Cointelegraph By Sebastiaan van der Lans
What was blockchain technology originally intended for? It’s generally presumed that it was created in 2008 by Satoshi Nakamoto as part of his white paper, creating Bitcoin (BTC). Since Bitcoin would be built on decentralized ledger technology, a blockchain needed to be established as the foundation for the cryptocurrency.
Since 2008, blockchain technology has expanded well beyond cryptocurrency usage and is now being applied in a variety of use cases from healthcare to finance to green tech and more.
But blockchain tech didn’t start with Satoshi’s white paper. It was actually invented in 1991 as a way to verify and protect content through a concept called timestamping.
A blockchain history lesson
In Satoshi’s famous Bitcoin white paper, he cites another paper: “How to Time-Stamp a Digital Document,” published by Stuart Haber and W. Scott Stornetta in 1991. The two researchers knew that, in an all-digital world, the issue of certifying documents — when they were created and when they were changed — would become an issue.
They explained that in the past, you could simply flip through the pages of a notebook to see dated entries. They cite other means of certification, such as mailing oneself a letter or having something notarized, but in those cases, tampering of documents would be discovered immediately. But not so in a digital world, where documents can be altered with no evidence left behind.
“The problem is to time-stamp the data, not the medium,” they wrote. The first solution they proposed was to simply send a document to a timestamping service. The TSS would then retain a copy for safe-keeping, which could be brought out for comparison when needed.
What is the problem with this solution? It relied on a third party that might mishandle it.
Instead of a third-party verifier, they would use a cryptographically secure hash function, which would serve as the unique identifier for a piece of content. Instead of sending the whole document to the TSS, the creator would send the unique identifier instead. Upon receipt, the TSS would make a confirmation with a digital signature. By checking the signature, the client would be assured that the TSS actually did process the request, that the hash was correctly received, and that the correct time was included.
But what happens if the TSS puts a false timestamp on the hash? Haber and Stornetta proposed two solutions: (1) Use bits of previous requests to create new ones, which forces a chronological record; and (2) Make the whole system decentralized, transparent and checkable.
For anyone familiar with how blockchain technology works, this is it. Blocks are created by drawing from the hash of the last block and solving the hash of the new block. Once a block is added, it’s verified by nodes on the blockchain in a decentralized system and locked into the public ledger, unable to be altered.
Original use cases
Haber and Stornetta outlined use cases for this kind of time-stamping, citing inventions or ideas where authorship would need to be proven. Because the documents are recorded as hash functions, it timestamps intellectual property and patents without revealing the contents. They also cite examples where, if a company has documents that were tampered with, they can prove the originals through the timestamp. They envisioned timestamping to encompass not only text documents but original audio recordings, photos, videos and more.
While Haber and Stornetta eventually went on to create their own company called Surety, which acted as that TSS (and, interestingly, published their hashes in the New York Times classifieds every week starting in 1995), but the idea never fully caught on. It wasn’t until Bitcoin was created in 2008 that blockchain technology was finally fully created — four years after Haber and Stornetta’s patent on it ran out.
Why do we need timestamping today?
The need for authenticating documents wasn’t just a 1990s concern. In a world where there’s so much digital content being produced and when distrust in content on the internet seems to be growing, timestamping might just be the way to achieve the transparency and accountability that’s needed.
The idea is simple. A unique hash is generated from a piece of content’s text, title or date, and is added to the blockchain. This not only locks in the time at which a piece of content was created to a public distributed ledger but if any part of that content is altered, the hash alters too — showing that it was tampered with or that a new version was created.
This allows content creators to be able to prove at any time that they created the piece by calling it up on the blockchain. Timestamping can also put an end to plagiarism and copyright disputes since original work can be found linked to its hash in an immutable blockchain.
Timestamping also increases trust for readers. With added identity tiers, they can know exactly who wrote the content and when and can view an authentication certificate. The more sites that adopt timestamping, the more readers will get used to associating timestamping with transparency, accountability and authenticity — and will reject any unverifiable content that not timestamped. Timestamping has a use case in e-commerce as well, where buyers can see original terms and agreements and not be cheated by a suddenly updated version that nulls a warranty.
With a simple implementation, the internet could become a safe, trusted place where authors can feel confident their content will remain secure, and where readers know that what they’re reading is verifiable. It’s been a long time since the original paper in 1991, but those ideas are needed today.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Sebastiaan van der Lans is the chairman of The Trusted Web Foundation as well as founder and CEO of WordProof. He’s the winner of the European Commission’s Blockchains for Social Good Contest. He’s on a mission to bring trust back to the internet.
