Introduction to Byteball — Part 1: Why?

So … let’s talk a little bit about Byteball! Byteball is my favourite crypto project, by far actually. I read the whitepaper and I instantly fell in love with it. That hasn’t happened with anything other than the original Bitcoin whitepaper. So trust me when I say that I don’t say this lightly! This story is based on a presentation which was given by Tony, the lead developer of Byteball on Bitcoin Wednesday in Amsterdam on the 6th of December. I guess there were a couple hundred people there, which is nice but in my opinion Byteball deserves a much larger audience than that. Rather watch a video than read a story? Then watch the YouTube link below. If not, just keep on reading.

First, I’d like to talk about the WHY. Why does Byteball exist? What does it bring to the world? Why should we care? In the other 3 parts I’m going to tell you a little bit about the technology behind Byteball. What makes it tick? What makes it secure? How does it work?

Economy

Byteball is essentially about our economy. About creating a better environment for everyone in it. An environment that enables trust where trust couldn’t possibly exist before. That sounds quite ambitious but trust me, it’ll be worth it to read on for a few minutes.

So, “economy”, what do you mean by that? Us humans are social beings, we want to trade and interact with each other. This behavior is what we call an economy. Now let’s take a look at the smallest building blocks of any economy: contracts.

A simple contract usually has two parties who exchange some rights and obligations. One parties rights are the other parties obligations.

For example: in a sales contract, the buyer has the right to receive an item and the obligation to pay, while the seller has the obligation to provide the item and the right to receive the money.

What’s so nice about contracts is that each party receives more from the contract than it gives. From each parties point of view! I mean, otherwise they wouldn’t even have entered into the contract and it wouldn’t have happened!

Another example. Let’s say you want to move from the airport to your hotel and you have some money. The other party is a taxi driver, he wouldn’t mind having some more money. Both of you would benefit from an agreement.

Or, to say it in other words: both of you give up part of your freedom in exchange for something you value more at the moment. The taxi driver gives up some of his time that he could’ve spent with his family or playing Bejeweled on his smartphone. And you give up some of your money so that you don’t have to walk to your hotel. You gain time and the taxi driver gains some money.

So if neither of you misbehaves we have a nice positive sum game. This is how value is created! Both parties end up with something more valuable than they had before!

But, what if the driver just keeps driving in circles to make you pay far more than you thought you would? Or what if you decide to run away and not pay for your ride?

Then it is highly unlikely you would ever come to new agreements again, so no more value will be created …

Our society needs a way to enforce contracts, make them certain, make the environment safe, and encourage creation of value. Only then can we have a thriving economy.

So let’s take a look at what we have come up with over the past centuries:

Currently, there are basically 3 ways to make contract execution certain.

First of all: Reputation. When the counterparty has a good reputation you pretty much know what to expect before entering into a contract.

To help with that we have Law. If the contract is breached despite of a good reputation, it can be enforced in courts. Both parties know this, so the threat of a lawsuit helps to keep each other honest.

Then finally, a more recent phenomenon, the Trusted Third Party. You could also call them a private judge who works more efficiently than the state judge.

All of these things help immensely to make sure that you can safely engage in economic activity and execute contracts. So a lot of value gets created this way. As we all know, just look around you, we have a fairly well established economy.

But how did we get there?

At first we could barely walk and we used sticks and stones.

But after quite some time we formed settlements and started the loop of value creation through economic activity.

But we made quite a lot of progress.

I mean, this is quite impressive, right?

And instead of walking everywhere we can now fly to whereever we want. So those 3 ways of contract execution I talked about got us quite far.

No problem right? Well, there’s where you’re wrong.

Problems

Because there are a lot of problems actually. If you’re new to the game then who is going to trust you? If you buy something from somebody on the internet then how can you be sure that this avatar is who he says he is?

But, but, the LAW you say! Sure, but you never know the outcome of a lawsuit for sure. It’s slow or sometimes even very slow, it’s horribly expensive, etc. Quite nice to have but hardly perfect.

Trusted third parties are great for speeding up and outsourcing the reputation problem but the trade off is that they have to escrow the entire amount of all transactions and they fully control all of the contracts on their platform. This gives them disproportionate power and makes the environment dangerously centralized around these huge single points of failure.

So although these methods have brought us a lot there still is much room for improvement. We want to be able to make contracts with total strangers, reduce costs, reduce uncertainty and eliminate any single point of failure.

Hmmmmm, now that would be something…. Surely there is no system that can combine all of this in one package?

Well, yes, yes there is … Byteball can do it. Don’t believe me? Read the other 3 parts of this series. Continue with Part 2 about the DAG.