves. See the game theory I explained in my OP.

[iamnotback]

So some dope-dealers on a tiny black market is your "massadoption", huh?

Buy and sell ads are very popular.

Unlike Craigslist, the idea is to add some reputation and escrow, to make it more reliable.

Having many different websites, each with different reputation schemes, is not as efficient.

Yeah I guess illegal products will be listed. But the government can't prosecute the decentralized block chain. It will have to go after the users who avail of those products.

[gustav]

So some dope-dealers on a tiny black market is your "massadoption", huh?

Buy and sell ads are very popular.

Unlike Craigslist, the idea is to add some reputation and escrow, to make it more reliable.

Having many different websites, each with different reputation schemes, is not as efficient.

Yeah I guess illegal products will be listed. But the government can't prosecute the decentralized block chain. It will have to go after the users who avail of those products.

That is IF the blockchain was decentral which it isn't and it wouldn't fall apart due to bloat within the next 24 months, maybe then there could be a remote chance for it to attract some pocketchange-applications but sadly, it won't be functional long enough to build up an ecosystem or userbase. It'll just fade into obscurity from here on out as more and more unsoluble problems and exploits start surfacing ony by one, imo.

I said it months ago that they would cut back on everything because all these promises can't be held and the tech aswell as math is faulty.  They'll just have to scale the features back a lot to be barely able to keep it afloat. It is a true shitcoin, bro. King of shitcoins, that's what it is. You'll admit this later too, no worries.
 
Hardfork incoming  


edit: it's also pretty remarkable how on almost all these ETH-pump-threads it's always hero and legendary members arguing with a member or lower about all this. You think we don't see that all the accounts pumping ETH who are above jr. member status are actually bought accounts? I'm arguing with a newbie account about ETH, lol.

[iamnotback]

gustav, I wasn't limiting the use cases to the ETH block chain design. We already skewered Ethereum in the Ethereum Paradox thread.

Of course, I am assuming someone doing correct engineering, not Vitalik, Tual, et al wasting $millions on being technobullshit rock stars. When I was age 21, I coded WordUp in my bedroom for a year. When I launched a shipping product to the real market, my father invested $30,000. The company was profitable and helped 1000s of users with a real use case. I don't produce bullshit software.

https://www.google.com/search?q=neocept+wordup

Now I promised myself to not waste time attacking others, so let's just leave it at that. I hold Vitalik to the same standard as I what I was able to do at his age. I worked hard and quietly and produced real s/w. Not roam around talking and promoting pie-in-the-sky delusions to n00bs. Even the one Comdex show and another San Fernando valley usergroup I did, I was very frank with the audience about the capabilities and limitations of the s/w. I guess I have to thank Ethereum for creating so much hype in the market that investors are ready to hand over so much money. So perhaps I should be praising them for promoting crypto. So I guess I will take that perspective and HODL my engineering nose about the level of delusion and lack of frankness about the technological (game theory, economics, scaling, etc) bullshit. Everyone has their freewill and their own choice. They should be free to reap what they sow.

The DAO is really unreal. But it makes perfect sense why n00bs can be lead to that delusion. And the audacity of Tual to say he thinks it will be good for crypto even if all the money is wasted. Well in some sense, I have to admit he is correct, because everyone should be free to learn and experiment and waste $150 million. More power to them Lol.

So any way, back to OpenBazaar that seems to be potentially a valid use case if engineered correctly.

gustav, I am more Hero account than you. If I had stayed with one account, I'd be Legendary already. I don't think we are arguing, are we?

[gustav]

The thing with smart contracts is that they bloat up the chain really fast and once the chain is really big the node-count collapses and the coin stops being decentral - and a crypto that's not decentral isn't a crypto and is worth zilch, nada, zero.

So to make smart contract viable you'd need new technology for compressing data and that's not happening currently.

Longterm viable smart contracts in a truely decentral network are probably still a decade away.

