Because you trade and automate assets through contract logic. The benefits of contract composability on Ethereum mean that the velocity of money increases because now assets can be manipulated by logic without an intermediary. So if someone wants to borrow your asset, you can deposit it into a contract and now can lend it out peer to peer, and have interest acrue on an ongoing basis. Assets can be more easily "put to work". This is exactly what banks do with your money actually, only with Ethereum it's easier so liquidity / velocity is greater with assets because they can easily move around. It needs to have decentralized consensus because otherwise it's not credibly neutral.
If a law changes and affects an on-chain asset, then that logic will need to be reflected on-chain, otherwise the involved parties won't come to agreement in the real world. There are ways to make contracts upgradeable on Ethereum while still preventing someone from stealing funds, like through a multi sig wallet, perhaps with lawyers holding some of those keys. It all depends on how it's structured, but the benefits of using Ethereum (or something like it) are clear.
You keep saying "asset" as though this means anything. Say my asset is a bulldozer.
How is an automated ethereum contract going to lend it out and ensure its return in good working order, or pursue damages if it is not?
Say my asset is actually just a lump sum of regular US dollars, which I would very much desire to be returned to me as US dollars plus interest so I can my US taxes with them at a later date. How is an ethereum contract going to actually ensure I get my US dollars back, or have resource to pursue them, seeing as how no mechanisms of US dollars are dependent on ethereum?
The asset won't be the bulldozer, but ownership of the bulldozer. How did the natives of the Yap islands know who owned which Rai stones? Through social contracts. The same would be the case for bulldozer ownerships on Ethereum. It's just a way for you to prove to other humans (or programs) that you own the bulldozer. If you sell the bulldozer in real life, then presumably the buyer would want the ownership. The difference here is where the ownership data lives, not necessarily who issues it.
There are stablecoins backed by USD reserves, like USDC. Again, the ethereum contract is only a ledger. The people responsible for giving you USD is going to be Gemini who control the supply of USDC. You having proof that you own USDC allows you to withdraw USD.
There are of course stablecoins that are not backed by USD, but rather backed by ETH directly and the USD peg is maintained through arbitrage, oracles and control systems implemented in the contracts.
Except you keep talking about automation of assets but you haven't answered the question: how does the delivery, and return of the bulldozer work?
How does the delivery and return of my USD work?
At every junction the answer is "well you trust another party and..." - so why is ethereum needed in the process at all? All of this is just companies providing an API for a service (which generally they don't, now, because it's complicated to orchestrate such a thing).
Ethereum is not contributing anything useful here, because everything important is "trust this person" - at which point I'm really just "hiring a lawyer".
Your bulldozer would need to have a chip installed that can connect to Ethereum and read off who the current authorized operator is. The operator and the owner would have to have cards that contain keys that speak a protocol that the bulldozer understands. Once the loan time runs out, the bulldozer locks out the renter.
The GP is describing a system kind of like Zipcar - you go online, you enter payment, and Zipcar allows your card to operate a car for a period of time. So, you might say, so what, we already have a Zipcar, why replace it with the blockchain?
Because if Zipcar goes out of business, all the cards and hardware on Zipcar cars are defunct. If all the hardware talks to contracts on Ethereum, there's no Zipcar to go out of business - you buy the hardware once, but the operation of the system happens on Ethereum, not in Zipcars' SQL database.
> There are stablecoins backed by USD reserves, like USDC. Again, the ethereum contract is only a ledger. The people responsible for giving you USD is going to be Gemini who control the supply of USDC. You having proof that you own USDC allows you to withdraw USD.
This still depends on trust. The blockchain doesn’t verify the backing. And USDC’s attestation is rather late.
Well, yeah, it's a centralized stablecoin. The advantage is that it can be used in Ethereum contracts in DeFi. If you want a stablecoin with no trust assumptions (other than the protocol and governance), there's MakerDAO's DAI.
If we're after velocity / speed of movement, why not just add APIs to existing services. Changes would be immediate and required setup would be so much simpler.
If a law changes and affects an on-chain asset, then that logic will need to be reflected on-chain, otherwise the involved parties won't come to agreement in the real world. There are ways to make contracts upgradeable on Ethereum while still preventing someone from stealing funds, like through a multi sig wallet, perhaps with lawyers holding some of those keys. It all depends on how it's structured, but the benefits of using Ethereum (or something like it) are clear.