The founders of Attores, Gorang Torvekar and David Moskowitz discuss their notion of “smart contracts as a service”.

The platform is currently being piloted by nanyang polytechnic in Singapore as a digital diploma registry. This is being extended into a full professional network platform called Indorse, which ran an ICO earlier this year.

In addition to the above we discuss the birth of the Ethereum Kovan testnet, which has it’s origins in a pub, just outside the Attores/Ethereum Foundation/Digix co-working space in Singapore.

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https://itunes.apple.com//podcast/the-ether-review/id899090462?mt=2

The Ether Review #76 — Attores & Indorse, Smart Contracts as a Service was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

Current solutions for decentralized data processing like Golem or Truebit provide part of a data services solution. Storj, Filecoin, Sia, and others offer storage solutions.

Streamer tokenizes the value in streams of Data. Using the same interface for both data delivery and payment, Streamr hopes to create a two sided market for data. This rounds out the basic data services portfolio, operating synergistically with existing projects.

CEO Henri Pihkala and COO Risto Karjalainen explain.

etherreview.info
https://itunes.apple.com//podcast/the-ether-review/id899090462?mt=2

The Ether Review #75 — Streamr, Completing the Data Services Trifecta was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

Element Group is a full service investment bank for the crypto-token markets.

Stan Miroshnik has a background in traditional finance. After watching the crypto-markets form, Stan and his colleagues began working to understand these new markets and build a traditional finance business to serve the space.

We discuss the maturity of the companies using the token launch fundraising mechanism, and those investing in the tokens. Stan sees an emerging market with strong similarities to traditional capital markets and opportunities for institutions used to investing there.

The entry of organizations like Element Group into the crypto-asset space indicates the fulfillment of the prophetic prediction of a super fluid economy Joe Lubin expounded in an episode of Beyond Bitcoin three years ago. It is also a harbinger of a stable paradigm for Ethereum: Capital markets 2.0

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https://itunes.apple.com//podcast/the-ether-review/id899090462?mt=2

The Ether Review #74 —An Emerging Capital Market was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

Today we hear from Ted Livingston, who founded Kik interactive in 2009 to address the problem of chat between blackberry, android and iPhone. Since then their chat app, Kik, has exploded in popularity, experiencing use by up to 40% of US teenagers.

In 2015 Tencent, the builder of Chinese chat giant Wechat, purchased a 5% stake in the company at a Billion dollar valuation. A move that some are saying has anointed Kik as the Wechat of the west. It’s interesting to see the youth focus with One Direction leading their award winning marketing campaign of 2014 .

Kik is a somewhat anonymous platform, with it’s own economy in which stickers are traded and users can be charged for access to certain chat rooms.

By launching the Kik in-app currency, Kin, as a cryptocurrency, Kik interactive aims to enable the Kik micro-economy to grow independently and organically. The Token launch ended recently with nearly one hundred million USD equivalent raised. No surprises there. What is interesting is that registered contributors numbered over 10,000 and resided in over 100 countries, indicating that the currency is indeed broadly distributed compared to other tokens. Though, my guess is it’s concentrated in the hands of speculators, rather than the 15 million community participants.

This episode was recorded over two months ago so it’s interesting to look back from the other side of the Token Launch and see Ted’s claims of broad distribution validated.

kin.kik.com

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The Ether Review #73 — Kik, Establishing a Micro-economy was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

Between re-constructing TheDAO and building his own governance platform Governx (once Boardroom), ConsenSys developer Nick Dodson is building a portfolio of powerful Ethereum based tools.

Disappointingly, the Enterprise Ethereum Alliance instantiation of Governex is not up for discussion. However, we do dig into the abstract structure of governance tools, data-driven design, the flaws of The DAO, and what can be salvaged from that project.

Ares DAO is a joint project between Nick and shadowy Ethereum community member Dino Mark. By applying the research conducted during the development of Governex, and lessons learned from watching DAOs in the wild, the two man team has repaired and refactored TheDAO.

In doing so curators have been removed, direct democracy has been implemented, and the proposal deposit has been raised significantly.

The team plan to launch a charity DAO to test the Ares DAO’s functionality.

