Decentralized trust graph for online value exchange without a blockchain (2017)
&gt;Conversely, cryptocurrencies such as Bitcoin or Ethereum have decentralized the process of issuing and managing a currency. But while the operations of such currencies, based on blockchains, have been fully decentralized, the trust graph of these cryptocurrencies have remained entirely centralized. Everyone need to trust Bitcoin to transact in Bitcoin, and everyone needs to trust Ethereum to transact in Ethereum or assets issued on the Ethereum blockchain. The centralized nature of the trust involved in these cryptocurrencies being actually at the core of how these currencies operate, as the only viable way to properly incentivize a proof-of-work system.<p>I don&#x27;t think it&#x27;s useful to equivocate the trust one places in an open decentralized system with the trust someone puts in a custodian of their money to not run off with it. That&#x27;s like equivocating trusting end-to-end encryption to keep your messages secure with trusting Facebook to keep your messages secure. Sure, in both cases there&#x27;s a risk, but one is based on your understanding of an open system, and the other is based on a guess that the custodian you&#x27;re trusting your data to won&#x27;t expose it by choice or accident. Just because the word &quot;trust&quot; can be used for both doesn&#x27;t mean there aren&#x27;t significant differences between them.<p>I think the system described is interesting, but for regular human commerce purposes, I think the downsides of it (managing IOUs from many different parties, needing to have a trust-path between users that could steal from you, needing to keep a node online always or trust your money to someone else who does so) make it less useful than cryptocurrencies. Having a common currency between many different parties is much easier to work with than trying to figure out a workable way to value IOUs from many different parties. Needing an established trust-path between users seems like a large obstacle in the internet age where I might suddenly want to transact with anyone on the planet.<p>The scalability of this system seems interesting, but I think the scalability upgrades that cryptocurrency is getting from sharding and rollups will make cryptocurrency more than scalable enough for human commerce purposes. I wonder if details of this system would be more useful in some kind of scenario of machine swarms bartering with each other, maybe in a situation where a common currency specifically doesn&#x27;t make sense and is undesirable, or where there&#x27;s no reasonable-latency access to the common blockchain because of the isolation of the network. Or maybe there&#x27;s a technique here that&#x27;s useful for cross-currency or cross-blockchain transactions.