Michael Goldstein

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Bitcoin Beyond Money
Michael Goldstein
[email protected]
A Theory of Property
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Scarcity
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Appropriation
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The prerequisite for property norms
Scarcity = conflict
Homesteading
Voluntary transfer of title
Technology for delineating
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“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
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Scarcity
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There is a finite set of bitcoins
Appropriation
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Homesteading → mining
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Voluntary transfer of title → Bitcoin transaction
Technology for delineating
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Public-key cryptography
The Problem of Securing Titles
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Historically done through written records
These can be forged or destroyed
Collecting informal records is costly
Online database?
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Centralized
Trust issues
Just as vulnerable, now to any hacker with a
computer and access to the internet
Distributed Solution
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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.”
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“Secure Property Titles with Owner Authority” (1998)
Intersubjectively and Digitally
Ascertainable Block Chain
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The block chain is the ultimate technology for
securing titles of scarce digital goods (and
more?)
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Unforgeable
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Verifiable
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Decentralized
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Resilient
Contracts
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“A contract is a relation between two or more
parties which includes legally enforceable
obligations between them.”
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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.”
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If you do X, then title of Y will transfer to you.
Smart Contracts
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A large cost of doing business is that which concerns trust and security
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Once again, historically we have paper, writing, and humans
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Let's digitize what we can.
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“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 paperbased ancestors”
“Smart contracts reduce mental and computational transaction costs.”
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“Formalizing and Securing Relationships on Public Networks,” Nick Szabo
Bitcoin Smart Contracts
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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
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M-of-n multisig transaction
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A third party can be chosen by both parties
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Transaction made requiring 2-of-3 signatures
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Establish third party arbitration
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Best part? Nearly trustless
External State
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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
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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
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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
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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
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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
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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
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