We also chat about the demise of the nation state and the role of tribalism in the evolution of blockchain governance.

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etherreview.info
https://itunes.apple.com//podcast/the-ether-review/id899090462?mt=2

The Ether Review #72 — Nick Dodson and Governx was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

CASH NOW!

Newcomers to the blockchain space often ask this simple question: How and how quickly can digital assets like Ether and Bitcoin can be converted back into their native fiat currencies?

The answer is with a simple click that initiates a bank transfer after executing a sale through many of the more reputable world exchanges (including Coinbase, Gemini, BitStamp and more).

On many smaller trading platforms though, banking complications create legal difficulties for businesses and fears of insolvency add risk for users. Many exchanges instead choose to exclusively trade tokens to avoid the legal constructs required of a financial exchange trading fiat currencies.

Still, facing demand for a steady trading pair during times of high market volatility and the ability to move fiat funds off of exchanges without trusting said platforms (i.e. if the business’ cash-reserves were called into question), the need for a “stable coin” has for years been widely recognized.

“Stable coin”: A digital asset with a non-fluctuating value, or a ratio of 1:1 with a fiat currency.

ENTER TETHER

To date, Tether is the closest that the blockchain space has come to a recognized stable coin. According to their website, “every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD”. Tether is owned a private company, and a “sister organization” to Bitfinex (a large digital asset exchange).

Tether is today used by large exchanges including Bitfinex, Poloniex, Bittrex, Liqui, and Kraken among others.

On its face the system works:

Businesses track fiat funds in the form of tether with the same distributed ledger technology used to view digital asset reserves, and users understand this representation of their fiat funds to mean more (being chain-based) than a generated number on a screen. Furthermore, if users’ bank accounts are connected to one of these exchanges, then a bank transfer is still a click away, as the business in turn will sell Tether for the usual $1.00 price before settling their books.

But what enforces this Tether system? Not much. The daunting issues around Tether have been well documented in industry publications (Examples below):

Coindesk: The Strange Story of Tether, the Digital Money That Claims it Isn’t Money

Coindesk: Tether Really Isn’t a Scam, Company Promises

Hackernoon: The Curious Tale Of Tethers

HOUSE OF CARDS

The event of an exchange hack can have a monumental impact on this industry (Read: Mt.Gox’s Lasting Regulatory Legacy). For newer readers, blockchains aren’t simply hacked and altered. The heists that you’ve heard of take place when centralized exchanges (private businesses through which tokens like Bitcoin or Ether are traded) are trusted with customer funds, but don’t correctly secure their assets resulting in stolen information and tokens. The rarity of such an event though alone provides some peace of mind for traders, and users are only at risk if their funds are on a targeted exchange, but what if many token holders were taken for a ride at the same time regardless of exchange and how could this happen?

The odds of multiple exchanges facing this fate at once are infinitesimal, but the collapse of Tether would lead to a crisis like none seen in the blockchain-era. While some platforms might maintain a matching cash reserve to make users whole, others which hadn’t sold Tether to balance books, and all offline Tether token-holders (in personal wallets) could be left without recourse despite Tether’s “always backed 1-to-1” guarantee.

Here are a few quotes pulled from the Tether.to legal page by Hackernoon better explaining the risks of simply holding Tether:

1. “There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money.”

2. We do not guarantee any right of redemption or exchange of Tethers by us for money.

3. They are also not stored value or currency.

4. Tethers are not money and are not monetary instruments.

When the amount of Tether in circulation increases rapidly while sister-company Bitfinex both loses access to US banks and simultaneously recovers from a $90,000,000 hack, it isn’t difficult to consider that a party could have created additional Tether to sell for money (like the fed printing new notes). A less conspiratorial is a reminder that the blockchain economy is not altruistic and that a privately-owned stable coin without a profit making mechanism creates the potential for ulterior motives. Regardless, alternative ideas for stable coins should be explored both in case of Tether troubles, and in the spirit of diversification of risk.

NEW CHALLENGER APPROACHING

Which party then could guarantee the value of a token tied to a fiat currency? The issuer of that fiat currency is one contender.

Why though would a government be so inclined to create such a thing?

