Currency, Blockchain and Social Extensibility (Ii)

Original title: Echo | Nick Szabo: currency, blockchain and social extensibility (part 2)

Source: Ethereum enthusiast

The social extensibility of network security technology

Long ago, we used clay, then paper, and now most business transactions are carried out through programs and protocols that run on computers and data networks. While this progress has greatly improved dealmaking and the flow of information, it has led to a decline in human defences against wrongdoing.

With the development of the network, more people who are not familiar with each other's behavior habits and constraints join in. Security systems based on root-trust access control work only in small offices, such as Bell LABS, where workers know each other well and where revenues and expenditures are controlled through paper processes rather than electronic programs on office computers. However, as organizations grow larger, organizational boundaries become more complex, and more valuable and centralized resources, such as money, are delegated to computers, this security system becomes less efficient and less secure.

The more emails you receive from strangers, the more likely you are to receive phishing attacks or malware. Traditional computer security systems do not have good social expansibility. As I describe in Dawn of Trustworthy Computing [7] :

When we use a smartphone or laptop on a cellular network or over the Internet, the other end of our interaction is usually running on a separate computer, such as a web server.   In fact, architecturally, all these machines are designed to be controlled by one person or a group of people who know and trust each other. From the perspective of a remote network or application user, these architectures are based on complete trust in an unknown "root" administrator. This administrator can control everything that happens on the server:

They can read, change, delete, or block any data on that computer at will. Even if the data sent over the network is encrypted, it will eventually be decrypted and mastered by a controlled computer. Using a network service (in which we are actually vulnerable) means that we trust the computer (or someone who controls it, possibly an internal employee or hacker) to faithfully execute any of our orders and protect our payments. If someone on the other end tries to filter or tamper with your Internet instructions, there is no good security to stop them, relying instead on unreliable and expensive artificial systems that often do not go beyond the borders of the country.

Many servers do not have sufficient attack value for insiders or outsiders. But more and more servers are being attacked frequently because they contain valuable resources. Centralized security system based on root trust is difficult to be extended. As computer-controlled resources become more valuable and concentrated, traditional security mechanisms based on root trust become more and more like the real world "go to the cops." Fortunately, with blockchain technology, we can do much better in most important computing scenarios.

Blockchain and cryptographic currencies

Scalable markets and prices require scalable currencies. Extensible money requires extensible security so that more and more different people can use it without losing its value -- it can't be forged, it can't be inflated, it can't be stolen.

Bitcoin was created in 2009 by someone or a group of people named Satoshi Nakamoto. Nakamoto's breakthrough in currency was to provide social extensibility by minimising trust: reducing counterparty risk and third-party risk. Nakamoto replaces the traditional security system of low computational cost but high institutional cost with the security system of high computational cost but automation, which greatly increases social scalability. A group of intermediaries requiring only partial trust replaces a single intermediary requiring full trust.

- Financial control on "computing steroids" : The blockchain is like an army of robots checking each other's work. -

When we can secure the most important functions of financial networks through computer science rather than traditional accountants, regulators, investigators, police officers and lawyers, we will move towards an automated, global and more secure system rather than a controlled, localized and inconsistent security system. If we implement cryptographic money on the public chain in the right way, we can replace the bureaucracy of traditional banking with an army of computers.

"By using computers to maintain the blockchain, we can put the most critical parts of the interconnection protocol on a more reliable and secure basis, making possible the trust interactions that we'd previously been afraid to try on a global network. " [8]

For blockchain technology, and bitcoin in particular, the most valuable features include:

Can operate independently of existing institutions

It can operate across national borders without barriers

Blockchain has these characteristics because it can maintain a high level of security and reliability without human intervention. Without high security, blockchain is just a distributed database technology with very low resource utilization and still relies on local bureaucracy to keep it running.

Computers have become orders of magnitude more efficient since the mid-20th century, but the human brain hasn't changed much. The new computing power has created many possibilities for pushing the limits of the human mind, and as the human mind has reached its limits, so has the system based on the human mind. As a result, humans have no remaining mind to upgrade our existing institutions.

But if we use computers to function directly instead of humans, there's still a lot of room for improvement in social scalability. (Important: This conclusion depends on the slope of the diagonal line in the figure above, not the absolute position of the human ability line. The positions of the ability lines shown above are arbitrary and depend solely on our estimate of human ability.