UAE enables private sector to adopt blockchain tech
Cointelegraph By Shiraz Jagati
It is no secret that the United Arab Emirates, along with Switzerland, Singapore and several other countries, is one of the most forward-looking tech nations in the world, with the Middle Eastern powerhouse promoting the use of blockchain in almost every sector imaginable, from energy to shipping to media.
To help the country with its adoption efforts, the UAE government has launched two extensive, well-crafted initiatives — i.e., the Emirates Blockchain Strategy 2021 and Dubai Blockchain Strategy. While the former seeks to spread the use of blockchain tech for facilitating over 50% of all government transactions by 2021, the latter will help Dubai transform itself into the first city in the world to be fully powered by blockchain.
Furthermore, the Dubai Future Foundation, which is backed by Sheikh Mohammed bin Rashid Al Maktoum, prime minister of the UAE and ruler of Dubai, recently established the Global Blockchain Council in order to help spur the exploration and real-world applications of blockchain tech across a host of financial and non-financial sectors within the country.
As things stand, the council currently comprises 46 members, including government entities, international players, leading local banks, as well as tech firms from across the globe.
Where does the UAE stand?
On the subject of the UAE’s holistic crypto outlook, Hadi Malaeb, CEO of AgoraGroup — a firm that seeks to facilitate international trade — told Cointelegraph that in his view, the UAE administrative regime is by far the most responsive to the crypto industry in the MENA region and one of the most progressive in the world.
To drive home his point, he highlighted that the UAE’s Securities and Commodities Authority recently published “The Authority’s Chairman of the Board of Directors Decision No. (21/R.M) of 2020,” which provides local businesses and digital asset owners with an additional detailed outlook regarding the regulation of crypto assets. Malaeb added:
“I can tell you from first-hand experience that the industry has developed tremendously within a very short period of time from an investment, adoption and regulatory standpoints.”
Business adoption is growing
While most countries across the globe are just starting to recognize the monetary and technological proposition put forth by blockchain and crypto tech, the UAE has already set in motion a number of projects that can potentially transform the country’s landscape in the coming decade or so.
For example, UAE’s Roads and Transport Authority is currently working on a project that seeks to help establish a fully automated vehicle lifecycle management system using an advanced blockchain framework. In brief, the final platform will create a mesh of manufacturers, dealers, regulators, insurance companies, buyers, sellers and garages, thereby creating a detailed record of each vehicle through the entirety of its life cycle.
On the subject, Khaled Alkalbani, CEO of Ideaology — an open-source project built atop the Ethereum ecosystem — told Cointelegraph that while use cases related solely to cryptocurrencies are low at the moment, the UAE is without a doubt one of the most advanced in terms of blockchain use cases and applications, adding:
“The UAE, as always, is bustling with blockchain, digital assets, crypto-related news — to mention, our central bank is using DLT for SME funding and trade finance. The Abu Dhabi Global Market (ADGM) is building an excellent foundation to use/trade crypto, as they believe that this technology will help the economy, businesses and investors.”
Notable use cases
In this vein, researchers affiliated with the UAE’s Khalifa University recently developed digital immunity passports, using blockchain tech. The passport, which will come in the form of a smartphone app, will serve as a digital document detailing a person’s innate risk of spreading COVID-19. Furthermore, the passport will also contain details such as prior negative test reports, vaccination info, etc.
The offering could potentially prove its value in settings where there is a high risk of transmission, like sporting events, live concerts, movie theatres or shopping malls. Not only that, but it could also help the travel industry immensely because it could streamline the screening process of high-risk individuals.
Etisalat, an Emirati-based telecommunications services provider, recently announced the launch of a new blockchain platform that will enable the company to conduct all of its human resource-related activities in a decentralized, transparent fashion. What’s more, Etisalat’s customer engagement program, Smiles, launched the UAE’s first-ever Rewards Exchange powered by blockchain tech.
Related: The United Arab Emirates chase crypto and blockchain adoption
The company also has its hands in a number of other notable blockchain projects, most notably, a platform called Shahada, a tamper-proof digital certificate ecosystem that can be used by any educational institution operating in the region, as well as UAE’s trade finance platform UAE Trade Connect.
Lastly, the UAE’s national carrier Etihad Airways joined forces with open-source travel platform Winding Tree to explore the use of blockchain tech, primarily as a means of distributing its various products and services directly to its customers, thereby cutting out the need for any intermediaries.