To track and to tax of course! Not interested? Don’t sell then, but there is a proposed trade herein that many law-abiding taxpayers might take, and one that Japanese banking institutions are rumored to be considering.

The solution would look a bit like this: A government, possibly in coordination with banking industry powerhouses, would issue an equal number of tokens to fiat currency held in reserve for the purpose of representing said tokens. Unlike Tether, they would be directly redeemable for the connected fiat currency. It could even come in ERC-20 form (Ethereum’s token standard) for better compatibility with coming decentralized exchange platforms.

IN IT FOR THEM

What’s in it for them? The Government Token (GT) would likely emerge as a legal fiat trading pair on registered Digital Asset exchanges. For governments, GTs could partially remove reliance on the trifecta of banks, exchanges and users for reporting capital gains.

Here’s how it’s done: Verified exchanges identify users through required KYC (Know Your Customer) standards and keep track of user-specific exchange wallet addresses (referred to as user-segregated wallets). Governments would then better understand the figure in taxes likely owed to them using DLT, which has recently been highlighted as a priority for tax agencies said to be under-collecting from token traders.

IN IT FOR YOU

A government issuer of a fiat stable coin would represent a natural solution to the problems listed above. It would somewhat protect against exchange insolvency concerns, and allow for instant transfer of fiat funds to and from exchanges without wire-fees or ACH wait times. The possibility could even exist in time to shift the burden of self-calculating taxable events on digital assets from users to businesses or governments.

Furthermore, the many privacy-focused users in this space would be unaffected so long as they steer clear of the GT, just as they would likely already avoid moving funds between the current banking system and AML/KYC required exchanges (often relying instead on smaller decentralized or foreign exchanges, or of course by holding and spending their funds in token form).

OVERREACH

Once this glass door is broken, is there any looking back?

A distributed public ledger records all of history, and once government chain-auditing begins it won’t likely stop. From which addresses, for example, did John Doe fund his KYC-verified Coinbase/GDAX account in years’ past and to what do his remaining assets amount? Were there any earnings originating from those same addresses that went previously unreported?

These and other deep dives by governments into public ledgers may well be enabled by the combination of GTs and the chain’s permanent record.

THE EYE OF THE BEHODLER

Many users of nationless and unowned distributed ledgers will always protect their right to privacy, but just as classic stock and bond markets would never allow anonymous payments or payouts, governing bodies will seek get their take from users who are cashing out as this space matures, even if they need to provide a service in the form of a stable coin to achieve that goal.

For some, this proposed trade of privacy for ease will be a coming-of-age for an industry, while for others it may well present the greatest threat yet to what began as an anarchic or libertarian cause.

Touching a Government Token would opt into that matrix, but users would remain free for as long as they so-choose. And thus the beauty of it all would be in the eye of the behodler.

BUT HOW?

What would all of this look like in practice? In The Government Token (Pt. 2, “The How”), we’ll take a deeper dive and look at how the creation of a fiat stable coin would work technologically, and we’ll explore the interactions between financial institutions and central banks that would be necessary to make this venture work for all parties.

The Government Token (Pt. 1, “The Why”) was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

In today’s long overdue, landmark episode we are joined by an international panel of leaders in fin-tech and blockchain law:

Claire Wivell, Hannah Glass (Australia), Alex Simms (New Zealand), Peter van Valkenburgh (USA), and James Duchenne (USA/Mauritius)

The theme for the discussion was regulatory sandboxes — frameworks for enabling businesses to operate in a deregulated environment. The goal is to allow legislative bodies to develop an understanding of new businesses before regulating them. We have seen a successful example in the United Kingdom, but Australia’s efforts to replicate this have not been so successful. Claire Wivell explains why.

We follow this with a discussion of the unique environments of Australia, Mauritius, Singapore and Dubai. New Zealand unfortunately is not so interesting at this stage (both Alex Simms and myself have independently been involved in some interesting conversations since this episode was recorded so watch this space).