A new centralised financial entity, a third party that needs to be trusted, is likely to become the next Mt. Gox if it does not have the equivalent of an "artificial blockchain" as traditional financial institutions do. Without bureaucracy, it cannot be a credible financial intermediary.

The cost of computers and networks is low. The cost of additional resources required to expand computing capacity is also low. We need more accountants, lawyers, regulators and police, as well as the attendant bureaucracy, risks and pressures, if we are to extend the reach of our traditional institutions in a safe and secure manner. Lawyers are expensive and regulation more expensive. And computer science is far better at securing money than accountants, police and lawyers.

In computer science, there is a fundamental trade-off between security and performance. Bitcoin's automated reliability stems from the high cost of running and using its resources. Until now, there has been no way to make the blockchain significantly more computationally scalable (such as transaction throughput) without compromising bitcoin security.

Perhaps one of the inevitable trade-offs for Bitcoin is that there is probably no way to have it both ways (maintaining reliability while dramatically improving performance). Compared with existing financial information technologies, Nakamoto makes some important trade-offs to improve security at the expense of performance. The seemingly wasteful mining process is the most obvious of these trade-offs, but it is not the only one.

Another tradeoff is the high redundancy of messaging. To achieve mathematically provable reliability, messages need to be broadcast across all nodes. Bitcoin can't do this, but even getting there requires extreme redundancy. As a result, a 1MB block consumes far more resources than a 1MB web page, because the former requires higher redundancy in transmission, processing, and storage to achieve bitcoin's automatic reliability.

These necessary trade-offs sacrifice performance to achieve the security necessary to support independent operations, globalization, and automated reliability. This means that the bitcoin blockchain cannot reach Visa's level of transaction processing per second while maintaining the automated reliability that is its unique advantage over traditional financial systems.

Accordingly, we only need a peripheral payment network (such as Lightning [9]) with low requirements for trust minimization to undertake a large number of small bitcoin transactions, while the bitcoin blockchain only needs to settle a batch of peripheral network transactions on a regular basis.

While bitcoin supports lower transaction throughput than Either Visa or PayPal, it has more automated security for important transactions. Anyone with Internet access and a smartphone can pay a transaction fee of $0.20 to $2 -- far less than current exchange rate fees -- and then use the bitcoin service anywhere in the world. Small, low-cost transactions can be processed on Bitcoin's peripheral network.

You can use bitcoin for daily consumption just as you would with legal tender. For example, credit and debit cards denominated in Bitcoin have the same second-order transaction and refund request functions as legal tender credit or debit cards. There are other clever ways to achieve peripheral bitcoin micropayments, namely by putting the micropayments down the chain and clearing them in bulk only on the bitcoin blockchain on a regular basis. As bitcoin usage increases, the number of bitcoin blocks will evolve into a large clearing layer, while small bitcoin payments will be processed by peripheral networks.

When I designed Bitgold, I realized that consensus could not be extended to high-throughput scenarios without ensuring security, so I designed it into a two-tier architecture :(1) Bitgold itself, as the clearing layer; (2) Chaumian digital cash, as a retail-level peripheral payment network with high throughput and privacy (realized through Chaumian blind signature), but this peripheral network, like VISA, is a third party that needs trust, so it needs "artificial blockchain" composed of accountants and other roles to guarantee reliability.

This peripheral payment network involves only small transactions, so it takes very little manpower to avoid the same fate as Mt. Gox.

-- Ralph Merkle, pioneer of public key cryptography and inventor of the hierarchical hash tree

By design, money must be socially scalable on the basis of security. For example, the currency must be hard to counterfeit by any user or middleman (to avoid dilating the supply curve, leading to excessive or unexpected inflation). Gold has value anywhere in the world and is immune to hyperinflation because its value does not depend on any central authority. Bitcoin also performs well in these respects and works on the Web, allowing people in Albania to pay bitcoin to people in Zimbabwe without having to trust third parties and/or pay sky-high fees.

There are various definitions of blockchain, but almost all of them are for marketing hype. I suggest giving blockchain a clear definition of what it means to the layman. Blockchains should have both blocks and chains. A chain is a Merkeltree or other cryptographic structure that has a complete function that cannot be forged. In addition, in order to objectively tolerate the worst case scenario and malicious actors, transactions and other data protected by the blockchain should be copied in a reasonable way (typically, the system will still work even if a third to a half of the servers are doing the wrong thing).

