EDIT: (Nov 11, 2013): The latest updated information on Bitfreak!'s proposal for a Mini-Blockchain is available at
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DRAFT FOR AN OPTIMAL DESIGN AND IMPLEMENTATION FOR A DECENTRALIZED/DISTRIBUTED ENCRYPTED DATA TRANSMISSION RIGHTS CRYPTOCURRENCY (EDC) AND DERIVED BUSINESS APPLICATIONS
Idea by: Zumbí ( BM-NAxjJDo6UzZUsjk5avFhEE8YC1pYgk3X )
Development and perfecting by: You who are reading this and all of us in the world who can execute this.
Q: WHY DID DREAD PIRATE ROBERTS BECOME A MULTIMILLIONAIRE?
A: He found a USE FOR BITCOIN (Buying drugs anonymously)
In the California Gold Rush, miners didn't get rich.
The ones who sold them mining equipment did.
How can we create a new type of “Digital Gold”, find a use for it and profit by making available the tools to mine it?
It is said that user data (“big data”) are the oil fields of the 21st century. No wonder they call it
“Data Mining”
But this is all done at the expense of user's privacy, and being subject to government spying.
It is the price to pay for “free” services (search engines, social networking, etc.)
Introduction
TED Talk: "Why privacy matters"
http://www.ted.com/talks/alessandro_acquisti_why_privacy_matters.html BITCOIN AND ITS LIMITATIONS
- - Lack of friendly user interface that is both convenient and safe
- - Not possible to liquidate fast enough or use in everyday needs goods and services (food, shelter, transport, clothing). High confirmation times (BTC = 10 mins)
- - Not widely available in local neighborhoods
- - Problems when settling trades with physical cash (robberies, logistics) or banks (taxes and Regulatory/AML issues)
- - Price uncertainty / volatility
- - Lack of liquidity (supply issues and due to lack of adoption)
- - Lack of marketing / advertisement / education - information / evangelization
THE IDEA
Idea is a hybrid of Bitmessage (
http://bitcoinmagazine.com/2855/bitmessage-a-model-for-a-new-web-2-0/) and Bitfreak.info 's proposal for a "Purely P2P Crypto-Currency with Finite Mini Blockchain" (
http://www.bitfreak.info/files/pp2p-ccmbc-rev1.pdf). Also inspired on Bitcoincard (
http://bitcoincard.org/product/?ID=3)
Bitmessage's network (although it has a proof of work), does not currently mint a coin whose rights can be transfered, everyone in such network is doing the relaying and transmission for free through the already established Internet.
Similar concepts of trading computing processing power and/or storage space are already taking place in the economy, for example the Deutsche Borse Cloud Exchange (
http://www.datacenterknowledge.com/archives/2013/07/05/deutsche-borse-to-launch-vendor-neutral-cloud-exchange/)
Taking into account Bitcoin's limitations I will try to address ways to mitigate most of the problems that are holding demand/adoption back.
FUNCTIONING
Miners/servers relay Clients/Buyers encrypted communications through a decentralized network and written on a universal blockchain called the "proofchain". When doing so, they will be minting a coin stored in a balance account that will be stored in a separate distributed database called the "account tree" (see Bitfreak's paper)
Relays for the system (Miners that will undertake the task of transmitting and encrypting data in order to create a proof of work, whether professional or casual individual users running the client) will be mainly chosen relatively to the distance factor for data transmission rates to be high, although a few relays that will transmit and encrypt data will be from far away in order to ensure decentralization or in the event of nearby major nodes shutdown.
