Blockchain is only half of the solution

iCash | 03.06| 360

Immutable data itself is not as helpful as we think

The only reason that blockchain is innovative is because it takes data, distributes it, and uses unbiased code to make sure everyone plays by the same rules in keeping or changing that data. Immutable data storage — that’s it. Nobody can go back and say something was recorded when it wasn’t. The tokens, smart contracts, side-chains, lightning networks, automation, and hype, all stem from the “Trust by Computation” that makes recorded data immutable once it’s in a blockchain.

So when we say that Blockchain is going to change industries, yes we’re right, but really immutable data itself is not as helpful as we think. While data storage in a blockchain is technically and mathematically trusted, there is still a significant obstacle in being able to actually use blockchain to innovate the many industries targeted.

Primarily, what happens when you put the wrong information into an immutable record? Let’s not make the mistake of assuming that just because data is permanent, that it’s correct.

An immutable ledger is not trustworthy if the data contributed to it is not reliable. What if, for example, you have permanently tattooed the wrong person’s name on your arm? It would actually better if the record was NOT immutable, so you could go back and change it when needed.

The evolution of blockchain Smart Contracts opens new business opportunities by enforcing rules and automatically executing transactions when coded parameters are met. The parameters and the preset/agreed outcome are both stored immutably on the blockchain, waiting for a signal of its fulfillment to execute.

A simple example would be the case where a Smart Contract is created to remit payment to a recipient when a particular action is done. Let’s say I’ll pay you 5 bitcoin to review this article. The Smart Contract would hold the parameter of “Review the article” and the outcome “pay 5 bitcoin”, and will automatically pay you the 5 bitcoin when you’ve reviewed my article. That means no more accounts payable/receivable processing — a huge potential cost saving for businesses!

The Problem

With just blockchain, Smart Contract parameters (and therefore payment) could execute erroneously, without parameters being met in the real world, i.e. you didn’t really review my article, just set up a bot to open the page and clap 4 times, but the smart contract would still pay you my 5 bitcoin. And because Blockchain is permanent and immutable, the invalid transfer of my 5 bitcoin would be irreversible.

No sophisticated party [like myself] would take the kind of execution risk that exists today with blockchain. Many different bots can be created, or malicious actors in the real world with access to Keys or API’s, to attest to misinformation without proper systemic contestation, recourse or rectification.

This raises a key question in the blockchain ecosystem: As Smart Contracts enforce predetermined outcomes, how can distributed consensus validate Contract settlement before it’s immutably posted to the blockchain?

Given the nature and scale of the operations being executed, trustworthy inputs are crucial. The disconnect between real-world confirmation and Smart Contract validation is of primary importance for instituting daily and industrial applications of blockchain Smart Contracts.

The other half (data input)

To gain enterprise (and my) adoption of blockchain systems, they must be integrated with systems validating data input. While blockchain has great value, it still needs to be applied with the right systems and measures to make sure that its data is valid before being immutably recorded. As anyone working in IT can tell you, “dirty data is dangerous”. This has never been more true than in the case of Blockchain. For serious users to be able to trust Blockchain, they need a type of checks and balances for cases of misinformation or nefarious inputs, to ensure that Smart Contract inputs can be validated before being irreversibly recorded.

In my case, before paying you my 5 bitcoin, I want the ability to contest settlement if necessary, and have it validated. Because the contract parameters contain a live, verifiable event, there are a large but finite number of actors that could validate (or contest) the event actually happening. Incentive mechanisms must be put in place for immediate and long-term effects ensuring the distributed participants can be trusted on a larger scale.

The Solution

Digital [nonhuman] inputs like RFID or satellite feeds can help, although even these technologies are not tamper-proof. Human actors in expert networks that have financial and reputational stake can help, although people work in erratic ways at times. So, as with most real-world solutions, the real answer will likely be a combination of both.

The team at iCash saw this opportunity and set out to create it.

iCash proposes the Proof of Trust (PoT) protocol to allow distributed validation of Smart Contract inputs, to be able to ensure, and potentially insure, valid settlement.

PoT works concurrently with any blockchain system as a mechanism for assessing, auditing and affirming data inputs to execute with distributed trust. The integration of iCash’s PoT in the technology stack of IoT data sharing bridges the critical gap left between real world inputs and blockchain’s immutable records.

With a network of accountable participants acting as decentralized oracle inputs (Delegates), PoT uses an algorithm to create, monitor, and report reputational trustworthiness over time, along with financial stake on majority consensus. Delegates can be both digital and human inputs. Smart Contracts are broken down to binary logic and voted on for majority consensus before being executed on the blockchain. To reach validity probabilities of a near-zero chance of incorrectness, Users are given the ability to contest even the Consensus determination of the Delegates and raise the query to SuperDelegates who have proven perfect reputation by always inputting correct determinations.

This development aims to support reliable institutional services within a decentralized framework, and take full advantage of the trust and efficiency that blockchain has the potential to avail. By adding a layer of Trust to the application layer of data input, further advances in blockchain scaling and IoT device integration can realize the future we envision for technological development.

The next article will address the different types of existing distributed oracle solutions proposed in the marketplace, and why iCash is uniquely positioned to succeed.

Now that you’ve read and reviewed my article, I can send you the 5 bitcoin — just need your private key :)

Blockchain is only half of the solution was originally published in iCash io on Medium, where people are continuing the conversation by highlighting and responding to this story.

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