Bitcoin Beyond Money

wallbroadSecurity

Dec 3, 2013 (4 years and 29 days ago)

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Bitcoin Beyond Money

Michael Goldstein

michael@bitstein.org

A Theory of Property


Scarcity


The

prerequisite for property norms


Scarcity = conflict


Appropriation


Homesteading


Voluntary transfer of title


Technology for delineating


“the existence of an objective,
intersubjectively

ascertainable link between owner and owned good”

A Theory of Socialism and Capitalism
, Hans
-
Hermann Hoppe

Bitcoin as Property


Scarcity


There is a finite set of bitcoins


Appropriation


Homesteading → mining


Voluntary transfer of title → Bitcoin transaction


Technology for delineating


Public
-
key cryptography

The Problem of Securing Titles


Historically done through written records


These can be forged or destroyed


Collecting informal records is costly


Online database?


Centralized


Trust issues


Just as vulnerable, now to any hacker with a
computer and access to the internet

Distributed Solution


Nick
Szabo

proposed a “secure, distributed title
database to prevent [fraudulent] attacks against
property rights in the future”


Transferable rights “enforced entirely by
protocol... [and] owned by a particular entity but
possessed and relied upon by the public”


“This technology will give us public records which
can 'survive a nuclear war', along the lines of the
original design of the internet.”


“Secure Property Titles with Owner Authority” (1998)

Intersubjectively and Digitally
Ascertainable Block Chain


The block chain is the ultimate technology for
securing titles of scarce digital goods (and
more?)


Unforgeable


Verifiable


Decentralized


Resilient

Contracts


“A contract is a relation between two or more
parties which includes legally enforceable
obligations between them.”


Stephan Kinsella, “A Libertarian Theory of
Contract”


Title
-
transfer theory of contract


“Any future
-
oriented title transfer is necessarily
conditional, as are exchanges of title.”


If
you do X,
then

title of Y will transfer to you.

Smart Contracts


A large cost of doing business is that which concerns trust and security


Once again, historically we have paper, writing, and
humans


Let's digitize what we can.



The basic idea behind smart contracts is that many kinds of contractual
clauses (such as collateral, bonding, delineation of property rights, etc.)
can be embedded in the hardware and software we deal with, in such a
way as to make breach of contract expensive (if desired, sometimes
prohibitively so) for the
breacher
.”


“Smart contracts combine protocols, user interfaces, and promises
expressed via those interfaces, to formalize and secure relationships over
public networks. This gives us new ways to formalize the digital
relationships which are far more functional than their inanimate paper
-
based ancestors”


“Smart contracts reduce mental and computational transaction costs.”


“Formalizing and Securing Relationships on Public Networks,” Nick
Szabo

Bitcoin Smart Contracts


Transactions have space for arbitrary data


Bitcoin

has scripting capabilities


In effect, the protocol has built in methods of
creating smart contracts based on
bitcoin

transactions


Watch Mike Hearn's talk!


https://en.bitcoin.it/wiki/Contracts


Let's cover a few examples...

Escrow and Dispute Mediation


M
-
of
-
n multisig transaction


A third party can be chosen by both parties


Transaction made requiring 2
-
of
-
3 signatures


Establish third party arbitration


Best part? Nearly trustless

External State


We already determined people are expensive


External state contracts use oracles


Oracles run computer programs that interpret
external data


Program the dispute and its resolution into the
contract itself


Oracle signs for transaction


Examples: sports bet, inheritance

Assurance Contracts


Who will build the roads?


Free riders, no incentives


Assurance contracts use
Kickstarter

model


SIGHASH_ANYONECANPAY


Transactions are signed and sent


When total adds up, transactions are bundled and
broadcast


Examples: Creative goods, web translation


Extend this further with dominant assurance contracts


Have at it, free riders.

Smart Property


Smart property are physical goods with hardware
and software that incorporate cryptography into
their security and ownership


Example: fob keys that open doors


Imagine a public private key pair associated with
a physical good... and a
Bitcoin

transaction


Ownership of these physical goods now dictated
by the block chain


Combine with other contracts for robust
ownership agreements

Namecoin


Bitcoin

uses a ledger tracing units of a finite number and
their relation to public addresses


great for money


The block chain, as a secure property title database, can be
used for other things as well


Imagine the block chain instead holds namespaces


Namecoin

attempts this


Distributed DNS


Login and authentication services


Smart property


Property titles in general


Block chain notaries (ProofOfExistence.com)

“While thugs can still take physical property by
force, the continued existence of correct
ownership records will remain a thorn in the side
of usurping claimants.”


Nick Szabo, “Secure Property Titles with Owner
Authority”

“The struggle of man against power is the struggle
of memory against forgetting.”


Milan Kundera,
The Book of Laughter and
Forgetting

Recommended Reading


A Theory of Socialism and Capitalism
by Hans
-
Hermann
Hoppe


Against Intellectual Property by

Stephan Kinsella


“A Libertarian Theory of Contracts” by Stephan Kinsella


“Secure Property Titles with Owner Authority” by Nick
Szabo


“Formalizing Secure Relationships on Public Networks” by
Nick
Szabo


“A Formal Language for Analyzing Contracts” by Nick
Szabo


https://en.bitcoin.it/wiki/Contracts