The whole purpose of Bitcoin is not decentralisation. Decentralisation is a tool to deliver micropayments and the low-cost transaction throughput that Bitcoin can deliver, says Dr Craig Wright, Chief Scientist of nChain.
Speaking at the recent Blockchain Developers Conference in Istanbul, Wright noted that just because something can be decentralised – it doesn’t mean that it should. ‘(That would lead to) everyone being their own government and having their own little place and nothing ever happens. So we don’t need anarchy, we need a system that is ordered and controlled and everything is recorded.’
However, he noted that decentralisation is valuable for the security that it provides. He highlighted that a single system can never be truly secure as it offers a single point of attack and will likely have a singular governing body or overseer. By comparison, given ten systems run their own programmes, it would require a bad actor to attack at least six of them to break things.
This leads directly to questions around ownership and proving ownership.
Provably demonstrating ownership with Bitcoin
Bitcoin is a system that allows an intangible property to be assigned individually or to a particular person. Even though represented digitally, the existence of a single valid token at any point in time allows bitcoin to be treated as a tangible document which is capable of being possessed, said Wright.
Wright explained that tokens that form the basis of any transaction in Bitcoin are analogous to documentary intangibles. A digital signature still requires an identity. For high-end and high-value transactions, identity can be provided through certificate authorities (CAs) and public key infrastructure (PKI).
Wright gave the example where a public key is attributed to Alice and Bob. Such a key could be certified using a certification authority (CA) or distributed using a web of trust. As long as it is known that Bob and Alice are attributed a particular key, Bob and Alice can retain privacy and still engage.
‘Using CGA (Cryptographically Generated Address), we can ensure that the sender of an NDP (Neighbour Discovery Protocol) message is the owner of the claimed address. In Bitcoin, a tokenised asset can be linked and registered to a key, but also to the individual’s identity – such as through a PKI-based key registration process.’
How Bitcoin brings privacy and security to a digital world
Wright noted that the prime failure of all PKI-based systems lies in the fragility caused when a single entity is compromised or enters bankruptcy. Bitcoin removes such fragility.
With PKI, the use of CAs links keys to individuals’ identities. Yet, individuals’ identities are firewalled from the blockchain. An individual’s identity can be isolated and, using deterministic key structures, provided in a manner that maintains privacy. Wright added that the ability exists to have a registered identity and still create related keys securely.
‘Here, a root public-private key pair is associated with an individual who can create linked sub keys for each use, linking to a PKI-based system whilst maintaining a high level of privacy. The root key can be attested and associated with an individual or a company, and the subkeys would then link to individual uses and spending.’
Bitcoin, blockchain and social media
The issue of ownership extends beyond traditional concepts and can also be considered when looking at social media. While the idea of micropayments for social media posts is not new, Wright noted that people often mistakenly consider micropayments in the range of 50 cents to $5. For the same reason, people are only thinking about existing business models, he said.
‘With the ability to facilitate micropayments as low as a thousandth of a cent, Bitcoin offers new transactional models. Low-cost transactions increase the ability to distribute and widen the transacting base,’ he said.
‘We can move away from an advertising-based model and towards the provision of goods and services, including information while protecting user privacy. Google, Twitter, and Facebook depend on the existing internet infrastructure with their ad-based model. Micropayments on Bitcoin enable new commercial models.’