-- Bitcoin's socially extensible security is based on computer science, not police and lawyers, so it supports cross-border payments -- for example, customers in Africa can pay seamlessly to suppliers in China. This is difficult for a private chain because it requires authentication, digital certificates, and public key Infrastructure services (PKI) that can be shared between different jurisdictions. -

Because of this, and, hopefully, the possibility of software update requirements that render historical blocks invalid (a dangerous condition called hard fork), the blockchain also requires a layer of human governance (though this layer is also at risk of political battles). The most successful blockchains (bitcoin) maintain their immutability partly because of decentralized decision-making among technologists and partly because of the principle of untamability. Under this principle, only a few major bug fixes and design improvements that don't have any other viable options can be made using hard forks.

Under the concept of governance, accounting or law level decision (for example, change the account balance or withdraw transaction) is no excuse for performing hard bifurcate, they should be by the system (or upper) system outside the traditional governance mechanism to achieve (for example, by COINS compulsively ban users to send a New Deal, which would lead to the revocation of the old trade, or confiscate the particular user key, so as to seize the key control tokens).

The so-called post-forgery and immutability refers to the fact that once data is submitted to the blockchain, it cannot be tampered with unknowingly. Contrary to some of the hype, there is no way to guarantee that the source before the data is linked is real, or that the data itself is fake. This requires an additional approach, often involving costly traditional systems.

Blockchain cannot guarantee the authenticity of data; It simply preserves the truth and lies in a way that cannot be tampered with, allowing later generations to objectively analyze the information and thus become more confident in uncovering the lies. The everyday computer is a force drawing board; And the blockchain is the force amber. Important data should be encapsulated into blockchain amber as soon as possible, preferably by the device generating the data directly after signature encryption, to maximize the advantages of blockchain in ensuring data reliability.

- A Merkel tree with four trades (tx 0 through TX 3). By making the block composed of exchanges form a linked list structure through the workload proof mechanism, and then propagating and copying appropriately, the Merkeltree structure can rely on the consensus mechanism to create the non-forgery of trading data after the fact. In Bitcoin, this data is used to securely calculate the root hash of the Merkerian tree, which is used to verify that all transactions in the block have been tampered with. -

The "secure property proof" architecture I proposed in 1998 uses the Merkeltree and data replication mechanism to tolerate objectively existing software errors or malicious behavior, but there is no concept of blocks. This architecture proves my theory that we can protect the integrity of globally shared data and transactions, and design a cryptocurrency (Bitgold) on top of that. But Bitgold also lacks bitcoin's more efficient and computationally scalable block and billing systems. And like today's private chains, it was designed with nodes that could be safely distinguished and counted.

Since the security targets of some public chains (such as Bitcoin and Eum) are limited by 51 percent force attacks, we are all concerned about how to identify the big miners and infer "whether it is possible to launch 51 percent force attacks in conjunction with others."

The security of blockchain has its objective upper limit, and blockchain governance will be seriously affected by 51% attack possibility. Of course, attackers don't call it "attack," they might call it "enlightened governance" or "democratic action." Some software updates designed to fix bugs or improve protocols require soft forks. Other software updates require a hard fork, which poses a greater security and continuity risk than a soft fork.

Compared with other network protocols, blockchain has greatly reduced the requirement of trust, but it is still far from trustworthiness. Miners are partly to blame. Those who are not engineering experts or computer scientists but spend a lot of time learning about blockchain design principles and code must have as much faith in the developer community as non-professionals who want to understand the work of a professional discipline have towards scientists in the field. Exchanges also have a lot of clout during a hard fork because they can decide which fork their markets and trading codes support.

Therefore, public chain relative (but not exclusively) to avoid identity dilemma, on the higher reality or social level to confirm the identity of the most powerful men, it may try to identity (brain) based natural fuzzy mapping is more suitable to the protocol layer, the concept of public key infrastructure in this effort is warning.

So I think there are some "private chains" that qualify as real blockchains; Others should fall under broader categories such as "distributed ledgers" or "shared databases". Their social extensibility is completely different from that of the permission-free public chains (Bitcoin and Ethereum).

The following scenarios require secure identification (distinguishable and computable) of server identity, rather than allowing anonymous identity like a public chain. In other words, they need some other, much less socially scalable solution to the witch attack problem:

Private chain;

The "joint" model of side chains (alas, no one now knows how to develop side chains without lowering trust requirements, despite all the pretensions and promises). The side chains can be private chains, which are a good match because they are very similar both architecturally and externally dependent (on the public key infrastructure);

Multi-signature-based schemes, even through blockchain-based intelligent contracts;

A threshold-based "information input mechanism" for moving data down the chain to the chain.

