Op Ed: A Cryptographic Design Perspective of Blockchains: From Bitcoin to Ouroboros

A Cryptographic Design Perspective of Blockchains: From Bitcoin to Ouroboros

How does one design a blockchain protocol? Back in 2013, while in Athens, I set out to design a non-proof-of-work-based blockchain protocol motivated by the debt crisis in Greece, looming bank liquidity problems and the increasing discussions about the possibility of having a parallel currency. The new protocol had to be based on proof of stake to make sure that it can run even on cellphones and be secure independent of any computational power existing that is external to it.

Very soon it became clear that the problem was going to need much more than a few months’ work. Fast-forward three years to 2016: I was at the University of Edinburgh and had joined forces with IOHK whose CEO, Charles Hoskinson, was poised to solve the same problem. The protocol, “Ouroboros” as it would be eventually named, was there but the core of the security proof was still elusive when my good friend Alexander Russell visited me.

Together, we tackled the problem of proving the security of the system. Whiteboards were filled over and over again until we felt we mined a true gem: a clean combinatorial argument that enabled us to argue mathematically the security of the scheme. 

Diving Into the Mindset of a Cryptographer

Security is an elusive concept. Take a system that is able to withstand a given set of adverse operational conditions. When can we call it secure? What if it collapses in the next moment when it is subjected to a slightly different set of conditions? Or when it is given inputs different from any that have been tried before?

Security cannot be demonstrated via experiment alone since attacker ingenuity can rarely be completely enumerated within any reasonable timeframe. Cryptographic design, thus, has to somehow scale this “universal quantifier”: the system should be called secure only if it withstands all possible attacks.

In response to this fundamental problem, “provable security” emerged as a rigorous discipline within cryptography that promotes the co-development of algorithms and (so-called) proofs of security. Such proofs come in the form of theorems that, under certain assumptions and threat models that describe what the attacker can and cannot do, establish the security of cryptographic algorithms. In this fashion, modern cryptographic design pushes the “burden of proof” to the proposer of an algorithm.

In the world of academic cryptography, gone are the days when someone could propose a protocol or algorithm and proclaim it secure because it was able to withstand a handful of known attacks. Instead, modern cryptographic design requires due diligence by the designers to ensure that no attack exists within a convincing and well-defined threat model.

This approach has been a tremendously powerful and inspiring paradigm within cryptography. For instance, the notion of a secure channel has been studied for more than 40 years. This is the fundamental cryptographic primitive that allows the proverbial Alice and Bob to send messages to each other safely in the presence (and possibly active interference) of an attacker. Today’s provable security analysis, even using automated tools, has unearthed attacks against secure channel protocols like TLS that were unanticipated by the security community.

Back in 2009 though, the blockchain was a concept that was presented outside regular academic cryptographic discourse. A brief white paper and a software implementation were sufficient to fuel its initial adoption that expanded rapidly. In retrospect, this was perhaps the only way for this fringe idea to ripple the waters of scientific discourse sufficiently and force a paradigm shift (in the sense of Thomas S. Kuhn’s “Structure of Scientific Revolutions”) in terms of how the consensus problem was to be studied henceforth.

As the shift settled though, a principled approach became direly needed. The newly discovered design space appears to be vast and the avenues of exploring it too numerous. The “burden of proof” needs to return to the designer.

Blockchain protocols need to become systematized, as they have gradually become one of the dominant themes in distributed consensus literature. The blockchain is not the problem; it is the solution. But in this case, one may wonder, what was the problem?

In 2014, jointly with Juan Garay and Nikos Leonardos, we put forth a first description of “the problem” in the form of what we called a “robust transaction ledger.” Such a ledger is implemented by a number of unauthenticated nodes and provides two properties, called persistence and liveness. Persistence mandates that nodes never disagree about the placement of transactions once they become stable, while liveness requires that all (honestly generated) transactions eventually become stable. Using this model, we provided a proof of security for the core of the Bitcoin protocol (a suitably simplified version of the protocol that we nicknamed the “bitcoin backbone”).

Given this proof, a natural question a cryptographer will ask is whether this protocol is really the best possible solution to the problem. “Best” here is typically interpreted in two ways: first, in terms of the efficiency of the solution; and second, in terms of the relevance and applicability of the threat model and the assumptions used in the security proof.

Efficiency is a particular concern for the Bitcoin blockchain. With all its virtues, the protocol is not particularly efficient in terms of processing time or resource consumption. This is exactly where “proof of stake” emerged as a possible alternative and a more efficient primitive for building blockchain protocols.

So, is it possible to use proof of stake to provably implement a robust transaction ledger? By 2016, with our Bitcoin backbone work already presented, this was a well-defined question; and the answer came with Ouroboros: our proof-of-stake-based blockchain protocol.

Ouroboros

The unique characteristic of Ouroboros is that the protocol was developed in tandem with a proof of security that aims to communicate in a succinct way that the proposed blockchain protocol satisfies the properties of a robust transaction ledger. Central to the proof is a combinatorial analysis of a class of strings that admit a certain discrete structure that maps to a blockchain fork. We called “forkable” those strings that admit a non-trivial such structure, and our proof shows that their density becomes minutely small as the length of the string grows.

With this argument, we showed how there is an opportunity for the nodes running the protocol to converge to a unique history. The protocol then dictates how to take advantage of this opportunity by running a cryptographic protocol that enables the nodes to produce a random seed, which, in turn, is used to sample the next sequence of parties to become active. As a result, the protocol facilitates the next convergence step to take place; in this way, it can continue ad infinitum following a cyclical process that was also the inspiration for its name. Ouroboros is the Greek word for the snake that eats its tail, an ancient Greek symbol for re-creation.

Having the protocol and its proof in hand gave us the unique opportunity for peer review, i.e., asking fellow cryptographers to evaluate the construction and its associated security proof as part of the formal submission process to a major cryptology conference.