We conclude that a US regulatory sandbox is impossible due to the interaction of federal and state legislation and the complexity of their enforcement agencies. However, there is hope if a bright line can be defined between the regulation of custodial and non-custodial businesses

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Ether Review Legal #6 — Playing in a Sandbox was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

What drives innovation in a crypto-world or any other tech-related industry? With so many chasing success in a faceless space, it’s vital that we take a step back and catch a breath before trying to gauge: What defines success? Do most industry developers aim to improve humanity through design, or is the objective financial gain?

Of course, the answer isn’t cut and dry. For industry newcomers and veterans trying to time markets, it’s vital to remember a few consistent themes that drive this field forward before gold-rushing into what you may have heard is the new Wild West:

Truth is dead. We live in the age of celebrated stupidity and disregard for both science and statistics (especially here in the States).

There’s now a market for exactness and proof, especially when money, votes or privacy are on the line.

Trustlessness, a basic tenet of decentralization, was bound to result from repeated violations of trust. People are inclined to trust in the good intent of our institutions, leaders and fellow voters until that trust is broken. Now a system has come into existence that operates without the need for such faith via transparency in open code and without a leadership structure.

Proponents of trustlessness, like followers of any ideology, fall across the spectrum. Some moderates accept that even in a distributed world, defacto industry leaders with track records of innovation and deliverability may have disproportionately loud voices, while others will remain vigilantly fundamentalist in their adherence to code or in the original intent of a chain. It’s important to keep in mind that both positions are reasonably grounded. Truth is in fact still truth, but many can’t trust right to consistently succeed over wrong, and it’s because of that realization that we’ve reached this point:

Code is Law. This tale you should already know. It has nothing to do with the foundational code of Ethereum, yet it remains the most famous story in the technology’s short life. A single error in code resulted in a bad actor claiming $55 million dollars in user Ether, today worth $1.3 billion USD. The funds would be easily retrieved with a change in code that only affected two parties: The users to be made whole, and an accused thief who exposed the coding error. The result was obvious, and the problem was resolved.

Code is law. We, the majority, ran the code, and we, the majority, changed the code. It’s human nature to make things right and we did. Errors were exposed, but the intent of the code was understood. A thief stole millions, but without disrupting the chain all users were refunded. Hard lessons were learned, and the ecosystem emerged stronger for it.

Code is law. We, the majority, ran the code, and the attacker used the code. It’s human nature to make things right and we did. Errors were exposed, and a bounty was claimed. Whitehats counter-attacked, and without disrupting the chain many users were refunded. Hard lessons were learned, and the ecosystem emerged stronger for it.

The first “contentious hard-fork” resulted in alternate and competing realities: Just vs. Just, Right vs. Right.

Ethereum Classic was born out of developer wedlock, backed by philosophical hardliners, and pumped by deep pockets still seeking to profit off of a dead snakeskin of an advancing technology, but can one side truly represent just or right? Is there room in DLT for good, or is this industry exclusively market-driven?

Good is Great. Well, if an objective good judged through the lens of kindness is what you’re looking for, then yes, it does exist here too. Meet Doge. Doge has been with us for a long while. Doge is adorable, it’s fun, it’s a tipping currency, a community, it’s occasionally profitable, and they do good work. Why? Why not!

…………………..Water for Kenya!

…..… Socks for the Homeless!

………………….…………...Such Drive.

…Very help.

……………..…….Wow.

Avenues for good work exist in all of us, in all industries and in all walks of life, but benevolence itself will never be the exclusive driver for a mega-corporation that occasionally holds a clothing drive. Societal betterment may result from distributed ledger technology (and that may have been the goal of Ethereum, IOTA, Bitcoin and other developers), but something in a similar form was bound to result as society had long had an appetite for their existence. Developers with formidable integrity, capability and drive were demanded by the situation and market. Good is great, but as we race toward scalability and security, one age old-truth stands as firm as ever:

Cash is King.

Welcome to a future wasteland. Remember the high and the good times? Good projects and projects for good still exist, but so many people messed up. You read the warnings: Failing applications with shrinking userbases didn’t need to raise hundreds of millions of dollars, freelancing developers with no code and plagiarized whitepapers didn’t need tens of millions. You looked back at the first well-publicized rise of Bitcoin in 2013 and saw that 95% of top projects just a few years old were long dead, but that market… The market was so hot.

