Honoring Contracts with the Blockchain

Emergence of Smart Contracts

Contracts erect the framework of partnerships. Clearly established expectations and goals drive plans into completion. Trust is established by a legal obligation to perform the duties and responsibilities outlined in the contract. Decentralized networks are trustless and could create new forms of contracts. Oracles are programs that verify specific inputs are entered and validated before releasing pre agreed outputs. These outputs could be a payment for a service, a release of funds, or the outputs could create new contracts. Bitcoin can create distributed contracts via the blockchain. In a separate blog I wrote about a decentralized job board, LivelyGig, that could monetize individual tasks for outsourcing. This is a separate contract agreement for micro tasks that stays within LivelyGig’s network.

An oracle is only a script, a function awaiting desired inputs. The only limitations of a contract are the constraints outlined in the agreement. A smart contract uses the outline of the agreement to contain releasing an output (payment) until a certain prerequisite has been met. When prerequisites are met in a smart contract, finalizing payment is only delayed by human interaction. The owner of the private key withholding payment in a smart contract must have no interest in the contract for the agreement to be completely trustless. This is the opportunity for new services offering oracle smart contracts to emerge. A company, SmartContract, emerged late last year and are one of the first to offer smart contracts.

You are the district manager for a regional business branch. You have received word that servers are down across your district and a technician must be dispatched to repair the network immediately. Your servers are located off site and in a remote part of the district and it would be impractical to send an employee to troubleshoot. A solution could be formed by using micro task payment channels and oracle contracts provided by decentralized services. Combining the automatized payment of oracle created contracts, with a payment system for micro tasks and you have a new system for sending contractors to remote sites to fix equipment. The contract would await specific inputs before providing payment. A GPS location can provide an input that the contractor arrived on site. An additional input can be created once a specific metric is reached (operational performance being restored). After the job is complete the output (payment) can be sent to the person who completed the contract with no additional involvement from the district manager required.

This example is not too far fetched and is a practical application for a service that does not quite have a large market at this time. Oracles have an autonomized payout by verifying inputs from each party. The service that creates the oracle will need a private key to verify that the transaction inputs are The oracle in the previous scenario can be set to pay out once connection can be reestablished with a specific server.

Trustless Decentralized Connections

Mesh Networks and Monetizing Unused Bandwidth

“We are thinking, what is the future of communication.”

This is one of the key phrases that came from Google’s Fi announcement this week. Big names in western technology are now exploring a communication concept already in use in other parts of the world. Mesh Networks are a primary means of connecting communities to give internet access over a large distance in the developing world. Wireless Mesh Networks allow communication by using radio redistribution points to gain access to the internet. A user will connect between nodes to gain access to the internet. This method uses a series of routers to create a wireless network that can reach over long distances by bouncing data from one node to the other. Established mesh networks can provide fast connectivity with dedicated nodes to boost signal strength or perform routing. Mesh networks are managed in a centralized or decentralized fashion. Centralized servers can be created or the network can be self sustaining in a decentralized manner. In a more decentralized mesh network, as one node becomes unavailable, the network protocol searches for the next available node to transmit to. This is a very cost effective method for creating network infrastructure as there is no single point of failure and it is rather inexpensive to create.

The reliability of mesh networks is creating communities with internet access they could not afford or were not able to previously. Political or geographic constraints are now eliminated with the establishment of a wireless mesh network. Many developing nations do not have the resources to build large scale infrastructure projects. In South Africa, mesh networks are growing in size and are creating new advancements in the technology. A small level of technical knowledge can now give internet access to any sized community. This network lead to efficient sharing between users and created a new marketplace with a bit of ingenuity. This ingenuity is what sparked the creation of a bitcoin company in Santa Cruz with a unique solution for unused bandwidth.

BitMesh

BitMesh has recently created interest as one of the first companies to use bitcoin to sell unused bandwidth. Creating a market selling unused bandwidth reliability and security will take time, but the implications are what excites observers. While away from your home network, you could lease your unused bandwidth and receive bitcoin for acting as a node for someone purchasing your bandwidth. BitMesh has a development phase before a full public release. Security will be the most important factor when creating a decentralized network of any kind. Bitcoin is the vehicle for services like mesh networks that want to create microtransactions that could not be done with traditional forms of payment. Micropayments using bitcoin take advantage of no transfer fees and are leading to the creation of other product markets. An example is the emergence of IoT products.

Creating a safe market built from mesh networks will be challenging. Articles have been published covering the challenges with creating a monetized internet access market with bitcoin. The most common concerns were creating secure networks, protection from false nodes, and participation. Many people already have home networks and may not require additional connectivity. With the announcement of the Google Fi service this week, there is validation that there is a market for retroactive internet connectivity. Mesh networks are designed to be as dynamic as it's users wish to be. Mesh networks providing internet services will be drastically different than BitMesh's service that offers micropayments for unused bandwidth. Technology firms are only beginning to explore this new level of connectivity. These types of communities could become more common in more developed nations once the technology to create these dynamic networks becomes more readily available.

Properties of Bitcoin

2.5 Billion people are without a traditional banking system. The rise of bitcoin in the last few years have started conversations about what constitutes a valid currency and how new currencies create value. Bitcoin is a useful form of money that can be exchanged regardless of the origin of the participants involved in the transaction. The characteristics of money are defined by scarcity, divisibility, portability, durability, fungibility, and recognizability. Bitcoin meets the requirements to be considered a viable form of money. As no central authority owns the bitcoin protocol, a transaction can be recorded on the blockchain that ties ownership of a good to the owner of those bitcoin. This creates a new value creation tool for goods that previously were not able to be traded outside of a regional market.

