Parent is referring to the transaction mechanism of the CC providers, not consumer credit.
Fraud is a function of humans not the currency. The reason large systems to protect from fraud are baked in, is because there are a lot of humans that commit fraud. The blockchain would only provide a well documented account of the fraud, with no tooling to remove the assets from the fraudster. Chargebacks are a blessing when you need them and a curse when you receive them, but something that the economy has deemed a necessary evil mostly because there are a lot of fraudsters in the world.
> Chargebacks are a blessing when you need them and a curse when you receive them, but something that the economy has deemed a necessary evil mostly because there are a lot of fraudsters in the world
This is an excellent point, and I think it's an example of how an institutional mechanism evolved to help address fraud.
There's absolutely no reason to think chargebacks would not come to exist if commerce were dominated by ETH or BTC transactions.
The difference is that the infrastructure to do chargebacks, merchant account underwriting, etc., can be built very easily with relatively few lines of code.
I don't think anyone doubts that smart contracts can be written that allow for a trusted third party to effectively reverse a payment, especially not in Turing-complete languages. I think the point is that if mutability and trusted third party oversight is actually usually a necessary and desired fraud prevention feature in a payments system, there's probably not huge demand to replicate all that using blockchains whose most-touted virtue is immutability and trustlessness and brand new institutional infrastructure
(it's not like we don't already have ways for algorithms to execute trades subject to contract conditions being met using old-fashioned dollars and yen)
> if mutability and trusted third party oversight is actually usually a necessary and desired fraud prevention feature in a payments system, there's probably not huge demand to replicate all that using blockchains whose most-touted virtue is immutability and trustlessness
This is exactly right. Once you empower trusted intermediaries to police and reverse transactions, you lose cryptocurrency's primary raison d'être.
I buy a shirt online using cryptocurrency. The merchant teams up with an intermediary to ship it to me.
I buy a shirt online. I team up with an intermediary to verify that the merchant ships the product as promised in exchange for a small fee.
I buy an electric skateboard online. I view reviews written by intermediaries about their experiences and watch some videos those intermediaries have posted of them riding the boards over various terrain.
I make a transaction where I am asked to commit money upfront without receipt of any goods. I use an intermediary (escrow service) to hold the funds in a specifically sanctioned way, to avoid the risk that my counter-party is dishonest.
None of these things are replaced by the core mechanisms of a cryptocurrency. Cryptocurrencies just make some kinds of trust more efficient to establish, but it still must be established and in most cases cryptocurrencies don't offer mechanisms for it. Ethereum does, but in a way that necessitates trusting the behavior of smart contracts, so it's a building block for efficiency and scale, but not a replacement to the core human institutions that involve intermediaries.
None of those are intermediaries that police and reverse transactions. Even escrow services do not offer the same protection as credit card chargebacks, which go out to 90 days or longer. Once you implement that type of intermediary, the primary raison d'être of cryptocurrency -- decentralization and immutability -- goes out the window.
I take note that you have reduced the claimed value of cryptocurrency from decentralization and immutability to mere "efficient trust establishment". However you are still making a totally unsupported claim that it is more efficient that existing methods (e.g. getting a credit card or payment processor). Considering the enormous energy cost of mining you will need to offer some support for that. Otherwise it's just frothy hype.
> I think the point is that if mutability and trusted third party oversight is actually usually a necessary and desired fraud prevention feature in a payments system, there's probably not huge demand to replicate all that using blockchains whose most-touted virtue is immutability and trustlessness
I'd argue that rarely in meatspace finance is the consensus mechanism considered separately from the other aspects of a currency that matter. Consensus at changing aspects of a currency typically fall upon a government organization which has its own politically-driven, non-transparent consensus mechanism.
In meatspace, we have things like bankruptcy law and its derivatives to help preserve order when contracts unwind.
Of course, provisions for unwinding an agreement in an orderly way are part of any sophisticated financial deal. Meatspace contracts bootstrap on existing legal interpretations and regulations, but those things mainly add convention, repeatability, and predictability to the behavior of the contract.
So when (if ever) does the consensus mechanism in a fiat currency actually matter? I'd argue that it matters when the sh*t hits the fan, when there is an economic shock and widespread demand for action. This is when the stupidest decisions get made and the rule of law is the weakest.
Hedging against these stupid decisions adds tremendous cost and friction to meatspace financial deals. While it may feel right for regulators to "make whole" certain parties, that is not necessarily in the interest of the rule of law. It's far better if the various contingencies are addressed before the fact so that they can be priced in accurately.
Systems like Ethereum have the potential to create (over time) a set of useful and inviolable rules that can allow transactions to take place without the costly hedging against stupid, knee-jerk decisions by regulators.
In order for parties to willingly enter into contracts, the desirable state is not that later some wise overlords will take a look at the contract and make a fair decision about some yet-to-be-determined aspect of it. The desirable state is for the contract itself to be 100% trustworthy.
Of course, with the infamous hard fork, Ethereum failed at this once, but ETC exists now in tandem, so the two governance approaches can compete on their merits.
Distributed blockchain consensus give us a more transparent consensus mechanism than ever before, which is crucial to democracy. On this bedrock, it will likely be possible to create a world where we truly have the rule of law, not the rule of men.
The point here is not that smart contracts are "law", it's that the execution of a contract should take place in an unbiased VM, and the transparency and consensus mechanism of ETH ensures that.
Fraud is a function of humans not the currency. The reason large systems to protect from fraud are baked in, is because there are a lot of humans that commit fraud. The blockchain would only provide a well documented account of the fraud, with no tooling to remove the assets from the fraudster. Chargebacks are a blessing when you need them and a curse when you receive them, but something that the economy has deemed a necessary evil mostly because there are a lot of fraudsters in the world.