Peer reviewing at the top cryptology venues is a painstakingly rigorous process that goes on for months. Papers are first reviewed independently by at least three experts, and afterward a discussion for each paper rages on as the three reviewers, as well as other members of the scientific committee, get involved and try to converge on the intellectual merits of each submission.

As a result of successfully passing this rigorous peer review process, Ouroboros was accepted and included in the program of Crypto 2017, the 37th annual cryptology conference. Crypto is one of the flagship conferences of the International Association for Cryptologic Research (IACR) and is one of the most exciting places for a cryptographer to be, as the program always contains research on the cutting edge of the discipline.

Furthermore, Ouroboros will be the settlement layer of the Cardano blockchain to be rolled out by IOHK in 2017, making it one of the swiftest technology transfer cases from a basic research publication to a system to be used by many thousands in just one year.

While all this may seem like a happy conclusion to the quest for a proof-of-stake blockchain, we are far from being done. On the contrary, we are still, as a community, at the very beginning of this expedition that will delve deep into blockchain design space. There are still too many open questions to solve, and new systems will be built on the foundations of the research that our community is laying out today.

The views expressed in this op ed are those of its author, Aggelos Kiayias , and do not necessarily reflect those of Bitcoin Magazine or BTC Media.

Ouroboros image courtesy of Wikimedia Commons.

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Blockstream Satellite: Broadcasting Bitcoin from Space

Blockstream Satellite: Broadcasting Bitcoin from Space

Yesterday a video teaser from blockchain technology company Blockstream created waves of excitement among enthusiasts of both cryptocurrencies and space. Most participants speculated that Blockstream was about to implement the idea, promoted by Bitcoin developer Jeff Garzik (among others), of a satellite system that streams the Bitcoin blockchain to the whole planet from space. The speculations were, indeed, correct.

Today, the company is announcing Blockstream Satellite, a new service that broadcasts real-time Bitcoin blockchain data from satellites in space to almost everyone on the planet. Blockstream Satellite covers across two-thirds of the Earth’s land mass and, according to the company, additional coverage areas will soon come online to reach almost every person on the planet by the end of the year.

“Bitcoin is a powerful and transformative internet native digital money that has blazed a trail of disruption, with its full potential yet to unfold. Because it’s permissionless, Bitcoin enables anyone to freely create new financial applications and other innovations that use the blockchain that haven’t been possible before,” said Blockstream co-founder and CEO Adam Back.

“Today’s launch of Blockstream Satellite gives even more people on the planet the choice to participate in Bitcoin. With more users accessing the Bitcoin blockchain with the free broadcast from Blockstream Satellite, we expect the global reach to drive more adoption and use cases for Bitcoin, while strengthening the overall robustness of the network.”

The Blockstream Satellite network currently consists of three geosynchronous satellites at various positions over Earth that cover four continents: Africa, Europe, South America and North America. Blockstream is leasing bandwidth on existing, commercial, geosynchronous satellites: Galaxy 18 (covering North America), Eutelsat 113 (covering South America) and two transponders on the Telstar 11N satellite (one covering Africa and one covering Europe).

Ground stations, called teleports, uplink the public Bitcoin blockchain data to the satellites in the network, which then broadcast the data to large areas across the globe. Additional satellites and teleports are being added to achieve worldwide coverage by the end of the year.

Blockstream_Satellite_Phase1+2_Coverage_Areas.jpgBlockstream_Satellite_Phase1+2_Coverage_Areas.jpg

The Blockstream service is expected to be especially useful to people in remote regions of developing world with poor internet connectivity.

“When I first heard of Blockstream Satellite, I immediately recognized its great potential to bring Bitcoin to regions of the world where internet access is either unavailable or expensive,” said Tim Akinbo, who runs the only bitcoin node in West Africa. “Not to mention providing redundant access when internet access is temporarily unavailable.”

Blockstream Satellite uses GNU Radio, an open-source software development platform for Software-Defined Radio (SDR), expected to reduce costs and streamline development by eliminating the need for specialized hardware. Blockstream Satellite utilizes the Fast Internet Bitcoin Relay Engine (FIBRE), an open-source protocol backed by several years of history operating and studying the Bitcoin Relay Network. “Together, these open-source technologies power the Blockstream Satellite network enabling Blockstream to provide this free service reliably and cost effectively,” noted the Blockstream press release.

“Anyone can receive the signal with a small satellite dish (similar to a consumer satellite TV dish) and a USB SDR (software-defined radio) interface,” notes the Blockstream Satellite FAQ. “The total equipment cost for a user is only about $100. The software is free. The software interface is the open-source GNU Radio software, which is the receiver. GNU Radio will send data to the FIBRE protocol, which is the Bitcoin process and is where the blocks reside.”

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NEO Completes Rebranding; Announces Blockchain Partnerships

NEO rebrand part 2

On June 22, Bitcoin Magazine reported that Antshares was embarking on a new rebranding strategy as part of its effort to lead blockchain development in China and around the world.

Now, on August 8, NEO Blockchain, China’s first original public chain project, has announced the completion of rebranding efforts from its former Antshares identity. Furthermore, NEO has upgraded its blockchain nodes, technical documents, social media, official site and exchange name worldwide, representing the transition from Antshares 1.0 to the NEO smart contract system 2.0.

NEO now is the top 10 cryptocurrency in terms of market value. It hopes to capitalize on its Chinese connections by calling to mind the success stories of other Chinese behemoths like Alibaba and Tencent. Whereas a month ago NEO may have been trying to “steal the spotlight from Ethereum,” it now seems to be trying to carve its own path forward.

Compared with Ethereum, NEO claims its smart contracts perform better in terms of determinism, high scalability and compatibility. The developers of smart contracts can use JAVA, C/C# and GO to write smart contracts without the need to learn new languages like Solidity, making it attractive to the global developer community.