There are bad actors here just as there are everywhere. Some well-timed traders will change their lives on projects doomed to fail and on the backs of the bagholders, and that’s not new. The unfortunate truth is that most blockchain projects now being released daily fit that bill and they always have. The informed among us knew that too because they trusted not in a market direction, but in the core principles of trustlessness itself.

So do industry developers aim for revolution, evolution or simply to profit? That depends on the developer, and it’s for each of us to weed through as we become involved and invested in a rapidly expanding space.

With recent news of SEC warnings, government acceptance and nonacceptance it can be hard at times to keep pace with it all. Still, we’ll know that we’re in the right as long as we follow strong communities and transparent development teams with clear roadmaps and open code, even when the market tells us that truth is dead. We hold (hodl) through understanding that code is law, and that developers with this underlying knowledge will build the scalable and secure applications that we’re vetting and incentivizing them to create. While the good within the next generation’s tech icons is great, innovation is driven by need and opportunity. And so for as long as these ideas carry value and there is success to be had remember this: Cash is king.

Truth is Dead. Code is Law. Good is Great, but Cash is King was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

If you’re not one of the 501 email contacts whose details I shared with one another last weekend, let me share with you two stories. They’re both heart-pounding cyberpunk techno-thrill-rides packed with subterfuge, plot twists, and high-crime. The first begins with a Facebook conversation.

I’ve done alright out of crypto this year but I’m no whale and that hurt. My friend was in pretty serious trouble too —

The hacker later indicated that he had an old password of mine and my US phone number. Presumably he acquired the password through a broker who purchased them from a security consultant. Stupidly, the phone number was on my Facebook profile.

This prompted a rapid personal security audit which turned over two serious holes: The compromised password was used for my twitter account and the phone number was attached to an email account which was set as the recovery account to my main personal email.

Realizing that I might have other security holes I hurriedly sent out a mass email, forgetting to BCC.

Sorry Guys. Thanks for the support. No need to keep emailing.

Within hours, all of hackee’s accounts were locked, including his exchange accounts. What I could get to in a timely fashion was re-secured or disabled by administrators. Thankfully, as of this writing it looks like I was the only person to lose any money. Fantastic. . . Lessons?

Keep track of your accounts and don’t re-use old passwords. Ever. In the event that they are compromised you are going to be scrambling around trying to make sure no one is using some long forgotten messaging app or forum account to impersonate you. Using old, insecure passwords for unimportant accounts puts others at risk.

The way you think of an account does not map to how a hacker will. As above, an account you set up to try out a new service will have your name attached to it and likely some contacts, creating a powerful tool of impersonation. It may also disclose messaging history which can build up a profile of your mode of speech and history of interaction with other people. It’s not all about getting into your wallet.

Don’t mix security domains. By linking your phone number to any account, however trivial it’s intended use, you are mixing the world of custodians, liability, and insurance with the unforgiving digital Wild West. The two were not built to work together and should be compartmentalized.

For heavens sake, BCC. Email is tricky business - To, CC, BCC, Subject, Content, filling in all these fields leaves the head spinning. Nonetheless, just as a minimum level of competence is required to operate a motor vehicle before driving on public roads, so a minimum level of competence is required to use public internet services like email. I’m not even being tongue-in-cheek here. The same weekend as this incident I received a newsletter from a well respected blockchain entrepreneur who failed to use BCC. We had a chat about it. Thanks for the commiseration mate.

The problem we are fast running up against is the slippage between interactions in the digital world and their analogue in the physical. Turning now to story number two, and a fictional trust network.

This is a diagrammatical representation of a human trust network. Were this a web of trust in which each participant has the option to either trust or not trust any other node, the path from one node in the network to any other would be open. Web of trust network connections have two states — trusted or not trusted — open or closed. Human trust networks do not work like this though. Humans model the world around them, including trust networks, in stories. This allows for a far more nuanced representation of the world with foot notes, ramifying back stories, and the ghosts of patterns which more often fade to nothing than fully materialize. . .