Unprecedented interest across the UAE
With each passing year, the UAE seems to be garnering more business interest from blockchain enthusiasts globally, especially as the country continues to help spur the widespread adoption of the technology by providing startups as well as big-name firms with a highly conducive atmosphere to develop their envisioned platforms with the least amount of regulatory pullback.
In this regard, Malaeb pointed out: “We have hosted more than six events in that space within a period of three years,” adding that AgoraGroup’s conferences “have helped startups and well-established companies in this industry to meet, one on one, with pre-qualified investors, and we have witnessed many deals taking place.” Overall, he believes that:
“There is a palpable increase in appetite of institutional investors to explore investment opportunities in digital assets.”
Lastly, Mohanned Halawani, a communications expert and blockchain technology specialist, believes that the country’s tolerance toward practicing new technologies has had a direct impact on the number of crypto entrepreneurs moving to the country. He believes that UAE’s fiscal foundation makes it easier for local firms to adopt blockchain solutions with relative ease, adding:
“It is a tax haven compared to countries with similar economic growth. […] But yet, there is still lots of room for blockchain adoption here. We hope to see crypto being accepted in retail businesses very soon.”
Some of the interviewees have participated in the Global Blockchain Congress in Dubai on Feb. 9, hosted by the Agora Group.
The quest for Bitcoin scalability through layer two protocols
Cointelegraph By Osato Avan-Nomayo
As the largest cryptocurrency by market capitalization, Bitcoin’s (BTC) effectiveness as a medium of exchange is still a matter for debate. Unlike fiat money that is inherently infinite in supply and must be managed by a central bank, Bitcoin is akin to gold in that it is commodity money with a finite supply of 21 million.
However, the supply cap is not the major stumbling block for BTC as a medium of exchange, but rather, the transaction throughput. While Satoshi Nakamoto envisioned Bitcoin as a peer-to-peer electronic cash system capable of facilitating online payments without a central counterparty, seven transactions per second on average is hardly the standard for scalability.
Indeed, scalability is only one of three major metrics required for any currency system to succeed as a medium of exchange along with adoption and liquidity. There is an argument to be made of Bitcoin’s growing adoption around the world across several strata of the global economy.
Price volatility that has seen Bitcoin peak at $58,000 and then briefly fall below the $30,000 mark within the first two months of 2021 likely indicates lingering issues with liquidity. However, it’s important to note that the current period is being characterized by a bullish advance that began in October 2020. Ultimately, some analysts expect Bitcoin’s volatility to level out as more institutions take up positions in the market.
What do the critics say?
Bitcoin’s scalability problem is even older than the network itself. Indeed, upon first proposing the system back in 2008, James A. Donald replied to Satoshi Nakamoto with: “The way I understand your proposal, it does not seem to scale to the required size.”
This astute observation has been at the heart of some of the more contentious and controversial debates within the Bitcoin ecosystem. Disagreements over how to solve the problem have even resulted in multiple hard forks.
These days, when Bitcoin critics cannot definitively dismiss BTC’s store of value proposition, scalability seems to be a low-hanging fruit with which to craft some anti-Bitcoin soundbite. Speaking during the 2021 Daily Journal annual shareholders meeting, Berkshire Hathaway vice-chairman Charlie Munger remarked that Bitcoin will never become a global medium of exchange due to its price volatility.
The 97-year-old billionaire investor is no stranger to espousing anti-Bitcoin sentiments. Indeed, together with Warren Buffett, the two Berkshire Hathaway chiefs have been responsible for some of the more colorful negative remarks among Bitcoin. From being “rat poison squared” to “trading turds,” Munger once slammed BTC investors for celebrating the life and work of Judas Iscariot.
Munger, like Buffett, is among a class of Wall Street Bitcoin critics who have often claimed that Bitcoin has no intrinsic value. However, with the price of BTC continuing its relentless upward advance over the past decade while attracting significant institutional interest, detractors now seem to be left with only the scalability argument.
Even among mainstream crypto adopters, Bitcoin’s inability to scale at the base protocol level also seems to be a significant issue. In an address during the Future of Money conference back in February, Mastercard executive vice chair Ann Cairns declared that BTC was not suited to its crypto payment plans.
According to Cairns: “Bitcoin does not behave like a payment instrument […] It’s too volatile and it takes too long to transact.” As previously reported by Cointelegraph, Mastercard recently announced plans to offer support for cryptocurrency payment on its network.