Powered by the Community

In the press conference held on June 22, Antshares announced its rebranding of “NEO” with an emphasis on upgrading itself to a smart economy platform with an integration of digital assets, digital identity and smart contracts. It has also introduced notable new features like a cross-chain protocol, quantum-resistant cryptography, a distributed storage protocol and a secure communication protocol.

Other new additions include PC web and mobile apps, as well as an introductory video about the project.

Da Hongfei, the founder of NEO, told Bitcoin Magazine:

“NEO’s development hinges on two important teams: one is the Shanghai-based development and management team, while the other is an international team called “City of Zion,” purely supported by the community, thanks to a huge number of volunteers for NEO.

“The community just volunteered to translate the video and other materials into multiple languages. Furthermore, the technical white paper has also been translated by the community into English, Spanish, Japanese and Korean. We are especially grateful to the community, which will remain the core of NEO’s development in the future.”

New Partnerships Underway

SInce its successful upgrade, NEO has added full smart contract support, attracting a range of blockchain startups to work with its platform. Bancor, Coindash and Agrello are among some of the first to have reached agreements for technical cooperation with NEO.

Meanwhile, Red Pulse and other projects have announced that they will join the NEO ecosystem and adopt its smart contracts.

Red Pulse, an event-driven Chinese market research company, will build a research sharing platform built on the NEO 2.0 smart contract platform. It will allow readers to guide market research and to use digital currency to reward analysts and contributors directly and fairly, disrupting the current financial research market models. The project will also release a new token, $RPX, powered by the NEO platform.

Elastos, launched by Rong Chen, Jihan Wu and Feng Han, is a new blockchain-powered operating system. According to an announcement made in July of 2017, in cooperation with NEO, Elastos will “explore the technological values and applications of blockchains in the new internet operating systems to further the development of a Smart Economy.” Elastos plans to become an “OS for the blockchain,” while NEO will enable developers to create blockchain applications quickly and easily.

Furthermore, the Nest Smart Fund, based on NEO smart contracts, will be a brand-new form of investment fund that will eliminate (as much as possible) the high thresholds, high risks, inefficiencies and moral hazards often associated with traditional fund intermediaries. Backed by blockchain technology, Nest will allow anyone to participate transparently and easily in the Nest fund.

As NEO Council Secretary General Tony Tao told Bitcoin Magazine:

“The core of the platform-level blockchain lies in the establishment of the ecosystem. For the next step, we will launch the NEO Seed Project, hoping to inspire the global community and to encourage traditional technology developers to use the NEO Smart Contract platform.”

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Bloq Outlines Blockchain Solutions for Trade Finance and Supply Chain Management

Bloq Outlines Blockchain Solutions for Trade Finance and Supply Chain Management

Bloq, a Chicago-based blockchain developer and software startup, has joined IBM and Microsoft to develop blockchain platforms and best practices for one of the most promising use cases for blockchain technology: trade finance and supply chain management.

Interest in the use of blockchain for trade is growing rapidly as companies and organizations like IBM, Microsoft, Hyperledger, JP Morgan and Walmart recognize that antiquated trade systems are long overdue for a complete restructuring and that blockchain technology has the potential to revolutionize the systems that make up global trade.

A common problem with current trade systems is fraud. The trip from farm or factory to store shelves involves numerous opportunities to falsify shipping documents and alter shipping container records or contents with little accountability.

“Global supply chain management has drastically changed in the last 10-15 years,” William Nieusma, Vice President, Government Strategy at Bloq told Bitcoin Magazine: “Regulatory mandates, operational complexity and data security concerns have ramped up the pressure to overhaul these outdated systems.”

Nieusma is one of the authors of Bloq’s recently released white paper, “Accelerating Global Trade Processes with Blockchain,” designed to introduce their new project to develop a model blockchain network for companies involved in trade.

“But it’s not all doom-and-gloom; adopters of blockchain-based systems can cut costs, improve customer service and find new, verified business partners,” added Nieusma.

Alan Cohn, attorney and consultant and advisor to Bloq told us:

“Global trade is an area where blockchain can play a transformative role, not just for industry but also for government.”

Nieusma noted that Bloq believes that in the future, the most significant and valuable business systems, including trade, will run on blockchains.

IBM has recognized the potential of blockchain and trade. In partnership with seven European banks, it is building a pilot blockchain trade program with Hyperledger to enable companies like Walmart and Maersk to use blockchain technology to better track the movement of farm and factory products to the store shelves.

Microsoft is also building a model trade program using the Ethereum blockchain in a pilot project with JPMorgan.

Blockchain Tech and Trade Are a Perfect Fit

Trade finance and supply management lend themselves well to the particular advantages of blockchain technology. The Bloq white paper states:

Blockchain technology holds considerable promise to substantially improve supply chain security and transparency. Blockchain’s inherent architectural attributes solve several weaknesses in current trade IT systems and processes to ensure information immutability and transaction auditing, thereby increasing trade value capture and value creation.

Bloq’s model trade platform promises companies high levels of cybersecurity, reduced waiting times, transparency, ease of revenue payments, low infrastructure investment, easily auditable transactions, efficient accommodation for additional participants, immutability and automatic bonding and payments through smart contracts.

Bloq plans to build a “permissioned, federated network” built on the Bitcoin blockchain that, depending on the client’s needs, will also support Ethereum and Hyperledger. Nieusma said:

“Bloq believes that the future is a multi-chain, multi-network world and that interoperability is a guiding principle in network buildout.”

The Bloq program will connect all parties involved in a trade including buyers, banks, sellers and transporters so that information about a shipment is distributed among all involved parties at the same time.

As the white paper states:

“Trade can be safer, more secure, and more profitable with less human error. We hope this discussion leads to an evolution in trade that benefits all stakeholders.”

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Decent Launches Global Media Distribution Platform

Decent Launch

Free and open communication has long been an essential component of a successful democracy. Unfortunately, money, power and influence over time have stifled today’s media environment adversely impacting both content producers and consumers alike.