. . . Bob’s a great guy. Appreciated by his employer, trusted by his friends, and loved by his wife, Dayna. His wife, mentions to an old high school friend George, in a Facebook conversation, that her husband’s blockchain company is consulting with a client to help them raise funds for a business venture. Interest piqued, George does a little snooping online. Indeed this looks like a potentially lucrative venture. Rather than approach Bob’s company through the standard channels, George asks Dayna for an introduction. Maybe Bob can can arrange some kind of discount for George.

After Dayna introduces them, Bob and George converse using Facebook messager and ultimately meet in person at a pub. They talk about the opportunity for a while and then conversation drifts to other subjects. They like the same bands from the ’90s and the same local sports teams but vote for opposing political parties. This leads to a moment of awkwardness between them followed by two hours of spirited debate. Eight or Nine beers deep, the pair realize that they both want a healthy nation but due to cultural and experiential differences their intuitive approach to building a stable and prosperous society is slightly different. The pair stumble out of the bar, past closing, and call Uber taxis. Bob’s arrives first.

“Oh well, this is me,” says Bob, reaching out for a handshake. . .

There is a pause, a moment of tension, a flutter in his chest, just behind the solar plexus. George’s hand meets Bob’s with momentum, their hands clasp at an upward angle, rather than in the formal horizontal configuration. Then, George pulls Bob toward him, and they go in for the handshake hug. They hold it for a second then part.

“Yea, sweet man, good evening aye,” replies George. “Send me the documentation when you have everything sussed and I’ll flick you some cash.”

“Cheers mate,” says Bob, stoically.

The two part ways, their spirits warmed to humanity in all it’s forms. While they may not find themselves together socially on many future occasions, both know deep down that the other is a kindred spirit. One night of drinking has created a bond that transcends traditional social boundries and will last a lifetime.

The next day, Bob is at his desk, pallid and sunken eyed. Alice approaches.

“Get on the beersies last night did we?” Alice asks.

“Yea, sank a few with a potential investor at Shammies after work yesterday,” says Bob, strategically neglecting to mention Dayna’s hand in the introduction. “The guy was a bloody legend actually. Reckons he’s in for ten percent of the round. This isn’t going to be hard to fill.”

Alice ruminates, “Hmmm, well, I’ll be meeting with an interested party this afternoon. It’s a fair bet we’ll have it locked down by the start of next week.” While walking away, she casually mentions, “The IT boys are changing our hosting over the weekend so most of the company services will be down periodically. May as well turn off the phone off and hit the beach. I know I will.”

“Cheers Alice,” says Bob, smiling through the puffiness around his eyes. “Sounds like next week is going to go really well.”

Here we see promises, obligation, expectations of behavior, incomplete information transmission, trust rituals, and the outsourcing of critical actions based on these. There are robust connections: an old friendship, a marriage, and trusted colleagues. There is also a new connection which leverages the scaffold other existing connections provide to support a new social and business relationship. In trusting Bob, George is not only trusting Dayna, but her ability to choose a trustworthy husband. He hasn’t bothered to check that Bob actually works for the company he claims to. In part because they have partaken in a ritual where they let down their social poise and communed as two men bearing witness to the world, largely divorced of narrative context. In part also, because to entertain the idea that Bob was lying would mean adopting a doctrine of skepticism that would hugely increase the cognitive work required to live day to day life. We make critical assumptions like this based on trust every day. It’s Dayna, she wouldn’t marry a scumbag. It’s completely unthinkable.

There is another dimension to this trust network however. The identity and communications infrastructure that mediates it: email, social media, the phone system.

The problem with this infrastructure is that the means by which it is anchored to the physical world is very brittle, and habitual security assumptions can combine with this brittleness with catastrophic results.

The trustworthiness of each human node, as represented above, is exactly half of the matter. Their ability to secure their identity’s binding to communication media is equally important. Yet it is completely unrepresented in the two descriptions of that trust network. Our common experience of an accurate mapping of the digital and physical worlds creates a bias toward trust. But one critical faliure can unravel the entire network, leaving the participants to wonder if they are really speaking to who they think they are, or a malevolent doppleganger.

