Introducing Ethereum Quantum Protocols: Solving Digital Asset Transfers
How an Ethereum Quantum Protocol Could Revolutionize the Movement of Digital Assets.
By Rikesh Thapa, CTO of Blockparty
The biggest problem with digital assets — such as live event tickets, airline tickets and music files — is the ability to transfer ownership.
The Battle Between Centralized and Decentralized Systems Looms
This problem made headlines in 2002 with the shut down of Napster and its peer-to-peer music file sharing platform. And despite efforts from digital rights owners and sellers, the problem still persists today:
1. Music Files
Some music re-sellers, such as Apple, embed Digital Rights Management (“DRM”) code into digital music to inhibit their transfer. But DRM-free copyrighted music files can still be shared illegally between individuals.
2. Airline Tickets
Airline tickets are generally non-transferable, and it is virtually impossible for a person who can not make a flight to sell it to another person.
3. Live Event Tickets
After an event creator sells a ticket, it is virtually impossible to regulate anything about the secondary ticket market — creating an opportunity for bots, brokers and scalpers to jack up prices and sell illegal duplicates.
Enter Ethereum Quantum Protocols
The Ethereum blockchain can solve these problems by combining ERC-721 non-fungible tokens with ERC-20 fungible tokens in a system I call a “Quantum Protocol.”
What Are ERC-721 Contracts
ERC-721 tokens are an untapped resource in the Ethereum protocol. The most well-known project to use them so far is CryptoKitties. CryptoKitties created new digital assets, each of which was unique, and can therefore only be represented with non-fungible contracts such as ERC-721’s. High demand for Cryptokitties bogged down the Ethereum blockchain, demonstrating the limitation of ERC-721’s as a tradable token.
But focusing on CryptoKitties misses the whole point of ERC-721 tokens. The project barely tapped into the real functionality of ERC-721 tokens. ERC-721’s allow each individual contract to have different characteristics. This is unlike ERC-20 tokens that, like a currency, do not allow for any variability.
You don’t need to invent new asset classes when there are already millions of examples of real-world uniquely identified digital assets that do have value, yet struggle with problems associated with ownership, use and transfer. Real-world digital assets that could be represented with ERC-721 tokens are live event tickets, airline tickets, digital music downloads and many others.
How Quantum Protocols Can Work
Using non-fungible ERC-721 tokens, you can solve the problems of proof of ownership, fraud prevention and transfer of ownership of digital assets. But in order to truly solve these problems, you have to do two things:
1. Keep the ERC-721 Smart Contract Logic Lightweight:
To prevent the system overload that CryptoKitties caused, you must build a standard protocol that limits the amount of information embedded into the smart contract. To do this, a separate metadata layer is created that stores and regulates non-essential information related to the asset.
CryptoKitties was unregulated, and tokens could be created that were so large they bogged down the entire Ethereum blockchain. You can still encode a powerful amount of data in a limited ERC-721 token, such as a digital fingerprint, and a transfer protocol that sends transaction fees back to the creator, and access to additional perks or privileges, etc. But the system must set limitations on the total data capacity of each token to ensure fast transactions.
2. Make non-fungible ERC-721 tokens interchangeable with fungible ERC-20 tokens, which can be easily bought and sold:
You could do this with Ethereum itself or any of the tokens built on it, like Metal, or Binance or Tron, but you could also create your own native ERC-20 token. This could allow any company to create a marketplace for the ERC-721s that they issue, where they are bought and sold using their own native ERC-20 tokens. That would give them a powerful way to fund their project and also incentivize activity in the marketplace they create.
This “Quantum Protocol,” — the combination of ERC-721s with a native ERC-20 token — would support any number of use cases. And it provides a way for each project to earn legitimate income from regular business functions surrounding their application. By creating a safer, trustless marketplace for digital assets that previously had all kinds of problems with security and fraud, you provide value, and you would be able to earn money on transaction fees, for example.
3. To combine the whole system, use a trustless consensus protocol to ensure that the system remains decentralized:
In order to ensure that the integrity of the ERC-721’s and ERC-20’s remain intact, the metadata layer must be regulated by a consensus protocol so no new information can impact on existing assets, unless agreed upon by the consensus protocol. This way we can make sure that we do not have a central point of failure, malicious actor, or corrupt authority manipulating data in the metadata or application layer.
Quantum Protocols can become the next evolution for blockchain. The Ethereum blockchain needs Quantum Protocols in order to expand beyond simple financial transactions and into an infinite number of real-world, tangible use cases.