This page explains it better: http://nashx.com/HowItWorks
No need for extras, you can do this today on Ethereum with Hashed Time Lock Contracts
It's possible to have some mutually assured destruction here, e.g. the contract is for $100 so the buyer puts in $150 and the seller puts in $100. Then when the buyer releases the money, they get $50 of their money back and the seller gets $200 ($100 from the buyer and their original $100). If the buyer doesn't release the money, nobody gets anything.
It gives the buyer a way to punish the seller for non-delivery, but without receiving any personal benefit (and in fact at a personal cost) for using it.
In the existing payment market you have a seller with no stake and have to correct for it by drafting the payment processor to post a stake instead. Then if the seller doesn't send the product (or sometimes even if they do), the buyer makes a claim with the payment processor and the payment processor is stuck refunding it because the alternative is having a larger cost imposed on them by the government. Then they try to mitigate the loss by not paying the seller, if they can.
This is just unnecessary indirection when the seller posts a stake instead. If the seller has $200 on the line over a $100 value item, they're going to deliver it because the alternative is a $100 net loss. It's the same reason the payment processor refunds your money -- because the alternative is worse for them.
The buyer doesn't actually lose the extra $50, they just sit on it until the seller makes good, which happens eventually because the seller's alternative is worse. The end result of MAD isn't that everybody gets nuked, it's that nobody does.
it is in this mindset that I am asking if we can adress the following issue: suppose the government or its postal system selectively withholds the goods payed for through cryptographic protocols, then buyer and seller lose.
again, I'm not trying to be destructive, just wondering out loud if we can generalize the kind of protocol you describe to include the transporter as an attacker in the attack model.
I think we could split up in 2 cases: transporters that are paid on the same cryptographic protocol/platform, and transporters that are paid outside. I believe it will be easier to solve the problem by restricting to transporters who get paid by the same contract/platform, since we could have the transporter deposit an insurance of same or higher value as the good to be transported, and upon arrival his pre-agreed transport cost and deposit are released?
Obviously the traditional postal system can not be forced to be paid through this platform, so this hole in the market would effectively create demand for crypto postage and hence create jobs.
I would like to see a more rigorous breakdown of such a protocol, and a censor-ship free listing of issues remaining with the protocol, so that the discussion on improvement can continue.
Also it seems like the first transporter does not need to be the same person as the last transporter, i.e. intermediary packet handoff could also be handled by the protocol such that the first transporter gets paid back his deposit after doing "his part" of the packet journey...
The second part is that it's often more efficient for the insurance provider to be the delivery provider, because then they have the right incentives to actually deliver your package. Then it's their problem whether they farm out the delivery to the local postal service and take the risk of having to pay claims, or operate some kind of underground railroad themselves in authoritarian countries and pay a little higher cost to reduce the losses they have to eat.
Censorship resistance is an edge case that's nice to have for some people, fraud resistance is the mainstream need that's mandatory for most users. Current crypto approaches don't handle fraud resistance as well as the traditional payment systems, so censorship resistance is a moot point until/unless that gets solved.
If we mentally subdivide all commercial activity between traditional/centralized/blind trust commercial activities and novel/decentralized/cryptographic trust commercial activities, then (even if it is not occuring yet) it can desirable for the supporters of decentralization to be able to assure themselves that the status quo can not undermine the economic value of the cryptographic trust community.
Even outside of cryptocurrencies we have debates about net neutrality, priority of packets etc... One could similarily wonder if current delivery services are able to say profit by investing in specific companies within a sector of products, and differentially prioritizing the delivery of their goods (or gentleness of delivery for fragile goods, or even non-delivery).
I don't believe in moot points, people can work on different issues, design solutions for them and then they can look at how to intersect/generalize their protocols so that it displays both or more desirable traits...
E.g. you may have a smart contract that's conditional on the price of some stocks in the future or on the result of some sports game. It'll get the information about the price of these stocks from some place which is assumed to tell the truth, that's the oracle - for example, it could be some NASDAQ service or the sports league website. However, it's obviously not guaranteed to tell the truth about the reality, you need to trust it, because if it lies, there's no recourse afterwards.
If I make a "real" bet on the superbowl results and bribe the superbowl website admin to publish a wrong result on the official site for 5 minutes at the right time while my bet is settled, then the bet will be revoked afterwards by the courts; however, if it's a smart contract looking at that site, then once I've cheated the escrow service, then I've won because it was falsely trusted.
Do you think having to rely on oracles is a major flaw in that they will become trust authorities?
That hides more than it reveals. Yes, trust is beyond math.
Measuring value is also beyond math. However there are ways of measuring value that aren't amenable to math (eg, how much you like a diamond) and ways of measuring value that are amenable to math (how much you are willing to pay for the diamond). The first worked method fine in a subsistence economy. The second way is how our current economy works. We are not completely and utterly dependent on being able to measure and transfer value with math. If we could not do it capitalism would not exist, nor would our society or way of life.
And so it is with trust. You can trust a banker not to embezzle your money because he has a reputation, mouths to feed, or he's your brother, or he will be perused by government agents armed with big guns, or any number of the other reasons we do now - none of which are easily quantified. Or you can trust him because he can't undo his decisions without corrupting a while pile of others and do to that he had to expend the net energy output of New Zealand for days. One is amenable to being manipulated with math, and one isn't.
Because the trust provided by crypto currencies can be quantified and manipulated with math we have smart contracts. Smart contracts mean the example you gave about trusting someone to deliver the goods means a computer can be the escrow agent and it is all done automatically the 99 times in 100 there is no dispute.
Yes, the OP was wrong in that crypto currencies allow us to replace trust with math. But only a little wrong. Crypto currencies allow us to manipulate and transfer trust with math, which is not so different.
If I want to use money to pay for some goods, I need trust that I can get that money back if the goods won't arrive. Math alone can't provide that, it needs something extra, e.g. a trusted escrow service in the case of crypto.
If I want to use money as a store of value, I need trust that the value is going to stay stable and maintain liquidity in the long term. Math alone can't provide that, that trust is inherently social. I also need reasonable trust that the money isn't likely to get stolen - math isn't sufficient for that, and our current experience shows that crypto assets are more vulnerable in practice than e.g. bank deposits, maintaining appropriate "opsec" is tricky and people fail in that too frequently.
And for your other point, the economy existed before a monetary system and currently works off of many monetary systems - however, for a monetary system the only criteria that matters is if it's good for what the economy needs; if some system does not fit these needs, then it won't get used much and is not particularly relevant.