Most transactions that occur daily across the whole world involve trivial amounts of money.
If I want to sell you a 300€ dishwasher, for example, I can either require cash, ask for a check/bank transfer and pray it doesnt bounce, or involve a 3rd party whom i trust in which case I will have to forego a % fee for their escrow service, maybe 30€.
With a smart contract, I can now be sure the buyer's funds exist and are locked before we meet. Then we shake hands, we load the dishwasher in their car and we both release the funds before parting way. I just saved myself a 10% fee and the buyer wasn't forced to get cash from an atm.
>Do smart contracts have a way to dispute an outcome?
Yes, but you have to write code to implement dispute resolution, which in turn implies you have to devise a form of "proof" to be presented to the contract. This can be tricky (or impossible).
In the hypothetical dishwasher example, what is the buyer's incentive to lock up funds before even physically inspecting the item? What is my recourse if a spiteful seller refuses to agree to releasing my funds if I decide not to go through with the purchase?
I'm not being facetious. I'm trying to understand why one would need to use an escrow service for something like this.
Buyer and seller enter a smart contract where the buyer's funds are locked for two days, then freely recoverable by the buyer only after the contract expires. That proves to the seller that the funds exist at no risk to the buyer.
A day before the contract expires, buyer and seller meet up to inspect the goods. Upon inspection, seller hands over the goods and buyer validates the release order in front of him before departing, thus completing the contract before its expiration.
> ask for a check/bank transfer and pray it doesnt bounce
Why would a bank transfer bounce? These are free and effectively instant in most places I know of now.
> I just saved myself a 10% fee
You probably had to pay network fees though.
Once again, the blockchain-positive argument seems to stem from outdated ideas about traditional banking.
--edit-- I'm going to reply here to the comment below then I shall bow out of this discussion because HN has me rate limited.
> Bank transfers are reversible.
Good, this is a form of buyer protection. Much like credit-card chargebacks. We have literally thousands of years of history of sellers ripping off buyers to show us what a great idea this is.
> Network fees will be infinitesimal compared to the fees a human wants to extract.
There are existing, non-blockchain ones with a flat fee of under £3 in the UK I could find with a quick search. Network fees have gone over this on various cryptocurrencies at various times.
1. Bank transfers are reversible. In Europe, you can void a bank transfer up to _several_ days after it has occurred by complaining to your bank. If the bank agrees with you (fraudulent transfer, identity theft, etc), they can ask the receiver's bank to transfer the funds back to you. In France, you have 13 months by law to contest bank transactions after they have taken place.
2. Network fees will be infinitesimal compared to the fees a human wants to extract.
1. Bank transfers are not generally reversible, only if another party has taken something from your account ( in Dutch "automatische incasso" ). If you did a transfer yourself it is not reversible.
1. this is obviously a good thing. Thieves, fraudsters, and scammers exist. The ability for a trusted third party to roll back history is a feature.
2. How do you know this? Typical POS Credit card processing fees are 2-2.5%. Paypal is 3%. Bitcoin transaction fees can be as high as $50! Unless your typical transaction is 4 digit dollar amounts, credit card processing is cheaper.
2. They were that high once, and have not been again
3. Point 2 really doesn't hold since they will be that high again if it ever gains mass appeal, however:
4. there are solutions to even that problem that are being tested and rolled out now called Lightning Network.
You can think it's all snakeoil or a scam or whatever, but building a little strawman to make it sound like it's pointless isn't helping anyone. There are plenty of things about bitcoin and cryptocurrencies in general that are still unsolved problems, but harping on the fees is silly at this point because it's the one that people are actively trying to solve in just about all cryptocurrencies, and I honestly believe that they have it figured out, and the road forward is just one of adoption and hardening.
Stellar uses a system that is pretty much designed to have low fees from the start, and Lightning Network is a pretty damn good way of scaling a blockchain system off the blockchain for the vast majority of transactions making fees a fraction of what they are even now.
For example, a single transaction in Stellar right now costs about $0.000002 USD. And that fee is expected to not change significantly, and unlike bitcoin is not variable but is fairly fixed, and will not go up with more activity.
Most transactions that occur daily across the whole world involve trivial amounts of money.
If I want to sell you a 300€ dishwasher, for example, I can either require cash, ask for a check/bank transfer and pray it doesnt bounce, or involve a 3rd party whom i trust in which case I will have to forego a % fee for their escrow service, maybe 30€. With a smart contract, I can now be sure the buyer's funds exist and are locked before we meet. Then we shake hands, we load the dishwasher in their car and we both release the funds before parting way. I just saved myself a 10% fee and the buyer wasn't forced to get cash from an atm.