EDC Coins will give them the right to do the same by using others in the network which will accept them, or sell that right to other users. There will be also standard transaction rates, also taking into account the cost of data transmission that needs to be processed for balances and maintaining the proofchain (presumably negligible). The implementation of SCIP by Eli-Ben Sasson (
http://www.youtube.com/watch?v=YRcPReUpkcU) can dramatically reduce transaction confirmation and verification time (excellent for mobile devices)
Mobile phone users, in order to prevent rapid battery power loss and handset overheating, could set their devices on "Mine on demand mode" so that they are only asked to relay a communication which is close to them enough and with low bandwidth requirements (like text messages). This will also help them reach self-sufficiency regarding payments of their own communication needs by serving others in the network (similar to people who have solar panels and sell surplus energy to the electricity grid)
The model of message propagation could be same as Bitmessage (
http://en.wikipedia.org/wiki/Bitmessage):
"Outgoing messages contain no explicit address of the recipient of the message. Therefore, every network participant tries to decrypt every message passing through the network even if the message was not originally intended for that network participant. Since only the actual recipient can successfully decrypt the messages intended for him, all network participants know that if they fail to decrypt the message then the message was not intended for them.
The original sender knows whether the recipient received the message or not (through acknowledgement system), but the sender cannot discover which network participant is the actual recipient since all the network participants will have this encrypted message stored on their computer irrespective of whether the message was intended for them or not"
We must set a standard on how much would a coin would enable you to transfer, maybe 1 megabyte and give it 9 decimal places to be able to reach the standard unit of computation (1 megabyte = 8,388,608 bits) so if you wanted to transfer 1 bit you would need to mine/purchase 0.000000119 coins.
The blockchain will be pruned as needed (adaptive algorithm) in order to keep it light -if possible, according to the storage specs that most economic mobile phones possess during that time- because pruning shouldn't take place on blocks that haven't been read by the receiver for one or two days. Facebook recently purchased a company specialized in mobile data compression ("Facebook heads to Israel with Onavo buy, gets a leg up on mobile data compression and analytics"
http://anype.com/SURF/http://po.st/8I7FHH)
Mycellium's Bitcoincard (
http://bitcoincard.org/product/?ID=3) is too focused on hardware (which is not a bad hardware if they really can do what they say). Also, John McAfee is involved in a similar project (
http://www.webpronews.com/future-tense-john-mcafees-new-company-aims-to-provide-new-type-of-internet-with-d-central-2013-09) but his idea is to place special routers which cost less than USD 100.
I think both ideas are not bad, but can be vulnerable to jamming and such frequencies/routers identified and made illegal to own/broadcast/use. Factories could be shut down or made illegal to import such devices.
It would be great to design an universal accessory that could turn a regular cellphone into a signal transmitter as well, and better if it could be manufactured in a 3D printer (ideal distribution).
It is best to use already established mobile Internet networks (3G/GSM/EDGE) and broadcast encrypted messages through them. But if existing networks fail, we will have to see if theres some small/smuggable micro-device that can also turn a cellphone into a transceiver as well.
We also need to develop methods to bypass the “Great Firewall of China” since it is one of the toughest communications filter in the world. We could develop something similar to using Tor Relays and/or encrypt embedded data within other unseemingly innocuous data (like Al-Qaeda did by changing some pixels between innocent pictures, using specific algorithms to decrypt messages)
The big advantage for high-end smartphones is that some of already them have the option to turn themselves into a WiFi Router and distribute their regular phone signal to other devices such as Laptops,etc)
ECONOMICS
When you create an open source cryptocurrency, you are basically doing an IPO of an asset which has some sort of value to users/miners.
In this case, holding a unit of such cryptocurrency gives you the right to transmit data packets through a very secure network.
Should emission be limited?
Resources used to create and sell an EDC are scarce and have opportunity costs (energy, computational power, bandwidth, hardware depreciation). Potential demand for EDC could be unlimited.
This is a scenario in which in order for supply to meet demand, the only way out is a price increase. This would be desirable for a store of value (because it would stay stable and or increase, avoiding depreciation) However, it could create a temporary bottleneck (if buyers set their devices not to pay more than X price) Maybe it could be not so good for a service in high demand in order to compete in price with other alternatives that do not offer the advantages of privacy.
Unlimited emission would eliminate the bottleneck problem, but the coins would lose its appeal as store of value, which is very necessary for a desirable currency to function as such.
