It's interesting, but I'd really like to see the paper expand more on the node/identity.
What's stopping me from writing software that floods the network with hundreds of thousands of identities, all under my control?
this seems to be the main question people ask.
It's not like Bitcoin. It's not an open house party, not everyone gets to be a node. Instead, the node identities are defined in some way.
Let me explain a bit... as I've spoken enough about confidence chains to warrant a more in depth explaination.
The idea came to me after I was following the work of the Color Coins project. Color Coins, as you probably know attempts to map 'colors' onto the existing block chain. The point is that these colors are EXCHANGEABLE for some other asset. They are VOUCHERS. Color Coins also claims to be ZERO TRUST, because it relies on the block chain and doesnt have some central authority controlling the ledger... BUT the coins themselves rely on redemption! Thus you haven't really achieved ZERO TRUST, you've only achieved some kind of hybrid chimera of zero trust which exploits the existing hashing banks whose incentive is the generation of BTC. The whole idea is doomed to fail. Secondly the group is claiming to offer similar features to Confidence Chains, but falls short in a multitude of ways. The underlying concept of Color Coins seems to be in a constant state of revision, which shows that they don't have very clear thinking. Confidence Chains has not changed since it's initial publication some time ago. There have also been offshoot projects of Color Coins that are high on the fraud scale that I simply don't have the time or the incentive to address.
To have a voucher system, you only need a credible ledger of accounts.
ex.
30 MeanieBucks from Account A1 to Account B1
40 MeanieBucks from Account C1 to Account B1
10 MeanieBucks from Account B1 to Account D2
balance is 60 MeanieBucks on Account B1
as long as I have cryptographic evidence of this ledger and the authority that issued the currency has notarized it, then they MUST redeem my balance if I choose, or be convicted of fraud. If someone presents cryptographic evidence of ownership, and the issuer fails to honor that evidence, then the value of their vouchers will plummet(not good).
but there's a problem, 1) what if someone shuts down the server? 2) what if different account ledgers don't match(double spend)?
these are the two problems that Confidence Chains solves(also Bitcoin solves these problems but in a different way using Proof Of Work). The problem of a centralized server, such as that found in Open Transactions creates many issues for currency stability and credibility, for one the server can prohibit transactions, they can privilege the ORDER of transactions, and finally it is prone to attacks by various groups who might see the currency as a threat(this has been a significant problem for digital currencies). Confidence Chains solves this problem by DISTRIBUTING the server to many nodes. Thus you must shut down ALL the nodes to disable the server, it is RESILIENT. Secondly it also offers OBJECTIVITY, no particular node can privilege the order of transactions in any specific way- there must be consensus and this gives you the ability to construct near perfect markets. This is impossible to achieve with Bitcoin/PoW systems. These near-perfect markets can be used to issue credit, futures, options and other things I will describe later. It can replace theoretically ALL our financial technology.
You can build a DISTRIBUTED EXCHANGE with Confidence Chains. You can broker Gold, BTC, USD, Euros, Turkish Lira, Peanuts, whatever you like. Naturally it doesn't look as big as other projects, because it is TRUE PEER TO PEER, and thus there is no clear profit model behind it. We dont have any VC backing, but we have a handful of enthusiasts involved(even a lawyer). None of us are paid off, none of us are working for some major corporation.
-bm
