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Author Topic: Teleportation of Coin between Cryptocurrencies  (Read 415 times)
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July 27, 2013, 02:49:18 AM

Many thanks to Satoshi Nakamoto for developing Bitcoin.  

Cryptocurrencies do not yet offer the ability to migrate or teleport value between between systems. Currencies can be exchanged for different denominations via centralized or local exchanges, but they reside locked in their own systems.   There is no mechanism to teleport an amount of value to another system via verified ledger transactions.  This post describes how to incorporate such a facility into a virtual currency system using Bitcoin as an example.  

Currency Teleportation

There are some virtual currencies that allow multiple denominations to be exchanged between users (such as Ripple, albeit not without detractors and the use of ledger-based debt.  The options presented here provide for ledger-based teleporting of value without the use of ledger-based debt mechanisms controlled by a central authority.

Why Teleport as Opposed to Using Conventional Currency Exchange Mechanisms?

There are a myriad of possibilities enabled by teleportation, including:

  • Avoiding exchange rate risk, spreads and fees.
  • Temporary teleportation to systems more suited to a specific purpose, such as microtransactions, without bloating the Bitcoin blockchain, faster confirmations, and enhanced anonymity
  • Migration of assets to a future system more suited to user needs while retaining assets in Bitcoin denominated funds
  • End of useful life mass migration to a new or more reliable system.

More reasons and detail of such a system the authors dub "Bitcoin 2" are discussed in

Options for Implementing Teleportation in Bitcoin or Bitcoin-like Currencies

Option 1 - One-way Teleportation via User Consensus and Alternate System Design

In Bitcoin, an account provable to have no private key to would be created and publicized.  For example, the hash of a specifically identified Bitcoin block could be formatted to a Bitcoin public key to identify the account.   It is effectively impossible to compute a working private key for such an account.  Users would cooperatively send Bitcoins to this dead, unusable account. These coins, through user consensus could be teleported to a new system via ledger book accounting. The new system would need the ability to provide Bitcoin denominated coins and provide some ecosystem for their use whereby the Bitcoins retained the same or possibly greater value.   Presumably, if the alternate system had the ability to exchange the migrated Bitcoins for legacy currencies such as the US Dollar, arbitrageurs would migrate Bitcoins until the BTC/USD exchange rate was nearly equal in the new system.  The new system could be Bitcoin denominated only, or have it's own co-existing currency whereby users could trade and establish value of the new currency.

Proof-of-ownership could be provided in the new system by revealing the private key of the account that transferred the coin to the dead account in Bitcoin.  This would be interpreted as valid proof-of-ownership of the transferred Bitcoin.  Alternately, the new system could utilize equivalent Bitcoin account keys and the coin could be teleported into the new system without revealing private keys.  A user could migrate assets to the new system and keep existing keys.

This option is attractive in that it takes no modification of Bitcoin at all to accomplish.  It does, however, take a new currency design and suitable teleportation distributed ledger book consensus to receive and verify ownership of the teleported Bitcoins.   This option would be attractive to users who simply wanted to migrate value to another system with attractive features.   It also benefits Bitcoin value in that users do not exchange Bitcoin for a new currency and decrease Bitcoin prices, but simply migrate it permanently to another system.  Bitcoin would function more as a reserve currency and retain or increase in value.

Option 2A - Two-way Teleportation via Miner Consensus

A Teleporting Bitcoin account is created that has both public and private keys revealed to all.  When an individual user desired to move Bitcoins to the alternate system, they would transfer account Bitcoin assets to the public Teleport account.   This account would act similarly to the Dead account described in Option 1.  Similar to Option 1, the new currency system would need to be set up to accept this coin via the same accounting and proof-of-ownership scheme previously described.   A user may well choose to eventually transfer assets back to Bitcoin.   Assuming the new currency provided such a facility, once such a transaction was verified in the new currency, that account would be zeroed and Bitcoin miners would record a transfer of assets back to a designated Bitcoin account.   The existing Bitcoin mechanism would ensure no double-spending occured in the Bitcoin ecosystem.

Any number of transactions could occur in the new currency system denominated in Bitcoin.   Bitcoin could change hands many times before eventually being returned to Bitcoin.  This facility might be attractive for implementing microtransactions in a newly devised system or to facilitate the launch of a new cryptocurrency.   This option would require no modification of Bitcoin clients because all transactions would appear valid on the Bitcoin side.  Of course the disadvantage is that with the Teleport account having a publicized private key, anyone could "steal" Bitcoins from the account at any time.  

The solution to the theft issue would be achieving a consensus of miners supporting teleportation that disallow theft from this particular well-publicized account by ignoring all but valid teleporting transactions.   Miners would need to modify their transaction-processing code to evaluate these special tranactions in Bitcoin as well as the matching transactions in the new currency.  

We propose a method whereby miners could cooperatively reach consensus after a majority of miners are informed of the proposal.   Successful miners of a new block in the blockchain could signal their support for this change by including a small deposit to the Teleport account.   These funds would likely be stolen when any miner processes a block that does not implement teleportation, but if enough miners signaled their support in newly mined blocks, it would be clear that a consensus had been achieved.   Eventually, new blocks may be rejected that included any theft transactions, forcing the other miners to either ignore these transactions or adopt the new standard.

Users could encourage such adoption by donating fees to miners if they adopt such a protocol or offering bounties for the first signal in a mined block and/or the first successful teleportation.

Option 2B - Two-way Teleportation via Miner Consortium

This option is similar to Option 2A, except that the Teleport private key is kept secret from the public among a set of like-minded and supportive miners.   We consider this to still be a distributed solution, but it is dependent on the success of the miners.   Users could transfer funds to the Teleport account at any time and these transactions would be be processed normally by non-consortium miners, but only when one of the consortium won the block would teleporting transactions to the new system occur.  Only one successful mining pool would be required and could be incentivized by users via fees.  If the miner or consortium were open to new members, the mining consensus could be achieved eventually this way as well.

Option 3 - Bitcoin Protocol Modification

The last option is to simply modify the Bitcoin Protocol.   Various methods could be used, but we do not believe this is a viable option because there would be too much resistance to it.   For one, we believe all clients would be forced to upgrade and this would be subject to significant inertia relative to Options 1 and 2.  

We do however suggest that new cryptocurrencies consider including a mechanism of two-way teleportation at the protocol level.  Alternately, a new system design could simply retain the Bitcoin denomination but provide a compelling reason for users to "fork" some assets to it.  Such a currency/system could be attractive to users for it's flexibility and facilitate it's use as a  reserve currency.   We believe a teleport-capable currency could have competitive advantage by providing compelling uses to the adopters of it.
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