In an effort to democratize creative content, DECENT has officially launched its blockchain-based, global media distribution platform. The name is an acronym for Decentralized Network; Encrypted & Secure; Content Distribution System; Elimination of 3rd Parties; New Way of Online Publishing; Timestamped Data Records.

Designed to bring more transparency and fairness to the media industry, DECENT allows artists to seamlessly distribute digital content for immediate payment and without hefty fees. Peer-to-peer in its orientation, consumers decide the merits of a certain piece of content posted through a Yelp-like community rating system. The content, however, cannot be censored or removed.

This blockchain initiative endeavors to disrupt the legacy world of media distribution by allowing artists more freedom and control over the ownership and distribution of their content, all without compromising on security. It represents a potential gamechanger for the massive global media and content distribution industry — one that’s estimated to grow from $1.7 trillion in 2016 to over $2 trillion in 2019.

DECENT was founded in 2016 by two friends, Matej Michalko and Matej Boda, from Slovakia. It sprouted from a shared vision that blockchain technology could fuel a coordinated system of digital content publishing and sharing throughout the world.

Funding for DECENT was fueled by an ICO campaign last summer, which raised more than 5,881 BTC, at that time valued at $4.2 million USD. There were 4,300 ICO participants in total and no other key funding partners.

Michalko recounted the journey leading up to his own personal discovery of blockchain technology and its potential uses for the content distribution space. “I’ve been extensively involved in Bitcoin since 2011, even mining it from my own laptop at the beginning. I quickly realized that the innovative technology behind Bitcoin had the potential to change the modern world.”

When Michalko started to delve further into blockchain technology, he found a seemingly endless list of use cases the new technology could support. “I became determined to use blockchain technology to create something revolutionary that would be beneficial for people on a global scale. A short time later ongoing discussions between myself and our future co-founder Matej Boda quickly led to DECENT being born.”

He says that DECENT Network is a reaction to the issues that the majority of content producers face nowadays in the entertainment and media industry. “There is too much artificial complexity and too many barriers in the industry affecting both the access to market and income of the content owners.”

DECENT’S digital model allows artists to distribute any form of content, including written, music, videos, ebooks and pictures. These distribution channels are free of third-party influence, meaning that artists can also manage their intellectual property rights and set their own pricing.

One of the innovative adaptations that distinguishes DECENT from other blockchain platforms is the network’s reputation management system. This allows content creators who share their digital work on the platform to build a lifetime reputation, based on ratings from those who purchase content on the platform. DECENT Network also allows content creators to instantly receive payment when someone downloads their content, without any middleman interference.

Michalko believes that DECENT can break the trajectory in which a majority of power is concentrated in the hands of a few players controlling the industry. “Artists, filmmakers and writers lose control over their work and depend on the mercy of the ‘big guys.’ We designed DECENT Network to do away with all that and bring more transparency and fairness to the digital content industry.”

DECENT estimates that writers, for example, lose a healthy 30–75 percent chunk of their earnings when publishing with Amazon. Similarly, musicians, through licensing agreements, lose around 30 percent when selling a track on iTunes. Blockchain technology therefore serves as a mechanism that helps writers and musicians keep more money, while connecting with their audiences directly.

Michalko says that artists will be paid for their downloaded content through DECENT’s own cryptocurrency called “DCT,” which will be launched together with DECENT Network. Other payment options, he says, will be available in the future. “Artists will no longer have to wait months before seeing a penny from their work. And at the time of launch, DECENT Network will be a completely free-of-charge service for artists.”

Michalko hopes that by  2020, DECENT Network will have become the number one worldwide media sharing platform. “We hope to bring more transparency and fairness to the digital content industry for both creators and consumers. I hope that with our launch people will realize the advantage of DECENT Network over other content distribution platforms.”

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Antshares Rebrands, Introduces NEO and the New Smart Economy

NEO-Beijing.jpg

At a gathering at the Microsoft headquarters in Beijing on Thursday, with about 200 people in attendance, Antshares, the first open-source blockchain platform developed in China, announced a complete rebranding of its blockchain solution, as well as a number of other developments detailing their ambitious plans forward.

One of the revelations was the platform’s new name and brand, NEO, which in Greek means newness, novelty and youth. The developers also highlighted the strengths of their advanced smart contract code, which will support decentralized commerce, digital identities and the digitization of many different assets. This rebranding of Antshares represents a new direction for the development of China’s blockchain community.

Currently, holders of ANS can now automatically generate Antcoins (ANC) in their Antshares wallets, which will be used as gas on the platform. The ANS asset symbol will become NEO in the 3rd quarter of 2017; meanwhile, the NEO team is working on new clients and a UI for the new NEO brand.

Throughout the day, there were presentations from participants including Microsoft representatives, NEO platform developers, and founders of partner platforms. Among the select attendees were several major potential investors, industry experts and blockchain enthusiasts, as well as members of the Chinese financial and mainstream media, including CCTV.

Presenters at the conference included: 

Da Hongfei, founder of NEO

After announcing NEO’s new brand and strategy, Da Hongfei elaborated on the future of blockchain technology, where every asset will be digitized and programmable with smart contracts. Calling for the transparency and openness of data, he introduced concepts of the “Smart Economy” and new smart contract system, and announced that he is building a new multi-chain protocol for interoperability.

Da Hongfei’s top revelations at the conference were that:

  • NEO is collaborating with certificate authorities in China to map real-world assets using smart contracts;

  • NEO has received a new patent for cross-chain distributed interoperability;

  • NEO’s recent new startup partners include Bancor, Agrello, Coindash, Nest Fund, and Binance, with more partner announcements to come.

Erik Zhang, Core Developer of NEO

In his presentation, Erik Zhang discussed the evolution of Smart Contracts 2.0, and explained the main differences between NEO and Ethereum. One big contrast of these competing platforms is their programming languages. Ethereum requires developers to learn to program with Solidity. Neo, on the other hand, will support almost all programming languages via a compiler, including those on Microsoft.net, Java, Kotlin, Go and Python, greatly lowering the difficulty for developers to write smart contracts. By making its programming languages more inclusive, NEO hopes to attract a larger community of developers. Zhang also explained the mechanics of the NEO Virtual Machine, its execution engine and interoperability.  

