Real life with decentralized trust networks
It’s been over a month since I last wrote an article on digital currencies and decentralized trust networks. A lot has happened in that time.
Bitcoin had a hard fork, Microsoft debuted the open-source Coco Framework to make it easier for developers to use distributed ledgers in applications, and the Ethereum founder unveiled “Plasma” to address scaling issues with Ethereum. But, who cares? What can you do with digital currencies and, more importantly, the decentralized trust networks?
Where the rubber meets the road
In the last article, I talked about the symbiotic relationship between digital currencies and the decentralized trust networks, which is often implemented as a blockchain. You can use digital currencies to buy things — from Overstock, Expedia, and Newegg to name a few. But, decentralized trust networks are far more interesting since they make the following possible:
- Establishing an irrevocable chain of custody for food: OwlTing is a Taiwanese company with an interesting backstory (the article is a little rough to read). In a nutshell, the founder was originally from Taiwan, worked for Google in Silicon Valley, got homesick, went back to Taiwan, and then started OwlTing to use blockchain to help food consumers trust that the premium food they were purchasing was what they were getting (e.g., milk, seafood, etc.). After reading Real Food / Fake Food, you’ll see just how awful counterfeit food is. Anyway, before you dismiss OwlTing as just an ex-Googler’s pet project in his home country, consider that several large U.S. food suppliers, including Walmart, Dole, and Nestle, are planning to use blockchain to track the source of foodborne illnesses (full article).
- Improving tax system compliance: This use of decentralized trust networks with tax systems is still in its infancy. China seems to be generating the most buzz with their plans to use blockchain to increase tax compliance. Noncompliance in China is real as documented by these articles: Trading Fapiao, Evasion Game, and Multinationals Dodging Taxes.
- Authenticating identities: About 7,000 credit unions in the United States are part of CUNA, a trade association. CUNA is working on a way for credit unions to be able to better authenticate that callers claiming to be a credit union customer truly are the person he/she is claiming to be and then share that identity among the banks in the network. Their pilot program site has a video update from May 2017 (skip to 26:00 to follow the authentication process through its steps).
“Through an interesting turn of events, companies like Facebook and Google who control the distribution channel between content and users, have become monopolies. Ending their dominance will most likely require a platform shift. Decentralized tech is a strong candidate.”
- Sina Habibian, notes from Blockstack Summit 2017
- Reverting the Internet back to a decentralized network: If you are paying attention, you’ve noticed that the web over the last decade or so is being increasingly funneled through the platforms and services of just a few large companies: Google, Facebook, and Amazon. Blockstack is an open-source project that is working to move us back toward a decentralized web.
- Making true cloud storage feasible: When the term “cloud” is used in polite conversation to reference file storage or application hosting, it now usually means Amazon Web Services, Microsoft Azure, or another hosting service. It seems a bit weird that we’re ok with ignoring the benefits of a decentralized network originally designed to withstand nuclear bomb attacks — the Internet — and instead place all our data in locations run by just a few corporations, which results in outage, outage, and outage. IPFS, short for InterPlanetary File System, is designed to counter this trend and push us back toward true cloud storage. Storj is another implementation of true cloud-based storage, as is Filecoin. Further, the relative impermanence of web-based records compared to paper-based ones is generating concern in some circles. Until the invention of blockchain, being able to compensate owners of excess storage capacity to hold pieces of files in a true cloud-based manner have been impractical.
It will all change
This video briefly describes more industries that will be changed by the use of decentralized trust networks. The main point is that trying to predict changes brought by blockchain, cryptocurrencies, and decentralized trust networks is as futile as it was in the 1990s trying to predict what changes the Internet would bring to the world. The correct answer seems to be “a lot”.
Good luck with your journey to learn more about cryptocurrencies and decentralized trust networks. I hope I’ve helped clear some of the confusion you may have initially had.
At the end of my last article, I recommended you buy a small amount of cryptocurrency. If so, your currency is probably still sitting on the exchange where you bought it.
Keeping your currency on an exchange long-term is not a good idea for a variety of reasons, including exchanges can be hacked, go away, or your account can be hacked through your own fault. The exchanges hold the private keys associated with the coins you own, which means those keys can be stolen by a hacker or malware.
While moving your currency to a “hot wallet” like Jaxx on your cell phone is likely not much more secure than an exchange, you will at least get a chance to test out sending coins to a different address and you will be holding your own private keys. Here is a video that will take you step-by-step through setting up a Jaxx wallet on your cell phone and sending coins from your exchange account to it.
For the best security of your cryptocurrency, you need to use cold storage. In a nutshell, cold storage involves sending your currency to an address that has the private keys stored on a device (or even paper) that is never connected to the Internet. Here are two articles to help you (Introduction, Power Guide).
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