Off-Blockchain economy any good?

[BTCIndia]

Miners eliminate centralization.

There are various companies in India and overseas working on to provide simple and safe solution for merchants with off-blockchain transactions. I think, this is done for (1)eliminate transactions cost given to miners and (2) quick transactions facilitation. If I'm not mistaken then, Bitcoin separated from blockchain is just another virtual currency.

If this is true then, off-blockchain transactions will dependent on central authority just like VISA, Paypal, Mastercard etc. How? Lets assume, I manage to create hashcash which does not belong to original bitcoin pool and try to use it on off-blockchain economy. How are they going to verify them off blockchain transactions? I guess, single way to verify is by letting it pass through Bitcoin network. If it comes clean, then only they're valid coin else. Here, they're trying to eliminate 'verifying authority i.e. miners.' Isn't it?

When we'll be having large off-blockchain economy working and managing company would itself be centralized and need security like existing companies(VISA, Paypal etc) thereby escalating cost and risks associated.

Right back to where we started from?

[franky1]

yes big risk of fractional reserving where (customers account balances not totalling the cold store)

this is what mark karpeles done, but blamed hackers for 4 years of siphoning off small amounts and letting people trade unbacked fake bitcoins

it would only work for pocket money amounts such as a daily spend wallet, but no one, yes NO-ONE should put their entire hoard into such a wallet. oh and they better have proper insurance

[BTCIndia]

yes big risk of fractional reserving and (customers account balances not totalling the cold store)

this is what mark karpeles done, but blamed hackers for 4 years of siphoning off small amounts and letting people trade unbacked fake bitcoins

it would only work for pocket money amounts such as a daily spend wallet, but no one, yes NO-ONE should put their entire hoard into such a wallet. oh and they better have proper insurance

That is proof-of-reserve you're talking about, I guess. My question was something different. Those company in-charge of off-blockchain economy will be just like VISA, Paypal or any other existing company in current era. At worse, they can create their own cash as they're are central authority of that off-block chain economy.  We can test exchanges for reserves by asking for JSON files and wallet details. Isn't it?

How are we going to check authenticity for these companies? Off-blockchain transactions seem to be transactions backed by Bitcoin. Another centralization!

[franky1]

yes big risk of fractional reserving and (customers account balances not totalling the cold store)

this is what mark karpeles done, but blamed hackers for 4 years of siphoning off small amounts and letting people trade unbacked fake bitcoins

it would only work for pocket money amounts such as a daily spend wallet, but no one, yes NO-ONE should put their entire hoard into such a wallet. oh and they better have proper insurance

That is proof-of-reserve you're talking about, I guess. My question was something different. Those company in-charge of off-blockchain economy will be just like VISA, Paypal or any other existing company in current era. At worse, they can create their own cash as they're are central authority of that off-block chain economy.  We can test exchanges for reserves by asking for JSON files and wallet details. Isn't it?

How are we going to check authenticity for these companies? Off-blockchain transactions seem to be transactions backed by Bitcoin. Another centralization!

proof of reserves is just to prove the numbers match so that it disproves the company isnt 'creating its own cash' (fractional banking)
also asking the company to send json files is not good enough. as they can easily make up usernames and passwords of fake customers and pretend those customers have funds which they will use as their siphoning account

these offchain services can be useful. as long as the amounts people deposit into them are small, for instance enough for a weeks worth of starbucks coffee and a few sandwiches.. not enough to buy a car

[BTCIndia]

yes big risk of fractional reserving and (customers account balances not totalling the cold store)

this is what mark karpeles done, but blamed hackers for 4 years of siphoning off small amounts and letting people trade unbacked fake bitcoins

it would only work for pocket money amounts such as a daily spend wallet, but no one, yes NO-ONE should put their entire hoard into such a wallet. oh and they better have proper insurance

That is proof-of-reserve you're talking about, I guess. My question was something different. Those company in-charge of off-blockchain economy will be just like VISA, Paypal or any other existing company in current era. At worse, they can create their own cash as they're are central authority of that off-block chain economy.  We can test exchanges for reserves by asking for JSON files and wallet details. Isn't it?

How are we going to check authenticity for these companies? Off-blockchain transactions seem to be transactions backed by Bitcoin. Another centralization!

proof of reserves is just to prove the numbers match so that it disproves the company isnt 'creating its own cash' (fractional banking)
also asking the company to send json files is not good enough. as they can easily make up usernames and passwords of fake customers and pretend those customers have funds which they will use as their siphoning account

these offchain services can be useful. as long as the amounts people deposit into them are small, for instance enough for a weeks worth of starbucks coffee and a few sandwiches.. not enough to buy a car

We're skipping central discussion here.

[bitllionaire]

actually that would mean a centralization

[franky1]

actually that would mean a centralization

off chaining as a option. eg only maybe 5% of peoples hoard, is not centralizing the entire market. but utilizing the blockchain decentralization for savings and the 5% for instant offchain spending. and who says there has to just be one online wallet.

starbucks-cocacola can have one wallet for coffee, cakes and vending machines. paypal can have another. apple another etc etc.. all of which are used just to put small amounts into for daily spend

[unpure]

yes big risk of fractional reserving where (customers account balances not totalling the cold store)

this is what mark karpeles done, but blamed hackers for 4 years of siphoning off small amounts and letting people trade unbacked fake bitcoins

it would only work for pocket money amounts such as a daily spend wallet, but no one, yes NO-ONE should put their entire hoard into such a wallet. oh and they better have proper insurance

Who actually believe his story of hacker siphoning small amount over 4 years?

Don't they check their balance sheet every time they try to replenish the hot wallet?

[zetaray]

If we have many trust worthy offchain systems all around the world, there shouldn't be too much centralisation to hurt bitcoin.

[Ron~Popeil]

For small quick purchases I think it will be a crucial thing. No one wants to stand around waiting for 10 minutes at a check out line etc. As Franky points out they should only be used for small amounts.