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Slide Of The NEO Virtual Machine

Tony Tao, CEO of NEO and Founder of Nest Fund

Based on the concept of Ethereum’s The DAO, a blockchain-based investment fund, Tony Tao is about to release a whitepaper for a similar project. Called Nest Fund, and built on NEO’s blockchain, this fund will make improvements on the failures of The DAO. By offering a global bounty reward for any hacker who finds bugs, Nest will be audited by a worldwide peer review, and will then release its token for decentralized investing.

Srikanth Raju, Microsoft’s G.M of Developer Experience and Evangelism for the Greater China Region 

According to Mr. Raju, blockchain technology will lead us into a new digital age, displacing traditional businesses and middlemen throughout many industries. He said that Onchain (the company that founded NEO) is “one of the top 50 startup companies in China”, and offered his support for their endeavors going forward.

 Mr. Han Feng, Tsinghua University I-Center 

Fostering innovation and entrepreneurship at the top university in China, Tsinghua University’s I-Center focuses on the large-scale integration of technology resources. Speaking for the university’s growing interest in supporting blockchain technology, Mr. Han Feng said that current systems of commerce are “outdated and insecure,” and that the internet is ready for an upgrade to a blockchain-based operating system. Calling for a fully-automated, blockchain-based, decentralized economy, he said we can expect a digital revolution in the years to come. This will include digital currency, decentralized storage, secure smart contract codes, IoT, AI, and many more innovations.

 Chen Cheng Qiang, founder and CEO of Innospace

Located in Shanghai, Innospace is a business incubation company, with office spaces, meeting spaces, cafes and living spaces. At today’s conference, Innospace CEO Chen Cheng Qiang announced a ¥200 million CNY ($29.3 million USD) incubation fund, a collaboration between his company and the NEO blockchain team. Plans for the fund include the establishment of a new blockchain space in Shanghai, combining working spaces, startup incubation and acceleration services. According to Mr. Qiang, his company plans to provide the most successful entrepreneurship acceleration services in China.

 Alex Norta, founder of Agrello

Coming all the way from Estonia, Alex Norta announced that his startup Agrello will be partnering with NEO to develop smart contracts for automation, self-execution, accuracy and transparency. Powered by AI, Agrello will be a platform for non-programmers to create their own legally binding blockchain-based smart contracts. Use cases for Agrello’s tech include renting and sharing, freelance contracting, orchestrating production flows, and reducing administration costs for multinational corporations.

Adam Efrima, CEO of Coindash

With offices in Israel and Shanghai, Coindash will be a social trading platform for crypto assets, offering portfolio management tools for digital asset investors. Features of the platform will include portfolio statistics and management tools, investment automation, an ICO dashboard, and insights into other traders’ successful investing strategies. In the upcoming development of Nest Fund, a blockchain-based smart fund by the developers of NEO, Coindash will offer advisory and prediction tools for Nest’s modern investors.

Mr. Zhao Chang Peng, CEO of Binance 

The former CTO of OkCoin, Mr. Zhao Chang Peng is starting his own digital asset exchange, hoping to compete with platforms like Poloniex. Calling his new platform Binance, this new exchange will only deal in coin-to-coin transactions, avoiding fiat pairs and therefore avoiding Chinese regulations. In order to maintain a standard in mature digital assets, Binance will only list coins that meet its strict criteria. With a launch planned for later this year, the platform’s first traded assets will be bitcoin, ether and NEO. 


From the looks, sounds, and energy of the event, NEO has built up some strong momentum going forward. They have one the top blockchain development teams in all of China, with 50 million ANS ($325 million) to support their funding needs and a growing list of partners now aligning by their side. While it may take some time to steal the spotlight from Ethereum, we are sure to see more from this platform in the months to come.  

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Op Ed: Three Technical Requirements to Connect Blockchains Without a Token

Op Ed: Three Technical Requirements to Connect Blockchains Without a Token

In my last post, I was talking about how connecting all blockchains is the final stepping stone for mass-crypto adoption. Here I want to outline the technical building blocks with which this idea can be implemented.

Since I see a lot of downsides to having one large uber-blockchain connecting all others, I will focus on a token-LESS solution. This would have several advantages:

  • No need for an additional token.

  • Users can “remain” on their blockchain.

  • No need to trust a centralized third party.

There are a couple of downsides to such an approach however. Since there is no uber-blockchain or a centralized party ensuring the connection, there needs to be enough liquidity between two blockchains to be connected. If I want to transfer funds from the Ethereum to the Bitcoin blockchain, for example, I need someone who, at the same time, wants to go from bitcoin to ether. For these two large blockchains, you will always find someone willing to go in either direction, but what about from Ethereum to a smaller blockchain or a small blockchain to another small blockchain? While I will be laying out a way on how that could even be solved, I want to stress that liquidity is the key economic factor in such a cryptographically secure multi-asset network.

Basic Building Blocks

Let’s look at the three very basic building blocks that are needed to connect any two blockchains:

  1. Multisignature feature (Multisig);

  2. Hashing functionality; and

  3. Time-lock functionality

Let’s work through each of these three and combine them into a larger single picture.

1. Multisig is an old and well-trusted concept that can be compared to a shared checkbook with multiple required signatories. A multisig transaction allows for the enforcement of arbitrary joint signature rules. In the case of a cryptographically secure, off-chain, multi-asset, instant transaction network (COMIT) one would use 2-of-2 multisig transactions for which both signers have to sign a transaction to become valid and be accepted by the network (an example of this will follow right after). This means a multisig transaction established between two parties needs to be signed by both so that its outcome becomes valid and can be accepted by the network.