I think a good analogy for such (digital) commodity would be food, which is also a commodity whose demand is potentially unlimited only restrained by economic/population growth, and supply is limited to land production capabilities (crop yields). Production is decentralized (many different farmers/farming operations around the world).
If the system and computing power is distributed enough, would it be impossible to scam the system by sending and receiving data from two computers owned by the same person?
Maybe if they will transmit combined data from other users as well that would be less likely.
A compromise between both alternatives (limited and unlimited emission) could be the following:
Limited edition of a huge amount of coins whose difficulty rises in a lineal way (instead of exponential) and for a long amount of time (50 years). This way everybody would get to own enough coins to use them productively (have complete conversations and data transmission in general), at a competitive price, while savers would hold a big amount of coins in order to save/transmit substantial amounts of money. Continual use of the coins for productive services will guarantee that its value will hold and increase in time.
What would be an advisable majority needed to change the code?
I think it would be advisable to change the majority ratio needed to change the source code, say 75%, in current democratic political systems this special majority is required (a very high percentage / two thirds of the full legislative body) in order to make the highest of "code changes" - a constitutional reform, and it makes a takeover much more costly. We should have emergency keys of in case something goes wrong (like Bitcoin developers and Satoshi).
Can the market be cornered?
A speculative attack by great balance holders by artificially requesting data to be transferred would last only for a short amount of time because of adaptive difficulty rates, if demand exceeds supply, difficulty rates would be dropped accordingly and miners would join and mint more coins, therefore dropping the price.
Bitcoin's market isn't perfectly competitive, it is very similar to gold mining. Only people with a lot of money can set up and run a successful gold mining operation. Right now, people need to have the means possible to purchase ASICs because its the only profitable way to do mining.
In this model, people will profit just for being at the right place in the right time, since the protocol will have adaptive difficulty, using a soft hashing method (scrypt) that doesn't require specialized computer hardware. I do not know how an adaptive difficulty rate will affect block creation time, since I understand that presumably in Bitcoin block times are fixed and related to coin emission, in theory currently 25 coins created every 10 minutes, yet the hardware development is so good that sometimes it can be in practice 7.5 minutes.
Adaptive mining difficulty rate should be good enough in order to adjust supply in order to compete with rates of traditional data carriers/ISPs/Telcos. Miners will produce EDC and sell at current market price versus Bitcoin or Fiat Currency or can hold on to them and sell futures to obtain profit.
The value of the currency will mainly depend on how much are people willing to communicate in a decentralized, encrypted manner.
The more goverments would want to control and restrict communications, the more value it will command.
Would people be able to accept an ever fluctuating rate for communicating?
For small data transmission such as instant messaging, text and low-res pictures that won't matter much because of the low amount of data involved. However consuming heavy content such as audio calls and videos might affect users/buyers. Users that think that will incur in frequent heavy data usage may purchase coins in advance or buy coins in futures markets in order to lock in rates.
Will the distance factor create different markets/coins for each area/zone?
Professional Wholesale Miners should keep into account current regular telecommunication market prices specially in the local area and maybe world averages to decide their equipment investment decisions.
Most probably, miners will ask more coins in order to relay data across larger distances, which is perfectly economically sound since the longer the distance, the higher the cost to distribute data. This will create regional sub-markets but it wont affect coin mechanics per se.
Miners will also be compelled to create or host popular content since that will increase their profitability due to increased transmission requests for that content. Today's examples in the economy are fusion or acquisition of tv networks/channels from telcos/cable companies.
TECH SPECS
- - Elliptical curve encryption
- - Hashing algorithm friendly for both potent servers and mobile phones (scrypt?)
- - Use SCIP by Eli-Ben Sasson (
http://www.youtube.com/watch?v=YRcPReUpkcU)
ROAD FOR IMPLEMENTATION
1) Development
Two Alternatives:
A) Develop original open-source software in a language which can be easily used in mobile phones (java?)