Lightning Network node count rises, but slowly
Together with the 10-minute block creation time, the one-megabyte block size acts as the actual transaction throughput constraint for the Bitcoin network. The block size debate of 2017 that ultimately led to the Bitcoin Cash hard fork proved the adamance of Bitcoin purists to the 1MB block size ethos.
With the “big blockers” now firmly on their own Bitcoin forks like BCH and Bitcoin SV, the question of how to get BTC to scale without changing a thing on the protocol level still lingers. From Bitcoin banks to sidechain protocols, and even deferred settlement infrastructure layers like the Lightning Network, several developmental projects are currently ongoing to make Bitcoin more suitable for microtransactions like paying for coffee.
At a high level, these scaling solutions involve the creation of trustless, centralized (pardon the oxymoron) entities or layer-two networks that maintain lightweight versions of the BTC ledger to handle the actual “coin” transfers without having to maintain the full Bitcoin ledger. These sidechain implementations then transmit the transaction data for final settlement on the actual Bitcoin network.
LN is one of the major Bitcoin scaling solutions under active development by several organizations including Blockstream and Elizabeth Stark’s Lightning Labs. The Lightning Network is perhaps the most popular of the “defer-reconcile” scaling implementations that allow users to create payment channels that offer instant coin transfers at minimal fees.
According to data from LN data aggregator 1ML, there are over 17,300 public Lightning Network nodes and more than 38,400 channels. LN capacity is currently north of 1,100 BTC.
While LN adoption is yet to attain significant heights, layer-two implementation might be about to get a boost with Zap — a Visa-backed Lightning Network payments startup. In February, the company launched Strike — a payments and remittance app that utilizes the Lightning Network for payments.
Strike has also partnered with crypto exchange platform Bittrex to deliver LN-powered payments to over 200 countries around the world. The company plans to issue Strike Visa cards to users in the United States as well as in Europe and the United Kingdom before the end of the year.
What about Statechains?
There is a school of thought that argues Bitcoin scalability is only possible via layer-two solutions. Ruben Somsen, Bitcoin developer, crypto podcaster and founder of the Seoul Bitcoin meetup, is one of the proponents of this argument.
Somsen is an advocate of Statechains, another layer-two implementation but with a twist — transaction participants send private keys instead of actual unspent transaction output, or UTXO. The process involves loading a Statechain-compatible wallet with the exact BTC sum required for the trade followed by the transfer of the private keys from the sender to the recipient.
Since transferring private keys across the blockchain is fee-less and instant, the Statechain idea seems to have gained some traction within the Bitcoin scalability discussion. However, revealing private keys comes with significant security implications.
Thus, in recent times, the Statechain concept has been modified to include a third entity that acts as an intermediary between the transacting parties. Detailing the workings of this counterparty federation within the Statechain matrix, Somsen told Cointelegraph:
“Statechains allow you to take your coins off-chain (meaning cheap transactions) in a way that puts a minimum amount of trust in others. You have to trust a federation, but the federation won’t know that they are getting partial control of your coins, and they can’t refuse peg-outs (moving back to the Bitcoin blockchain).”
Blockchain infrastructure firm CommerceBlock is one of the companies actively developing Statechains as a viable scalability solution for Bitcoin. The firm is credited with introducing the counterparty federation or “Statechain entity” to improve the security of the system. In a conversation with Cointelegraph, CommerceBlock CEO Nicholas Gregory outlined how Statechains operate:
“At a high level, Statechains are simply a way to transfer your private key to another user. To facilitate this, you have to cooperate with a Statechain entity. However, at all times, the user has full control of their funds; at any anytime, they can withdraw their Bitcoin to their own custody. Therefore, the transfer is instant and private.”
While Statechains is a scalability solution on its own, some proponents agree that the system could integrate with the Lightning Network. With Statechains operating on the UTXO level, it is theoretically possible for another layer-two protocol such as the Lightning Network to be implemented on top of Statechains.
Such a hybrid integration could solve the limited node capacity issue of Lightning Network while ensuring the ability to facilitate multiple microtransactions via Statechains. Since the exact transaction amount is loaded into Statechain wallets, it’s impossible to split UTXOs making Statechain in its present iteration unsuitable for microtransactions.
According to Somsen, the Statechains can operate independently as well as function together with the Lightning Network: “Statechains complement the Lightning Network perfectly because opening and closing channels can happen off-chain. This removes a lot of the friction that exists in the current Lightning Network design.”