In the picture below, a transaction was created with 1 BTC as input; however, in order to get it out, both parties (Alice and Bob) have to sign the transaction:

 

2. Hash functions are standard cryptographic concepts. These are one-way functions to convert arbitrary data (in our case a secret “s”) into a unique hash “h.” This hash h can then be shared safely without anyone being able to compute the secret s used to create it. This allows us to build a hash-lock transaction which will only unlock the funds with the knowledge of the secret s. In order to route across different blockchains, we need the same cryptographic hash function available in the smart contracting language of each blockchain participating on such a route.

In the picture below, someone put 1 BTC into a contract, but Alice can only take it out once she has the secret (which she normally would get from Bob).

3. Time-lock is a simple requirement for funds to be locked up until a future date. Blockchains are found to have two different time-locks: relative and absolute. Absolute time-locks will lock a transaction output until a fixed point in time in the future, whereas relative time-locks will lock a transaction output relative to an event or a point in time. That is to say, a relative time-lock rather defines a time span than a specific point in time. Time-locks are a requirement for trustless payment channels, and relative time-locks are recommended as they allow for indefinitely open payment channels.

In the example below, someone put 1 BTC in, but in order for Alice to get it out, she has to wait a predefined time. 

Putting It Together 

If we go ahead and combine these three building blocks, we get something called HTLCs (Hashed Time-Lock Contracts) whose states can be updated on a multisig basis. HTLCs combine the concept of a time-lock for refund purposes with a hash-lock. If the recipient can provide the secret s for the hash-lock before the expiry of the time-lock, he will be able to retrieve the funds. Otherwise, the sender can safely reclaim the funds. In case one party wants to update the HTLCs state, he needs the other party’s approval (signature). This is how the multisig function comes into play.

In the example below, Alice put 1 BTC into the contract with Bob. Bob can either take the 1 BTC out if he gets the hash from Alice within a predefined time, or Alice will get the funds back automatically after that predefined time has past.

Two HTLCs can be coupled with each other resulting in something called atomic transactions. To do so, the recipient first generates a secret s and computes its hash h. Subsequently, the recipient will share this hash h with a sender who in turn creates the first conditional transaction, i.e., its output is (hash-)locked by h. This output can only be redeemed with the knowledge of the secret s.

In layman’s terms, this would mean that if Bob wants to send Alice 1 BTC and wants ETH in return, they could open two payment channels (one with BTC and the other with ETH) and couple them with a hash h. Bob sends Alice BTC as long as she sends him ETH. In case either one backs out, the original amounts would just be returned.

The Full Route 

Now we can stack an arbitrary amount of transactions onto each other as every node in this chain can safely use the same hash to create a transaction which is also conditional on knowing the secret s. This hash is initially shared with the sender, who will then subsequently send a conditional payment to the first node requiring knowledge of the secret s to redeem it. Each node in the route can then safely forward the transaction while adding the same condition to the transaction redemption. Through the use of HTLCs we can guarantee that either all of the transactions via this route get fulfilled or all payment channel transactions will be unredeemable. No trust has to be put in any of the nodes in the middle of the route. In the end, you have a chain of transactions which all depend on the same secret to be fulfilled. When the receiver takes the last transaction and uses the secret to redeem the money, every other node will see the secret that was used and can then fulfill their own incoming transaction.

After the secret s has been shared across the route, every payment channel will then settle the transaction back into the channel. This is done by updating the payment channel’s state to the final balances and then invalidating the HTLC transactions by revealing the invalidation key k to the payment channel counterparty, which will eventually make the transaction complete.

The time-lock mechanism is used as a refund mechanism in case of an intermittent routing failure. The time-locks need to be stacked from receiver to sender to make sure no one is able to cheat by having a shorter period than someone after him/her and thereby being able to pull out first.

Conclusion 

These transactions can span within the same blockchain, but can also go cross-chain as long as you find someone who is willing to transact on both blockchains. This is where the concept of liquidity and routing comes in. To go back to the beginning where we thought about connecting two low-liquidity blockchains we see now, that we actually don’t necessarily transact between those two directly. By using stacked payment channels one after the other, money could flow from one low liquidity chain to a high liquidity chain and then to the final low liquidity chain. 

This concept connects payment channels to a large network that is now:

  • Cryptographically-secure (relies on cryptographic standards),

  • Off-chain (like the Lightning- or Raiden-Network) ,

  • Multi-Asset (cross-chain),

  • Instant (no need for a transaction to settle on the blockchain as updates only happen between the parties until it gets broadcasted)

  • A Transaction Network, such as COMIT.

In the next blog post, I will talk about the concept of liquidity and Liquidity Providers (LP) and also on how routing through such a network could work.


This is a guest post by Dr. Julian Hosp, the co-founder of TenX and co-author of the whitepapers of TenX and COMIT. The views expressed are his alone and do not necessarily reflect those of Bitcoin Magazine.

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E&Y Report: How the Wealth Management Industry Could Benefit from the Blockchain

E&Y Report: How the Wealth Management Industry Could Benefit from the Blockchain

Blockchain technology has morphed from a popular buzzword to a technology that is in the process of revamping a wide range of operational and business processes within the financial service industry. A segment of the financial industry that could benefit greatly from the implementation of the distributed ledger technology is the wealth and asset management sector.

The global accountancy firm Ernst & Young published a report on the benefits of blockchain technology for the wealth and asset management industry titled ‘Blockchain Innovation in Wealth and Asset Management.’ The report states that the implementation of blockchain technology would likely result in reduced operational expenses, elimination of redundant yet time consuming functions and more opportunities to better the client experience. More specifically, using blockchain technology in important areas such as the client onboarding process, the creation of model portfolios, the settling and clearing of trades and compliance processes related to AML regulations can all be improved by implementing distributed ledger technology-based solutions in the wealth management industry.

Blockchain Use Cases in Wealth Management

In this report, Ernst & Young highlights two use cases as examples of the benefits of the blockchain.