[iamnotback]

The thing with smart contracts is that they bloat up the chain really fast and once the chain is really big the node-count collapses and the coin stops being decentral. So to make smart contract viable you'd need new technology for compressing data and that's not happening currently.

I can fix that.

[gustav]

The thing with smart contracts is that they bloat up the chain really fast and once the chain is really big the node-count collapses and the coin stops being decentral. So to make smart contract viable you'd need new technology for compressing data and that's not happening currently.

I can fix that.

Please do. You could win a nobel-prize with it.

[iamnotback]

Please do. You could win a nobel-prize with it.

It is not that difficult, not deserving of a nobel-prize. The technology will be released soon in the context of strictly CC, not smart block chain. I don't like to give ETAs but it better be released within 2016. But I wasn't planning on targeting smart contracts initially. I am only 1 coder so I don't think I could do that all in one step with one launch. jl777 is probably closer to doing something with smart block chain scripting than I am, but again I should not speak for him and he can followed on slack apparently, so perhaps consider this inquiry as feedback for him as he maps out the GUIs for his next product launch. (no commitment yet from me if I working on his stuff or not, trying to feel my way through what the best priorities are)

As for actual stocks on the block chain, that is also a use case except it intersects regulations. The DAO attempts to sidestep that under the presumption that the stockholders vote on every decision of the organization, thus being entirely decentralized mgmt, then there is no "secuirty" of relying on others to manage the money invested. Thus in theory sidestepping investment securities regulation. But the problem is afaics, the DAO concept fails both game theory and also I can't see how any organization can function with stockholders voting on each decision of who to hire, fire, evaluate work, etc..

Legal contracts and perhaps business process logic can be enforced by smart contracts. The external inputs need to come into the block chain by way of M-of-N agents who sign the data. Can't just have the miners grab an unsigned data feed, as that would break Nash equilibrium.

[iamnotback]

I wrote some posts about The DAO which are very similar to Barry's point:

https://bitcointalk.org/index.php?topic=1504662.msg15206740#msg15206740

Barry Silbert says:

Although Silbert is excited about Ethereum, he does not agree with the vision held by some of Ethereum’s most-ardent supporters. He explained:

    “I sense there’s a certain utopian view of society, which I may or may not agree with philosophically, that I just don’t see from a real-world application perspective happening anytime soon.”

Silbert went on to explain that a world where there is no regulation, lawyers, contracts, or SEC rules is not going to exist in the near future. He then clarified, “It may solve some problems. The idea of a decentralized autonomous organization, it’s super interesting.”

Silbert also noted that many of the earliest applications built on Ethereum are related to gambling, Ponzi schemes, or pyramid schemes, but he also admitted that this isn’t necessarily a problem. He added, “That’s OK because that’s an interesting way to experiment; it’s certainly what happened with Bitcoin.”

What Does the World Need from Ethereum?

One of the main criticisms of Ethereum up to this point has been the lack of useful applications that solve real-world problems. On a recent episode of Unconfirmed Transactions, host Dan Anderson and Wall Street veteran Tone Vays described how Ethereum supporters were unable to provide any use cases for the project to them at a recent meetup in New York.

During his panel appearance on day one of Consensus 2016, Silbert seemed sympathetic to the idea that practical applications of Ethereum are yet to be found. He stated: “I don’t think the world needs a decentralized Uber, which is one project. I don’t think the world needs a decentralized AirBnb, which is another project.”

Having said that, it’s important to remember that Ethereum is a platform on which a developer is essentially given the power to build any decentralized application they wish. It’s possible the best use cases of Ethereum have simply not been thought of at this point.

During his final comments on DAOs, Silbert questioned the role these decentralized organizations can play in the real world. He concluded:

     “These DAOs that are raising money from the masses with — basically it’s a blank check. It’s a pool of capital that’s going to be deployed in a way that I think will be very democratic. I’m skeptical because I don’t know the role it needs to play in society. I don’t know, in the capital formation process, what’s wrong with our current system that it’s solving for. I’m philosophically supportive. I hope it’s successful, but I don’t see the problem it’s solving yet.”