The properties of bitcoin are defined by mathematics, rather than value based on material goods or issue by a central authority. The value created by these algorithms  molds a currency that only relies on trust and the level of adoption. The adoption of bitcoin is measured by the frequency of users, merchants, or other parties exchanging the currency and the level of acceptance. An increase in the frequency of bitcoins exchanged does affect the price.

Bitcoin’s price is created by supply and demand. As demand for bitcoin fluctuates, the price will also change. When demand for bitcoin decreases, so does the price. There will only ever be 21 million bitcoins created. This creates a predictable rate of how many bitcoins will enter the market and inflation can be predicted if demand does not match the level of inflation. If the level of demand does not match the changing level of inflation, the price will fluctuate. Bitcoin’s overall market share is relatively small, and because of this small pool of currency, the price can become volatile when significant amounts of money are exchanged.

If bitcoin as a currency does not reach a high level of adoption, it can still hold value. Romans used the silver denarius as a means of exchanging currency and the coins still hold value today even though the coins are no longer in circulation. As long as there are people using bitcoin they will hold value. The usefulness of bitcoin boils down to trusting the reliability of the decentralized ledger and using bitcoins that are validated and recorded on the blockchain. Transactions being recorded on the blockchain, verified, and posted are referred to as blocks. It takes approximately ten minutes to solve, or validate, a block. There is an analogy I enjoy using from a talk Andreas Antonopoulos gave at MIT that describes the adjusting difficulty of validating a bitcoin transaction.

The analogy begins by describing a room with 50 people, each with their own Sudoku puzzle. The amount of rows and columns have been calculated to have the Sudoku solved in approximately 10 minutes. A reward is posted for the first person to solve the puzzle at 25 bitcoin. As the timer begins people have started to walk towards the front of the room to have their puzzle solution validated as correct. After 9 minutes of continuous attempts someone shares the correct solution, and is paid 25 bitcoin. The next round begins and someone solves the puzzle in 8 minutes. The puzzle is made more difficult as rounds are being solved faster than ten minutes. More rows and columns are added to the puzzle to adjust the time taken to solve the puzzle on average. After a few more rounds, a large crowd enters the room and now 500 people are attempting to solve a puzzle in 10 minutes. More rows and columns are added to the puzzle to adjust for the number of new players. The players are randomly guessing and checking their answers until the correct answer is discovered. That random element is also used in the bitcoin protocol as cryptographic nonces assign values to each transaction so it can be verified.

These basics give an overview of the technical complexity of bitcoin. Financial inclusion will increase for unbanked individuals as more consumers begin to use bitcoin and adoption increases. The ability to increase financial inclusion without the risk of fraud, laundering, or other negative financial disruption is unique feature that bitcoin offers. Economic uses of bitcoin are just the tip of the iceberg for the usefulness of the technology. Read other posts on the sidebar or an expanded look at how blockchain technology is affecting other industries.

Social Media Content & Blockchain Technology

Distributing Social Media Content on Decentralized Networks

Upcoming Social Media Communities

The ability to control the content that you interact with on social media is decreasing. With each year, more tools are created to data mine your interactions to optimize advertising content.  Engagements are the driving element for advertising campaigns. Likes, Shares, Retweets, or Follows all increase engagement metrics in social media analytics. The disadvantage from using pure analytical data to target marketing campaigns is the level of attention the targeted consumer gives to each add. The level of acceptable promoted content a user will tolerate is low. New decentralized social media networks are increasing the interaction between consumer and content creator at a level accepted by the user. I previously wrote about Gem, a messaging app that pays content creation with Bitcoin. This discussion will move forward into social community creation with blockchain technology.

Synereo

Synereo is leading the blockchain technology march into the social media domain. Synereo’s business model, for their decentralized social network, is designed around an ‘Attention Economy” measured in Amp Coin. Synereo is designing a platform that is attempting to change how your social media networks are manage mutual content sharing. Content have a set AMP value. To share content amongst other users you can pay in AMP currency set by each user. Content is already shared in social media either organically, or promoted. The disruptive opportunity that Synereo creates is rooted in organic content that everyday users contribute to social media everyday. As you share content, your submission is generating “Attention” and you are paid in AMP coin.

Advertisers purchase AMPs on an open market. To distribute advertising campaigns you pay in AMPs. Synereo takes the advertising campaign and it’s content and distributes with what is advertised as ‘intelligent content delivery’.  Users receive AMPs for their attention to the AMPlified advertising campaign. Users can spend AMPs in Synereo or exchange them for other currencies in various bitcoin exchanges. Synereo wallets will integrate multi-signature key distribution which is a recommended level of security for handling bitcoin.

Not every user will want to migrate to Synereo from an established social media platform. Some may even find the new system of interaction cumbersome if there are too many steps to interact with other users. Non-users can be offered AMP coins, in this scenario, or other cryptocurrencies to migrate to new social media platforms. Smart contracts can be created to guarantee payout as well.

Blockchain transactions will continue to keep a record of spent coins during use of these social media networks. Say a parent or guardian wanted to monitor the amount of social media their adolescent is participating in. The users wallet can be found by the wallet address if it is known and track spent social media cryptocurrency. This is a unique parental control system that does not require an intermediary and is completely monitored by the guardian. There are unknown cause and effect scenarios that will determine the success of these new social media platforms.

Synereo In the News

• http://btcfeed.net/news/synereo-bringing-crypto-and-social-media-on-a-revolutionary-platform/
• http://cointelegraph.com/news/113858/synereo-splicious-partnership-unveils-prototype-in-user-demo
• http://cointelegraph.com/news/113724/synereo-attention-economy-and-distributed-cloud-to-deliver-next-generation-social-networks
• http://www.synereo.com/whitepapers/synereo.pdf#section.0.1
• https://www.youtube.com/watch?v=pswRWPDzq6I