[Cryptography] Code is Cruel -- The DAO

Ray Dillinger bear at sonic.net
Wed Jul 27 13:14:38 EDT 2016



On 07/26/2016 08:26 AM, Ron Garret wrote:

> You’re missing something very important: double-entry bookkeeping is
> not just an error correcting mechanism, it’s a more accurate
> conceptual model of what’s really going on in the underlying
> financial system.  ....  A complete model of
> the situation necessarily includes the employer and the merchant, and
> necessarily entails double-entry, not to correct errors, but because
> every time money changes hands it leaves one account and ends up in
> another.

This is highly relevant to Ethereum.
It would be relevant to Bitcoin if accounts existed.

On the block chain, txOuts disappear from the consensus
history and new txOuts appear and everybody checks that
the new ones add up to the same number of coins as the
old ones.

It isn't like a check register, because every transaction
records both the txOuts destroyed AND the txOuts created.
As with double-entry, the money disappears from somewhere
and appears somewhere else.

There is no recorded label as to their purpose or owner.
If someone does account-based double-entry bookkeeping to
keep track of which ones are owned by whom and what they
intend to do with them, that requires accounts and hence
must happen off-chain.  Essentially, Bitcoin has the same
"accounting" requirements as physical cash.  As long as
a particular physical dollar bill can't exist in more than
one instance, can't be copied, and won't vanish from my pocket
due to someone else's non-performance, holding and spending
it doesn't require me to do accounting.  The block chain is
just a mechanism for ensuring that it can't exist in more
than one instance, can't be copied, and can't vanish due
to someone else's nonperformance.

> ... So you need a separate account to record
> debts, which credits against the cash in your checking account and
> debits against your net worth.

Also the Bitcoin block chain has no model for debt, hence
no role for more sophisticated forms of bookkeeping to
track debt.  Debt would require accounts.  If you want
to borrow Bitcoin from somebody, or allow them to borrow
Bitcoin from you, you have to do that in some venue that
has accounts, hence off the block chain.  And such borrowers
have a history of melting down, as anyone who's gotten
Goxxed (at any of them! eMpTy Gox is the largest, not the
only, example of Goxxing) - can tell you.

This ignores the fact that Bitcoin itself does not measure
an investment that can be recovered in any other form. It's
just as much a fiat (unsecured or "debt" asset) as any other
form of fiat money, the only distinction being the identity
of the entity by whose fiat it exists.  With Bitcoin it's the
holders' fiat rather than any sovereignty's.  But don't tell
them that. They are confused on this point and happy about
it NOT being fiat, and about the block chain not being
capable of recording debt.

				Bear

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