Why Fungibility Matters
The concept of the Blockchain first bubbled to the surface of our cyber-consciousness in mid-2008 when Satoshi Nakamoto published a whitepaper titled “BitCoin: A Peer to Peer Electronic Cash System”. The paper presented the first use case for the technology — a digital currency.
Since then many developers have thought up other use cases and have pitched for funding to bring their ideas to fruition. According to an article published in April, cryptocurrency startups have raised over USD 6 Billion in 2018 alone by selling their crypto coins to early backers; similar to how shares of a company get sold to investors. These are called Initial Coin Offerings (ICOs).
However, a report produced by Fabric Ventures in collaboration with Token Data reviewed 2017 statistics and found that only 48% of ICO funded crypto startups were successful. Compound this with the scarcity of projects bringing in-demand, functional value, and the marketplace’s exposure to fraudulent ICO campaigns on a regular basis. Your average business owner will no doubt take a ‘wait and see’ approach before putting their business functions or applications onto a blockchain.
At present, the majority of enterprise blockchain solutions are for the financial technology sector. It is understandably so because the cryptocurrency market acts as proof of concept. In implementing the solution, the industry tends to opt for ‘private’ (permissioned) blockchains, where they run their blockchain in a sort of private Intranet and restrict connectivity to outside networks. That’s fine for now, but if we want to exploit the full benefits of this technology, then we must accept that private (permissioned) blockchains are a suboptimal solution.
For mass adoption to take place, there are specific assurances that the user must have. Perhaps the most important of them all is the assurance that their data is fungible.
Fungibility is a legacy of the trade practices of the Roman Empire. We can trace it back to the Latin verb ‘fungere’ which means ‘to perform’. It is the idea that when trading perishable goods we must assure that one portion of its weight is of equal value to any other portion if they are of the same weight. So one bale of wheat performs the same function as any other bale of wheat when traded in the same marketplace.
When we began to use paper currency, this idea was carried over. If a buyer had a 50 Euro note that was either lost or destroyed, it was in the best interest of the marketplace to allow the buyer to replace it with an equivalent 50 Euro note. Regardless of the source. So the idea of fungibility exists because it promotes ease and efficiency of trade. It is a requirement for basic addition, and interchangeability of said good or currency.
Fungibility in Blockchain Networks
Since the first use case for the blockchain was a digital currency Satoshi Nakamoto carried over the idea of fungibility to promote ease and efficiency of information exchange; just like in the marketplace.
However, in the case of Bitcoin true fungibility has not been achieved, and many subsequent tokens or cryptocurrencies are not fungible. Although it is true that 1 BTC + 1 BTC = 2 BTC, we are starting to see this potentially changing in the future. Due to the complete open and transparent nature of the bitcoin blockchain there is a full record of all transaction ever done. Some of these might have been done with malicious intent or for fraudulent activities. Because of the nature of the blockchain we know exactly which bitcoins were used for ‘bad things’. Now a company might not want to associate itself with these types of activities and therefore only want ‘clean’ bitcoins. This means that one bitcoin suddenly isn’t the same anymore as another bitcoin, and could lead to a premium being paid for a clean bitcoin, as opposed to one with a negative history, regardless of them being technically identical. There are some counter movements such as ‘Washing’ or ‘Mixing’ bitcoin that effectively try to reduce your exposure to ‘bad’ bitcoins but it is easy to see how this aspect of the bitcoin blockchain might prove troublesome in the future.
With the assurance of real fungibility the widespread adoption of blockchain technology is more likely, not just in the financial tech space. If it is possible for the origin of a crypto coin to be invisible from the rest of the network, then the same is possible for other forms of data as well. The knowledge that data is protected, at the deepest possible encryption levels, will give individual users, businesses and institutions the confidence to use applications built on top of it.
It Matters to the Dusk Foundation
The Dusk Foundation is created to advance the research and development of the unrestricted, un-surveilled and fully distributed blockchain-based cryptosystem called Dusk Network.
The Foundation believes in promoting an ecosystem of bi-directional peer-to-peer data transmission networks that are private, immutable, scalable and decentralized. This belief is why the Dusk Network is designed to offer these features to businesses and developers who have applications that require high bandwidth and low latency while remaining secure and private.
The network protocol is optimized for speed — completion times to show proofs or achieve consensus have been reduced, and data packets are bundled to use bandwidth efficiently. The network is built to scale — the Dusk team have developed a Segregated Byzantine Consensus algorithm that guides the growth of the blockchain while maintaining its integrity.
The Scope is laser focused, but the possibilities are endless
At the Dusk Foundation we focus on one thing; privacy, in all its flavors. Of course there are many relevant technical aspects to the network to empower this, such as the all important fungibility. However providing various degrees of privacy, whether for a file streaming service, financial transaction, security token, or video game interaction.
We encourage everyone who believes in personal freedom, economic liberty, information pluralism, and the right to privacy, to follow the development of the project at our Telegram channel. For more details on how the technology works, please visit our website and read the project’s white paper.
How to learn more about Dusk Network
The Dusk Network is a project coordinated by the Dusk Foundation. We are a decentralized ecosystem entirely focused on providing the perfect trade-off between privacy and transparency. Dusk protects privacy and fits regulations in payments, communications and asset transfers.
Please consider joining us at the following media: