Bitcoin Forum

I've written a new article covering smart property, that is, physical items in the real world whose ownership is controlled by the Bitcoin block chain. You can find it here:

  https://en.bitcoin.it/wiki/Smart_Property (https://en.bitcoin.it/wiki/Smart_Property)

I give cars, phones and house locks as examples of things which can be traded or used as collateral in a cryptographically mediated way. Feedback welcome as always.

How does this address the Statute of fraud? You know, the one that says all conveyances of land or interests in land must be in writing?

That's the problem MERS and all the banks are having. They tried to use the law that govern negotiable instruments and paste it on to the law governing conveyances of real property.
Needless to say EPIC FAIL.

Wikipedia: The statute of frauds refers to the requirement that certain kinds of contracts be memorialized in a signed writing with sufficient content to evidence the contract.

In what universe a bitcoin contract doesn't fulfill those?

• Memorialized: Yes, forever in the blockchain.
• Signed writing: Yes, by the use of public/private key (way safer than a traditional signature on a piece of paper btw)
• Evidence the contract: Bitcoin contract... the whole construction is, per se, a contract

Not only is it full of potential, I'm certain it's the future.
Great complement to this https://bitcointalk.org/index.php?topic=39433.0 (https://bitcointalk.org/index.php?topic=39433.0)

Frozenlock , it might be safer , but electronic signatures are not the same as signed writing. None of the E-sign laws either state or national apply to real estate. The law would have to be changed to accommodate it. It's a good idea just difficult to to implement because of politics .

Also Wikipedia is not the law. There isn't a single court case that cites it as authority.

Also I'm talking about the statute of frauds as it relates to the transfer of real property not business contracts

At least here in Romania (so, I guess al of EU), they are. You need to get an key+token from a certified company, but after that, digital signing is the same as signing a paper. I don't personally know any contract signed this way, but, at least in theory, me and another party would be able to save a pdf with a contract, sign it both with our electronic signatures, and it would hold exactly as it would on paper. Most common usage here in Romania is to sign income/etc/etc declarations that need to be filed monthly/trimestrial/yearly by companies.

Quoting from http://digisign.ro/en/services/electronic_signature

Could you use this to make "smart" safe deposit boxes whose keys are transferred via the block chain, that know when they're opened, and support storage fees (that are paid to their storage provider to prevent the automatic transfer of ownership to them)?

One reason you'd want it to know if it's been opened is so that before remotely purchasing ownership of the box, a potential buyer can remotely query it to see if it's been opened since some trusted auditor last closed it.

For example, this could be used to create fully backed digital currencies without trusted issuers.  Well, technically at least.  Not sure of the legalities here.

Also thinking loan collateral could be secured this way with property that won't be used for the duration of the loan.  The box would have to prevent entry to the owner until the loan is paid off, or if it is defaulted on it would transfer ownership to the lender.

Yes, I think that's possible. An interesting product for somebody to explore in future. Safes controlled electronically already exist, I suppose you could adapt them with new software. It'd need very careful security audits of course.

I predict that Mike Hearn is going to be filthy stinking rich some time in the future...

I can't believe this was thought of years ago.  I wonder how many more years until this becomes a mainstream reality.

Interesting idea.

Though a bit scary too. I wouldn't want my house lock dynamically reprogramming itself because someone else claimed to be 'owner'.

holy fucking shit to this, which i am just seeing and necroing.

more attention please?

After my London stay, hotel room locks come to mind also ;)

EDIT: I'm trying to come up with more "immediate" (not that Mikes examples are unrealistic, they are just a bit far away for now) examples, something we can do now, rather than after having the automobile industry embrace bitcoin, which might take another year or 1.5 ;->.

Maybe access to gaming platforms is feasable, or access to servers? Could we make a pam module?

Yes, a PAM module or OpenSSH extension is possible. Access to remote computers is mentioned on the smart property wiki page as a possible use case. It ties together with the idea of agents quite nicely.

Also seen in London: unattended public bike rentals, similar to the car situation.  Like your hotel lock example, once internet connectivity becomes cheap and widespread enough to embed anywhere, you could potentially "smartify" all kinds of miniobjects like parking spaces or stadium seats whereby they'd restrict or allow occupancy through blockchain address ownership, instead of using meters or physical tickets.

Also, DRM on music/movies/content/ppv (physical disc, or digital download) could potentially be implemented as a smart property, this seems more likely in the near term than the car scenario.

wouldn't namecoin be better suited for that purpose?

Don't tell to Hollywood  ;D

This would work well for anything that cannot be picked up and hidden. Land, intellectual property(patents, copyrights, trademarks etc) and other such items would be transferable without the need for a central authority.

bingo,this is big
Mike do patents, copyrights, trademarks for "Smart property protocol" only for Bitcoin blockchain,this should be under the control of the core team

A guy named Nick Szabo has been writing about similar ideas since the mid-to-late 1990s.

Without intending to disparage the intellectual effort involved in the creation/maintenance of the idea, I hate it for the same reasons and in the same way I hate DRM and "copy protection". It's the same thing, but applied to physical items, and I believe it will fail in similar ways.

No, it's not the same thing: you can't just copy a car... wait!

So if you give me a loan to buy an Iphone are you going to write into the contract that I'm not allowed to jailbreak it?  And isn't that the same as not paying a third party to implement the hair-brained DRM in the first place and just ask nicely to abide by the terms of the contract?

Yes, it's a form of digital rights management and the assumption is the implementations will be strong enough that it's easier to just pay back the loan than break the crypto-locks. Eg, to break most vehicle immobilizer systems requires replacing the engine (except for BMW cars where they screwed up). Immobilizers are often not particularly competent DRM systems - some manufacturers don't even use real cryptography at all - but they're good enough to stop most car thieves.

If you want to take things to an extreme, Bitcoin itself is just a form of DRM - the rights it manages are claims on quantities of value, and it manages those claims digitally to ensure you don't "copy" the value (double spend).

I don't have any personal problems with DRM - the idea that it's inherently evil is dogma and we should rise above it to examine the arguments on their merits. Locks of any form, whether digital or not, arise when the legal system cannot satisfactorily provide enough security because it's too hard to build and process a case against perpetrators of a crime. Without door locks burglaries would be a lot more common and most of them would go unpunished. Likewise, the legal system has shown itself incapable of handling copyright infringement even when the evidence is watertight, so content creators naturally resort to technical measures.

This leads to the question of whether the crypto-locks on smart property would be trustable (by the lender). Computer security systems of all kinds have a patchy track record but especially DRM.

I think it's absolutely possible to build systems that are good enough for this. The success of immobilizers show that even very weak digital security was a huge upgrade over analogue/physical locks and slashed car thefts. Systems built by experts tend to be even stronger.

These things come in generations. I'd expect the first few generations of smart property systems to have flaws that lead to them breaking. Over time defenders learn from experience and get better. We can see this with the development of pay-TV encryption, games console security, video disc security and so on. The difficulty of breaking later generations was orders of magnitude higher than for earlier generations. Eventually it reaches a point where the attackers go away. I've seen it happen multiple times.


Re: patents. You can't patent something that has already been disclosed (at least not in theory).

One reason I've been doing all this research is to try and ensure nobody actually does patent these features or protocols. Arguably Bitcoin has bigger problems to fix right now, but long-term public research is important to avoid trolls tying up the use of ideas that are too important to own.

this company can use smart property protocol to unlock the scooters and not only for iphone but on the other devices as well
Video http://gigaom.com/cleantech/the-zipcar-of-electric-scooters-launches-to-the-public/ (http://gigaom.com/cleantech/the-zipcar-of-electric-scooters-launches-to-the-public/)

Many years ago I used to suggest that if we aren't watchful some day no one would be able to even use a simple tool like a screwdriver unless their DNA was derived from Bill Gates' DNA, as the ratchet in the handle would simply refuse to work.

This seems to be heading us there a lot faster than if we had to wait for DNA identification systems that can fit into screwdrivers...

-MarkM-

This is good, I've read your article before I saw it here. Good job. As for people complaining that we don't use it yet... we just need to start working on something haha

That's true, good idea. You could just store the ticket in your phone and tap it to some reader on the turnstile to get in.

Perhaps a thought for a future Bitcoin conference :-)

Exact-a-mundo ;p

Smart property simply proves that you "own" a digital token, nothing more.

So, as such, I think it is less like DRM that protects Apple's iTunes.  Nothing is encrypted, you are simply proving ownership.

The system that connects "proven ownership of digital token" to something useful is left open.  It could be as simple as "if you hold this token, I will pay you bond interest" in the distributed bond case.

Shameless self-plug: I'm working on implementation, it is called "colored bitcoin": https://bitcointalk.org/index.php?topic=106373.0

grand idea! *remembers the fiddling with printed lists in London*

Potential for smart property
https://www.youtube.com/watch?v=D1L3o88GKew (https://www.youtube.com/watch?v=D1L3o88GKew)

Could "smart property" be used to trade shares of assets and pay dividends? What'd be necessary to make that happen?

Yes, it's possible. A share is somewhat like a bond that doesn't pay any interest, instead yielding occasional dividends (or none), and allowing you to cast votes.

The key used in the control output would receive the dividend, and you could sign votes with it then submit them to the issuer of the share.

It's only a minor variation on the scheme for bonds described elsewhere in this forum.

Colored coins are very similar to smart property (or maybe it's the same thing, depending on how you look at it), and currently there are people who work specifically on "trade shares of assets and pay dividends". See here: https://bitcointalk.org/index.php?topic=106373.0


I think we'll get a working proof-of-concept in a couple of weeks.

Also Jeff Garzik is working on pybond: https://github.com/jgarzik/pybond

Arghh someone beat me to the punch re
darn it, beaten to the punch - digital content was the first thing I thought off.

The way I saw it, someone would download an album from iTunes which is signed over to the customer who then OWNS that item and it has value (I dont think people consider there mp3 collection as valuable at the moment, napster/p2p has changed that - not that digital music ever had value - but now we have the blockchain....

I think smart property could be made to do wonderful wonderful things for society (or not in the wrong hands), in a lot of areas!

Subbed to this one - cant wait to see the proof of concept and where this thing can go :)

Mike, I'm sure you mean this thread by you: Distributed bond markets and pay-to-policy outputs (https://bitcointalk.org/index.php?topic=92421.0), right?


Oh, "colored coins", I saw that thread title before but dismissed it immediately as something to do with coin taint.

Thanks for the hints guys, this is all so exciting!

Well, that's the happy version.

Unfortunately, that's pretty much the opposite of what we've seen of copy protection/DRM over the past 30 years - the "smart property" will likely be used to make sure that if I buy a new computer or a new car stereo, I have to re-license all of my music again, or pay an extra fee so I can enjoy my content on a new device . . . or that if I sell my device, all of my content will disappear, and the new owner will need to re-license it. And if the device gets confused about the facts and circumstances, it may deny me what I've paid for, and since I'm "arguing" about my "rights" with a computer who thinks it knows all of the important facts already . . .

I am not saying that DRM is inherently evil - but that it has traditionally been designed not to protect the rights of people we'd think of as owners/consumers, but of the rights of publishers/lenders/sellers. That probably sounds good if you identify with those classes of people - but I spend most of my time using software written by other people, and machines designed by other people, and I spend more time than I'd like trying to work around practical problems with copy protection/DRM that prevent me from doing the things that I've (approximately) already paid for.

(e.g., I have paid for probably 8 licenses for Adobe Acrobat, and I have five people in my office who need to use it from time to time - but I am reluctant to re-image some computers, because I am not confident that I will be able to reinstall Acrobat, even though I've paid for it.)

"Intellectual poverty" has no moral legitimacy. Information is not scarce.
I don't like that use case for smart property and you can't stop p2p sharing anyway.

I had a thought about smart property in a business setting.  Suppose I issue bonds for my business to buy new equipment.  To ensure my investors that I don't run away with the cash there would need to be a way to mark the the bitcons I receive so that I can only purchase equipment with them from certain manufactures that will sell me products that have been tied to the bonds somehow.  Furthermore, there would need to be an added incentive for me to ship back the bricked equipment if I break my contract (say I get back triple the shipping cost).

Distributed, cryptographically signed proof of ownership, digital commodity systems FTW. The whole paradigm has plenty of potentially useful applications, whether used partly or in full. I suspect the proof of work for creation could end up used also in another co-opting of the Bitcoin "design pattern".