Firstly, blockchain technology can be applied to digitize and streamline the customer onboarding and profiling process. Strict regulatory requirements require wealth managers to collect information such as proof of identification, marital status, residency, sources of wealth and political ties from new potential clients. This can be a cumbersome, long-winded and, therefore, costly process.

If, instead, high net-worth individuals’ data were to be stored on a distributed ledger to which permissioned parties could gain access with the individual’s approval, then this would greatly reduce the time and cost of onboarding a new customer. Furthermore, due to the immutability and auditability of the blockchain, an audit trail could easily be kept for each client.

Secondly, the blockchain could facilitate the creation of portfolios and the communication of portfolio changes to clients. Currently, wealth managers use a variety of different platforms to create and maintain portfolios and most of these platforms do not enable direct communication with the client.

Hence, by developing and implementing a blockchain solution that allows wealth managers to create and manage portfolios according to clients’ stored investment constraints that also allows for direct communication with regarding portfolio changes, the entire investment process would be made substantially more efficient and client relationships could be deepened due to an increase in direct communication between the wealth manager and its clients.

There Will Be Hurdles for Adoption but First-Movers Will Benefit

The report also highlights the challenges of adoption that the technology is likely to encounter. Scalability, interoperability with legacy systems, security and accordance with technology standards were the largest issues raised by the firms polled by Ernst & Young.

In addition, wealth and asset management funds do not exist in a bubble and are usually interconnected with other firms. Therefore, a wide-scale adoption would likely take a long time, considering there would have to be a consensus as to what type of blockchain solutions the whole financial industry chooses to adopt. Due to these factors, most firms are currently only willing to test blockchain technology on a small scale before considering a broader adoption of the tech.

Ernst & Young, however, believes that firms that are the first to adopt blockchain technology will reap the lion’s share of its benefits. As the success of financial blockchain solutions depends on its participants, E&Y encourages firms to begin the innovation process early as first-movers are likely to benefit the most.

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Will Blockchain-Based Gun Control Keep Your Family Safer?

Gun Safety on the Blockchain

Gun violence continues to be a hot topic. Gang violence in neighborhoods, terrorist attacks in cities, accidental gun discharge among kids, mass attacks at schools and businesses — these and other forms of gun activities are leading to calls for reform throughout the world.

Through the use of smart technology, the startup Blocksafe seeks to deliver a blockchain-centric solution for gun ownership and their safe use. Its core premise is predicated on a key issue tied to firearms, namely the danger they pose when they migrate into the hands of non-owners.

With the support of the Blocksafe Foundation, an organization evangelizing smart-gun technology and gun-ownership freedoms, an innovative device and decentralized network is advancing in its development. Its mission is to create a safer world through weapons tracking and accountability, preventing guns from falling into the wrong hands and being utilized by unauthorized gun users.

Citizens, law enforcement agencies and armed security firms will have 24/7 real-time access to the secure and anonymous Blocksafe network, thereby allowing them the ability to self-monitor their supported firearms devices. Owners can receive notifications if shots are fired by an unauthorized user of their guns. Moreover, they have the ability to locate and disable a stolen weapon, all through the Blocksafe app or web portal.

It should be noted, however, that Blocksafe cannot identify the actual shooter who is utilizing the firearm. Rather it’s more of a tracking mechanism for both individual owners as well as gun store owners, giving them peace of mind as to where their firearms are at all times.

By way of example, an adult at work might remember that his gun is possibly accessible to his kids at home. Blocksafe can help him track where the gun actually is and even remotely disable it. Again, the goal is to offer some semblance of control to the owner in the event that the firearm ends up in the hands of an unauthorized user, which often results in a gun tragedy.

Another illustrative use case: A gun owner whose house is robbed while she is away can remotely disable the stolen firearm, rendering it unable to be resold or used later in a crime.

Pulling the Trigger on Innovation

Kevin Barnes, founder and chairman of Blocksafe, is an honorably discharged U.S. Army veteran, blockchain developer and passionate advocate of gun ownership. He is also a tech coder of 20 years.

Raised among liberty-minded gun lovers, he was taught to embrace the U.S. constitutional right to bear arms first and foremost. As he listened to and read about politicians pushing smart-gun efforts in the media, he feared a loss of life or liberty due to risks inherited by a centralized smart-gun infrastructure. These concerns led him to launch Blocksafe.

In this interview with Bitcoin Magazine, Barnes discusses the evolution of Blocksafe and his greatest hopes around the future of gun safety worldwide.  

Can you describe the moment when the Blocksafe idea first struck you?

Being an avid gun lover, I was at a range teaching my wife to shoot various firearms and she began thinking about what to do if she was overpowered by a thug while she was armed. At that moment the concept of “Blocksafe” was born. 

In layman’s terms, what is Blocksafe?

I tend to think of Blocksafe as a light version of particle.io for enhanced firearm technology. It is a full-stack IoT device network that gives innovators what they need to enable users to securely manage their devices and data. Blocksafe can also facilitate an innovator’s use case in IoT development, expediting their roadmap to the market with security and anonymity for the user and sensor data being the major area of focus.

Blocksafe enables innovators to develop a myriad of solutions to solve the problems associated with firearms — such as malware and ransomware risks — that were not possible before without compromise.

How does this benefit the gun industry?

Decentralized applications (DApps) can be developed in a way that greatly benefits companies in the gun industry. For example, a third-party device is created by a manufacturer. They could install a custom-built DApp onto it, so the manufacturer can easily track its inventory and distribution.

What about the economics of your solution?

Economically, revenue can be generated from the upsale of enhanced add-on devices to firearms. With the cost of the IoT infrastructure greatly reduced, innovators can focus on improving their product to meet market demands, especially those from a newer generation who are always connected. Innovators can also better meet government and commercial needs for these enhancing devices.

What sorts of other use cases are being bantered about?

Here are a few that might align with the Blocksafe model.

Litigation: enhancing the authenticity of a camera video allowed in court proceedings.