To identify the identity of the server, the mainstream but generally less socially scalable way is based on the trusted Certification Authority (CA) PKI system. To avoid a trusted third party turning into a security hole, a reliable CA must itself be a costly, labor-intensive bureaucracy that typically performs extensive background checks either by itself or by others (e.g. Dun&, a business research firm; Bradstreet). (I have led a team to design and build such cas). The CA also acts as a gatekeeper, protecting these permisse-requiring systems. The CA can be a single point of global control and failure. "The public chain is automated, secure and global, but identity authentication is labor-intensive, insecure and local."

Pki-based private chains are a good option for banks and large companies that already have mature internal PKI systems for certifying and approving employees, partners, and private servers involved in important transactions. Bank PKI are relatively reliable. We also provide semi-reliable cas for Web servers, but this generally does not include Web clients, even though people have been trying to solve client certificates since the Web was invented: for example, advertisers will want a more secure way to track a client's identity instead of phone numbers and cookies. But that hasn't happened yet.

PKI can work well for a few important things and people, but it is not as good or easy to use for less important entities. Its social extensibility is limited by the traditional identity authentication bureaucracy on which it depends.

- Above are some of the biggest thefts in the Bitcoin ecosystem. Given that the Bitcoin blockchain is probably the most secure financial network in existence (in fact, bitcoin is far more secure than traditional payment networks to maintain its low governance costs and peer-to-peer cross-border transfer capacity), peripheral services based on the old centralized network server are not secure. (Source: author) -

We need a more socially scalable way to count the number of nodes, in other words, a more robust way to be as resistant to corruption as possible, and to assess how much nodes contribute to blockchain integrity. This is the key to workload proof and broadcast replication: sacrificing computational scalability to improve social scalability.

That was Satoshi Nakamoto's genius tradeoff. Its genius is to recognise that people are much more expensive than computers, and the gap widens every year. The genius of it can make people across the border from human trust seamless collaboration (such as borders) and securely, and no longer like VISA or Paypal relies on architecture "has something to find the police", which is expensive and prone to errors, even have corruption, in normal work, only these bureaucracies can provide a certain degree of reliability.

conclusion

With the rise of the Internet has come a proliferation of networks, including social networks, long-tail retailers (such as Amazon) and services (eBay, Uber, AirBnB, etc.) that provide platforms for small buyers and sellers. These are only the first attempts at our new capabilities. Due to the great progress of information technology in recent decades, it is no longer computers and networks that limit the number and types of participants in network organizations, but human thinking and institutional design that have not fully kept pace with technological progress.

Early attempts at the Internet were very centralized. By enabling data integrity through computer science rather than "go to the cops", blockchain technology is bound to bring advances to other areas of finance and scenarios where transactions are largely based on online data.

This does not mean that it will be easy to adapt our institutions to our new capabilities, or that it will be less difficult in certain circumstances. Utopian ideas are common in the blockchain community, but they are not a viable option. Reverse-engineering our highly developed traditional institutions, or even reshaping some of them in new forms, is often better than starting from scratch or talking about grand plans and game theory.

Nakamoto shows us a key strategy -- sacrificing computational efficiency and scalability (consuming relatively cheap computing resources) to reduce the human waste in the social institutions (such as markets, large companies, and governments) needed to achieve collaboration between strangers, and to make better use of this precious resource.

Note:

[1] :http://whatsupnah.com/2009/02/twitter-vs-the-dunbar-number-and-the-rise-of-weak-ties/

[2].https://en.wikipedia.org/wiki/Alfred_North_Whitehead

[3] :http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/tradition.html

[4].http://www.lifewithalacrity.com/previous/2005/10/dunbar_group_co.html

[5].https://nakamotoinstitute.org/the-playdough-protocols/

[6].https://www.econlib.org/library/Essays/hykKnw.html? chapter_num=1#book-reader

[7].https://unenumerated.blogspot.com/2014/12/the-dawn-of-trustworthy-computing.html

[8].https://unenumerated.blogspot.com/2014/12/the-dawn-of-trustworthy-computing.html

[9] :https://lightning.network/lightning-network-paper.pdf

[10].https://en.wikipedia.org/wiki/Chargeback

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