For Gregory, integrating Statechains with the Lightning Network is among the future developmental plans for CommerceBlock: “Statechains are instant and do not require liquidity lock up; however, you are sending the private key, so you can’t do small or specific denominations. This is where LN excels.”
With these developments and more, the quest for a workable Bitcoin scalability solution is still ongoing. While critics, like Munger, who have been consistently wrong about BTC, continue to drop soundbites, developers are hard at work to solve one of the longest-running operability issues concerning Bitcoin.
Decentralized finance may be the future, but education is still lacking
Cointelegraph By Piers Ridyard
Engaging in the traditional financial markets has become less appealing to consumers and institutional investors as of late. New opportunities are plentiful, with decentralized finance getting a lot of attention. However, that new movement is not without its risks and flaws, either.
For decades, consumers and institutional investors have explored the many different options presented to them in the financial world. This approach has worked out rather well, as one could even earn passive revenue on their savings account. Today, things look very different, as many banks charge negative interest rates and continue to exploit their customers.
Another problem compounding the lessening appeal of centralized finance is the ongoing impediments in the industry. More specifically, banks are forced to settle lawsuits regularly, mostly due to their wrongdoing. This ranges from opening accounts for clients without their knowledge, masking products under different names while providing the same service, money laundering and so forth.
Despite all of this, many people remain loyal to their banks or other financial institutions. Or that used to be the case, as decentralized finance has a lot of people interested today. Unlike traditional finance, DeFi has no exorbitant fees, unfair terms or financial exclusion. Instead, it is a movement that aims to bring financial services to everyone regardless of their current access to these products.
Making DeFi more accessible
While it may seem as if decentralized finance is destined to disrupt traditional finance, there is still a lot of work to be done. In its current state, DeFi primarily caters to users who have sufficient knowledge of the cryptocurrency market. Unfortunately, the crypto industry remains a niche market even today despite prices for Bitcoin (BTC) and Ether (ETH) moving up quickly in the past few months.
In fact, there are no viable guides on how to prepare yourself for these new financial opportunities. Every existing guide assumes the reader already knows the ins and outs of cryptocurrency, which is usually not the case.
Education is the first big step
Wading through the complex nature of DeFi requires clear and concise education. There is a rising need for educational platforms that address beginner levels of investing. Publications contributing educational content around DeFi noted significant growth throughout 2020 and early 2021. Educational initiatives have a goal to lower entry barriers to decentralized finance by educating people on cryptocurrency and the opportunities the broader industry provides. Ultimately, a good goal for DeFi would be for 100 million more people to have deposited at least $1 each into decentralized finance by 2025. It may seem like an easy goal, yet convincing millions of people to partake in this industry isn’t easy. Many people remain unconvinced by cryptocurrencies in general, and they will likely feel the same about DeFi.
We as an industry need to acknowledge that things need to improve to be taken more seriously by the masses. Making a global impact with complex structures and technologies and requiring the use of cryptocurrencies warrants clear and concise education.
A big catalyst for launching more educational initiatives now is the recent r/Wallstreetbets and GameStop saga. People worldwide suddenly found themselves in a position of power to make the financial market dance to their tunes. It depicts the need to make financial markets accessible to everyone, yet the current financial industry doesn’t always allow this to happen. This became apparent when the trading of GameStop stocks was halted by several providers to protect larger investors. It serves as an excellent example of how unfair the financial industry can be.
Creating a level playing field
At its core, the financial sector can operate without gatekeepers or centralized intermediaries. The DeFi industry has shown that this is possible, even though the industry is still in its early stages. Creating an environment where anyone can safely borrow, lend and trade directly is possible, but the educational aspect needs to come first.
As the public perception of traditional finances keeps taking blows to the chin, it is a matter of time until large groups begin exploring other horizons. Investing in cryptocurrencies has given many a taste of what financial freedom can entail. However, it is crucial to understand that this is only the first step along a long road toward achieving that freedom.
There is a lot more to DeFi than just owning Bitcoin, Ether or any other crypto assets. While that does grant one access to decentralized finance, the educational initiatives led by industry leaders will help explain how you can use these assets for more than speculative purposes. Through education, research and guidance, a new era of finance may just be around the corner.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Piers Ridyard is the CEO of Radix, the decentralized finance protocol. A Y Combinator Alumni, Piers joined Radix after exiting his previous company, which built DLT-based deal rooms for clearing syndicated insurance contracts.
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