Product Theft: a gunstore can recoup their firearms if stolen.

Insurance: armoured trucks and security companies in general can better monitor and manage the firearm usage of their employees.

Training: Instructors can use analytics to study shooting skills to better train students, thereby reducing the likelihood of accidents.

What are Blocksafe trigger tokens and how will they work?

Triggers are the appropriately named “tokens” that power every event from smart devices to the Blocksafe network. The token is an ERC20 (which may become ERC223 later), which will be introduced during demonstrations at CoinAgenda in Las Vegas later this year.

What else are you currently introducing?

Soon we will be demonstrating with the TrackingPoint M400 to our  smart-gun network. There are many sensors, a smart trigger and a smart scope on the firearm that make it a great candidate to use in demonstration.

We will also be introducing another DApp use case made for mobile phones and tablets called “Gunshot Spot.” It’s a free gunfire-mapping app and token wallet that sends notifications of gunfire and its proximity. Users will have the option to anonymously share the data to the app community, which will be used to populate gunfire mapping within the app using Blocksafe. Think of it as SpotCrime for gunfire.

What steps have you taken to garner support from the gun industry?

We have provided a pilot signup page for our network’s web portal. We are also in talks with many firearm and accessory manufacturers, some of which we met at the recent NRA show in Atlanta. A quarter of them expressed positive interest in Blocksafe as they recognize that nothing is stopping the progression of defense tech and the launch of Blocksafe. One exhibitor summed it up in one sentence: “Blocksafe’s use case is that it enables use cases development for enhanced firearm solutions that were never possible before.”

We’ve also received a lot of support from organizations that support the firearm industry such as Smart Tech Foundation, which we plan to join in their effort to support startup innovators entering the enhanced firearm space.

What is your response to libertarians and others concerned about gun privacy and anonymity?

What I say to them is that enhanced firearm tech is going to continue to develop no matter what. When I was following the smart-gun mandates from President Obama and his administration, all I could picture was my wife, kids and future grandkids with a weapon that some third party could share control of.

As a programmer of 20 years and a Bitcoin enthusiast, I realized the only solution was to bring to market a network that would prevent that nightmare. At the same time, we can use the blockchain to save lives by enhancing the very tool that has been protecting our freedom in such a way that the device owner keeps full control of the device features and data.

As is the belief of many libertarians, I have the liberty to choose how to defend myself and my family. It is our human right. Whether it is using a 25-year-old revolver or a TrackingPoint AR, we all have the liberty to choose our firearm of choice.

But how do you think these arguments will sit with the government?

We spend millions to politically protect our legal rights to defend ourselves. We must also focus on making sure the technology is not used against us — as, without an alternative, the chances of technical tyranny is a threat too great to chance — regardless of the laws.

Plus, I think it is cool not being able to be shot with my own weapon.

What is your long-term, grand vision for Blocksafe?

Simply to continue to help grow the enhanced-firearm space including expanding the consortium globally. We will try to incubate startups and launch Smart Gun News to showcase the innovators and aggregate news in the space. We also endeavor to work with nations to adopt blockchain tech and their smart city efforts in general. Ultimately, as I see it, it’s about promoting a safer and more peaceful world full of liberty.

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“The Future Is Here”: Singapore Tokenizes Fiat Currency on the Blockchain

The Future Is Here: Singapore Tokenizes Fiat Currency

In a report entitled “The Future Is Here,” Singapore’s central bank announced that it has completed the first phase of a project involving the development of a tokenized version of the Singapore dollar (SGD) on an Ethereum-based blockchain.

Project Ubin, which began in November 2016, is an attempt to create a functional replacement for Singapore’s interbank payments network using tokenization and blockchain technology.

The first phase of the project was successful, developing a proof-of-concept replacement of the MAS Electronic Payments System (MEPS+), the Singaporean analog of the Clearing House Interbank Payments System (CHIPS) in the United States, which handles the settlement of interbank debts.

In the prototype model, MEPS+ transfers simply become transfers on a private Ethereum-based blockchain. Although it is still in the early stages, Project Ubin promises a future in which bank customers can send and receive payments and exchange currency without lengthy processing times, fees or intermediaries. In the long term, Project Ubin could herald the overthrow of fiat currency by tokenized cryptocurrency.

It is important to note that the prototype, if implemented, would not affect the net money supply, as all tokens are backed by Singapore dollars held in “custody” by the central bank and which can be freely exchanged back to fiat currency.

In June 2016, the Bank of Canada partnered with R3 and several major banks on Project Jasper to develop a blockchain-based competitor to the country’s current interbank payments solution, the Large Value Transfer System (LVTS).

On May 25, the Bank of Canada announced that a blockchain-based solution was not a viable substitute for the LVTS and abandoned Project Jasper.

However, much of the code and architecture developed for Project Jasper made its way into Project Ubin. In turn, the Monetary Authority of Singapore (MAS) says it plans to make the Project Ubin prototype available to students and professionals in order to further development and innovation.

Other central banks have considered or experimented with tokenization, including the Bank of England, the People’s Bank of China (PBOC) and the Central Bank of Russia.

In February, the PBOC began testing a prototype cryptocurrency that has been in development since 2014.

The Central Bank of Russia is currently testing an Ethereum-based blockchain solution to process online payments and perform customer verification. President Vladimir Putin met with Ethereum’s creator Vitalik Buterin at the St. Petersburg Economic Forum last week and reportedly encouraged efforts to advance blockchain technology in Russia.

Many other countries are already on the blockchain bandwagon; however, if Singapore’s project is fully implemented, it would mark the first tokenized fiat currency and the first blockchain-based interbank payments system.

But Project Ubin is not over yet. The first phase was successfully completed on March 9, and the report only summarizes its conclusions and outlines the goals of the second phase.

The project’s next goal, according to the report, will be to test the viability of a tokenized blockchain-based solution to domestic and international securities transactions — such as the global stock exchange — and cross-border interbank payments.

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