Bitcoin Q&A: Irreversibility and consumer protection

[AUDIENCE] Let’s imagine that
you have some cryptocurrencies.
[What if] somebody takes a gun and forces you
to transfer your cryptocurrency to some address?
Then once that’s done, it cannot be reversed. [inaudible]
I personally feel, as a system, the main obstacle to it
getting a lot of traction in the mainstream is that…
nobody in their right mind will put most of
their net worth into something that can be lost.
[ANDREAS] Okay, I think that’s a
fair comment. It comes up a lot.
But forgive me if I say that it’s based on a
misunderstanding of the underlying mechanism.
I’m actually planning a talk specifically on this:
the difference between a system that delivers
hard promises which can be softened,
and a system that delivers
soft promises which can’t get any harder.
We’re used to operating in a system of soft promises.
Your bank can reverse your transaction if you want,
or if you don’t want, because the government asked,
or they decided to kick you out of your home.
A system of soft promises has its own problems.
These blockchain systems are [about] hard promises.
You have to understand the really subtle distinction:
Bitcoin does not guarantee that a
payment will happen irreversibly.
Neither does Ethereum.
Bitcoin guarantees that the contract within
the transaction will be executed irreversibly.
If that contract says, ‘Without second thought, give
this money to [this address] and never look back,’
that is the contract [which is]
going to be executed irreversibly.
But that’s not the only contract you can put in there.
You can put a contract that says:
‘This payment can only be made [after a] 30-day [period],
with a third-party escrow signature that can resolve…
a dispute, [after which point the]
contract will be executed irreversibly.’
The choices you’ve made in there will be guaranteed,
but you can simulate all of the softness you want.
You can re-introduce automatic consumer refunds,
third-party escrow, and counterparty risk.
The fundamental difference is, the owner of the money
is the only one who can reintroduce those constraints.
They can re-introduce them in the way
that they choose who the third party is,
can very carefully tailor the conditions and controls
under which a third-party, timelock or system operates.
That is not an irreversible payment.
That is an irreversible guarantee that the
wishes you expressed as a consumer,
within your transaction script will
get executed exactly that way.
Right now, it’s very difficult to do the more complex
transaction scripts, but that’s an engineering problem.
The whole point of this space is that we’re just a
few rounds of incremental innovation [away from]…
doing this very easily and offering more robust,
more predictable guarantees for consumer protection…
than any system of soft promises.
[AUDIENCE] Assuming there are no bugs.
[ANDREAS] Assuming there are no bugs…
There will be bugs, which is why
you then iterate through the bugs.

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