Edit: of course, SatoshiDice has already subverted the intended use of the Bitcoin blockchain, so proof of work has already been re-used, but not totally re-implemented (yet, that I know of!)

I guess the simplest way yo do it is by using those funds to buy "colored vouchers" (https://bitcointalk.org/index.php?topic=138000) from your providers: that trade could be audited by anyone.

Smart property isn't really relevant to DRM. Content producers would not be interested in this.

Mike, what do you think about atpcas's "auditable funding" use case and my proposal to implement it using killerstorms's "smart vouchers"?

If you want to give people money "with strings attached" then I think the better direction to go is CP-ABE, see my posts on distributed investment funds. Smart property isn't really relevant to that use case.

I think it should be stated what the whole point of this "auditable funding" song and dance is.   We want to have a stock/bond market where all parties can keep their anonymity.  Anything less will lead to a shutdown by government forces and if you think otherwise I believe you are being naive.  In a crypto anarchist system where there is no government to enforce contracts alternatives must be sought.  Smart property in the use case I described is one such way.

The whole point is that company will get smart property instead of money. This smart property will enforce certain smart contract which would discourage misuse.

Ah, yes, if the companies needs can be met only with smart property, then sure. That sounds unlikely though. Most companies biggest cost is wages, not assets.

A bond market with completely anonymous participants has to rely solely on reputations (as it doesn't really make sense to buy a passport/fidelity bond/etc to borrow money). I'm not sure that's tractable in the real world for the same sorts of reasons that the web of trust never really took off: barrier to entry is too high.

People value their physical identity as an asset because everyone is given one for free at birth by their parents and the state, and because it can be used to easily put your own personal freedom and all assets on the line as collateral in a deal.

The vouchers/colored coins can be used for smart property and/or wages.  In the case of wages an employee gets vouchers that he can use to purchase goods at stores.  The stores can then swap the vouchers for bitcoins.   However if the bond issuer breaks his contract the vouchers he pays out will no longer be exchangeable for bitcoins.  Its a slightly different scenario from purchasing smart property but the underlying goal of keeping the bond issuer honest is the same.  With the voucher system described the barrier to entry for the web of trust would be lowered, you would have to trust people, but there would be that safeguard of the vouchers and smart property.  

Many companies listed on litecoinglobal.com sold shares/bonds to buy equipment. E.g. ESECURITY SA and OPCU are hosting companies which need servers. ART is going to be a ceramic art studio which requires expensive equipment. And so on...

Maybe it's not representative sample, but it's still an interesting case.

Concept still works its way around my brain every now and again. ASICs probably would've been a great product to really prove concept on. Might still be, though the markup on them is rapidly depreciating to where they probably wouldn't offer as much benefit (OTOH, it could be a valuable feature once the mining market evens out and you want to distinguish your product from competitors'). ASIC manufacturers are pretty much the only large "Bitcoin manufacturers" -- has anyone suggested an implementation of the concept to them? What better collateral can exist than a money printer? This isn't the only use. Today, was talking to someone about having escrow released at time of confirmed shipment instead of after arrival and testing, and it hit me - that it was possible to do that with smart property. Sites could report hash stats on the signatures of the specific ASICs being sold (which'd be signed as "proof of hashes" [proof of funds]), which would remove a significant amount of trust required to release escrow at time of shipment, rather than after testing (they're often hosted far away from where they end up shipped, and international shipping occasionally results in customs delays).

-Not that I'd recommend releasing before actual arrival of the order and inspection, but it would remove *some* of the trust and make that kind of transaction more reasonable.

Oh, this reminds me, Mike, that you told me in Amsterdam that you hadn't seen the freimarkets proposal for "a hard-fork implementation of colored coins", because, yes, there's many posts in this subforum.
Here it is:

https://bitcointalk.org/index.php?topic=280292.0

This could allow very light clients to operate with smart property, specially if the chain also hashes an UTXO index like in: https://bitcointalk.org/index.php?topic=204283.0 (another hard-fork, although there's the merged mined chain possibility too, but it would be less secure). There's also unique "tokens" that are ideal for some cases like the smart car.

We would love to have review and input from more bitcoin developers.
Specially those like you, that have also thought about smart property or off-chain transactions.