B) Use Bitmessage/Bitcoin open source code and use it/modify it in order to speed up production, port it to mobile phone friendly programming language. (BitcoinJ?)
Fork Bitcoin and mount it on top of the Bitcoin Blockchain.
Start mining as soon as possible, maybe using cloud services.
2) Debut
Testing/Upstart should be done in a city/jurisdiction where communications and freedom of press are being threatened, albeit that jurisdictions government doesnt have enough geopolitical power and/or technical finesse to crack down on this. Electricity/Communications/Internet supply must be stable, population with a high literacy, preferably a good amount of IT experts, and must have high Mobile penetration (upwards of 80%). General population distrust on the government and on its currency, high inflation and banning of foreign currency purchases. High population density.
Bigger-picture implications and Game-changing matters
There were several Media Businessmen in certain countries who had to forcibly sell their holdings in media companies which were either government critics or that the government wanted to acquire at a fire-sale price, in order to fuel their propaganda machine and silence opposition, in a mafia-like pressure fashion. Government Military bodies are created to censor media.
Repressive governments also ban for newspapers to advertise supermarket ads which contained prices since they enact government price controls by force. It is a double effect operation since it deprives independent media of incomes and population wont know true prices and the real rate of inflation.
Media conglomerates usually have a great deal of participation in telecommunications, cable tv, media content (politic shows in which they set their own agenda, whether if they are government supporters or critics), own ISPs, some others were vying to provide Triple-Play.
Some of the smaller players that are caught up in the middle of the fight for the mass media market between government and big players, opened Web-based TV channels but that wont suffice since the National Communications Agency could filter their content and efficiently ban their broadcasts (like China or Iran)
These Governments also have direct control on their countries TLDs and also control telecommunication companies via strawmen, or nationalize telecommunication companies while doing unfair competition to private companies, therefore decreasing the quality of mobile/internet communications.
With this business solution, they could become miners (in offshore locations) in order to produce encrypted data-packet transmission rights cryptocurrency that will give them a credit to use other decentralized devices in the country of their target audience. Best example is of independent, humble old-school government licensed frequency broadcasted radio shows that are critical of the government who have huge overheads, complex operating costs, union workers that need lots of sponsors in order to sustain everything and get heard.
When the network is widely adopted people will most likely listen to radio from their mobile device than from regular radio airwaves.
This will also ensure a greater independence of opinion, they wont depend on sponsors but on listeners that will have to buy the cryptocurrency that they will mine, in order to get heard and profit.
"Illegal" immigrants in developed countries who need access to mobile phones need to provide certain data in order to get mobile service, that could compromise their status in the country, in immigration-paranoid countries like the USA it can be an important privacy matter (NSA).
3) Marketing and Evangelization
Demand Side
- - Advertise in Bitcoin forums and specialized Bitcoin sites, concept could quickly catch like wildfire. Contact local Worldwide regional Bitcoin Foundations.
- - Talk to Canonical/Mozilla and see if they could pre-install the client in Ubuntu Touch / Firefox OS for Mobile.
- - Talk to Bitcoin exchanges in order to make EDCs quote in their platforms so as to be able to trade them.
Program APIs in order to make purchases/sales seamless.
- - Talk to major outlets/drugstores and sell them prepaid scratch-off cards denominated in local currency that would enable customers to top up their balance of EDCs via website with a code. Share profits.
Supply Side
- - Talk to prominent Bitcoin miners worldwide and ask them to install mining client, distribute it to mining pool participants.
- - Talk to regional, smaller ISPs and telecommunication companies, since bigger ones won't like the idea of losing their dominant position in the market. Smaller ISPs would be able to take more risk in order to get a slice of the pie.
AND
-Talk to cloud hosting services that are specialized in privacy
Both their datacenters/racks could be turned into mining pools and their existing users in pool participants. We could ask for 50% of produced coins in exchange for setting up the system and mainteinance, protocol upgrades, if possible via remote networks (no physical presence)
BUSINESS OPPORTUNITIES / MONETIZATION
Transaction processing
Develop custom proprietary software and customized secure hardware to process transactions for exchangers (like credit card companies)
Disrupt Facebook, Google+, Whatsapp and others
Why share all of your personal private data in a centralized database which is most likely infiltrated and supported by the CIA? Even if you set the correct privacy settings the data is still stored unencrypted in stranger's servers, and transmitting themselves through unsecured means of communication.
NSA Used Americans’ Cellphone Location Data In Tracking Trials
http://www.webpronews.com/nsa-used-americans-cellphone-location-data-in-tracking-trials-2013-10 After the encrypted data-transmission cryptocurrency network is established, we can elaborate on a data-storage cryptocurrency, to execute decentralized encrypted webhosting. People who offer space will be miners and will have the right to issue this currency.
We can then create a social-networking site hosted on distributed server space which will use only aliases and no further verification information, not even email. Those people could then share their personal aliases in the network and find their friends. They will have customized privacy filters in which they will choose what information they will share to whom. Your mom, your boss or your government wont be able to track you. Some info may leak from friends to which you have shared information with, however at least it wont be in the hands of a giant information sucking squid like the NSA.
This will increase the usage and demand of the encrypted data-transmission cryptocurrency network (in order to upload pictures, send messages, etc) and automatically regulate covert spam and advertising from "friends".
Another great idea is for users of such network to pay for content that others users produce (since such users will be paying to post content) a paywall (or mini-crowdfund) to see a blog post, or give them cryptocurrency for each "like" they get in order to reward a witty comment, cool picture, etc. People could just profit on saying cool things like any regular celeb on Twitter! (like Reddit Gold) We and/or the network would get a small commission too (like transaction costs in Bitcoin) from such payments.
WeChat (China) = 300 million users (China), 100 million (World)
Line (Japan) = 250 million users (80% outside of Japan)
In the last trimester (Apr-Jun 2013) Line generated USD 103 Million income by selling virtual items (games, stickers, etc. WeChat hasn't generated much income so far.
This kind of disruption is already going on with Namecoin, a cryptocurrency that enables its purchasers to register .bit domains, albeit not very popularized.
Updates
Each time people ask for updates developed by us (or we propose some kind of security updates) in order to make the code more resilient, we will launch for each release/update we can do a crowdfunding with BTC or with EDCs and once the profitability target is met, release it to everyone simultaneously.
Regarding security related updates, users (and ourselves), could raise money for bounties in order to run a decentralized security initiative, in order for people all over the world to be actively examining the code and be able to find security
Further monetization from the business can be derived from:
Specialized downloadable security tweaks for Android/Apple for all the new versions that handset makers release that can make your smartphone totally (or at least 99%) secure against any unwanted snooping. Since the code will be open source, same crowdfunding software "IPO" technique must apply.
This could be a very succulent source of earnings since it will be like an arms race between Intelligence Government Agencies and their easily pressured US Companies versus us and a worldwide army of hackers/coders which will unmask all their dirty ways of using consumer goods for spying purposes. This issue will be further intensified with the coming of the "Internet of Things", any kind of personal appliance that is connected to the internet and has many sensors that can track your every move, even without you knowing.
Personalized/customized setup of secure communication consulting fees for institutional/corporate customers. Likewise, installation/upgrades of miner's servers.
See if we can also extend this cryptocurrency model to file-storage and web-hosting, since the communication protocols for that to exist will be securely tamper-proof (data privacy)
MAIN MARKETS
- - CHINA
BIG! Lots of censoring and huge market. Huge shadow economy)
- - USA (NSA)
-BRAZIL
Another big shadow economy who is pissed off at NSA for spying on them
- - RUSSIA
Tricky because in my opinion Russians are the best hackers and internet fraudsters in the world.
Also pissed off at the NSA.
- - INDIA
Although not concerned about privacy, the country with the second biggest population in the World, have an empoverished population with a lack of infrastructure. Despite its problems, they have a huge percentage of talented IT engineers and a booming IT industry.
Looking forward to your feedback!
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