So what happened to our fictional friends? Well, one month before George met Bob, a hacker, Malory, found a password of Bob’s purchased from a mass data dump comprised of credentials stolen from Adobe, Twitter, Yahoo, his bank JP Morgan Chase, and his ex-employer, the US Army. Malory used that password to access Bob’s Facebook via a VPN in the locality he lived in to avoid raising red flags. Bob’s mobile number was on his company website. Using the “forgot my password” link on his email, Malory identified the phone number as an account recovery vector. Malory then built up a dossier on all of Bob’s regular contacts by cross-referencing their names and email addresses found on company pages and Facebook with the database of stolen credentials. Dayna was the only person with no obvious attack vectors. She only used Facebook to keep in touch with friends and had an email because you need that to use Facebook.

Following Bob’s Facebook exchange with George, Malory decided she had found the mark. That fateful Friday evening she called Bob’s phone company and convinced them to transfer his phone number to a handset in her possession. The she passed the security questions using information from stolen accounts and what was available on Bob’s Facebook profile.

Bob’s phone stopped working. He was too hungover to do anything about it and figured that he just needed to reset the carrier settings. Then he kind of forgot about it and it ran out of battery.

The hacker used the phone to recover Bob’s email account and found the draft SAFE note in Bob’s inbox, along with a note from Alice:

The hacker also found an email from the IT contractor indicating the expected service outages. Feeling ambitious, he/she produced the SAFE notes and emailed them to the investors from Bob’s email, advising them of an ether address change. George, who’s email address the hacker had not been able to find, received the SAFE note by Facebook messenger.

Over the course of the weekend, all but George and John Jonston (known as “Cagey” by his friends in the real estate industry) sent funds to the newly provided address. George did think about sending, but decided to wait until he saw Bob in person again to complete the transaction. Maybe even have a few beers to celebrate.

Malory sat, watching her wallet, waiting for the funds to arrive. They never did, because through some one in a million, completely inexplicable brain fart, she had misspelt the ether address. The funds had been irrecoverably destroyed. After screaming with rage for a little while, Malory, recomposed, turned to the next target on a very long list.

There are endless elements and variables which comprise a trust graph. Far more than can be represented in the digital world, and far more than can be recognized by participants in the physical. Tools we introduce with the intention of increasing the strength of the mapping of the physical to the digital usually do so at the expense of expanding the attack surface. Things like phone numbers and recovery emails. Additionally, the availability of information online makes true security almost impossible. It’s only by being comparatively difficult to hack that we avoid being targeted. There is so much opportunity out there that hackers just don’t have time for all of it. This is humanity’s collective digital security debt. It’s a mine of opportunity and we should expect the hacking industry to grow. I mean BTC-e was a clearing house for billions of dollars of stolen funds—online identity theft is so huge it has its own financial services co-industry!

The interaction of different trust and identity domains is an area of high risk. The human, the digital, and now, the trustless digital worlds are all very weakly bound to one another. You can call up google to rectify and identity theft, and rebind your digital and physical identities. However, there is no one to call about stolen, or even misplaced cryptocurrency. There is no re-binding that identity.

So if the current state of affairs is this bad, why are we adding a new mediation layer with an even more brittle identity binding?

There are lots of answers to this question but for this post I’d like to focus on one. The faliure of existing trust networks. We live in an age where we no longer fully trust our financial system, our governments or the companies we purchase products from. We can’t trust online identities, and I don’t know about those who are reading this, but I don’t believe in God so I can’t trust that entity either.

As a population we are experiencing the sensation of trusting the world we live in less.

The existing networked world is untrustworthy so we are building a new network that doesn’t rely on the assumptions that created holes in the networks of yesteryear.

Binding this network to the physical world is no mean feat however. Perhaps the biggest challenge is not the underlying technology, but translating the UX of this radically new medium into design language the everyman can understand. This is a feat that existing digital service providers have utterly failed to do, and yet we rush ahead with reckless abandon assuming “the problem will solve itself”.

A while ago I was at Cornell, having dinner with Emin Gun Sirer and one of his students Philip Daian. We were discussing the recovery of crypto holdings in the event of death. When it came time for me to share my methods, I explained that my father has my private keys and my mate has the password to decrypt them written down on a piece of paper and stored in a safe place. They looked at me slightly aghast.

“Whoa, you must really trust your friend!”

But I do of course. Implicitly and unreservedly. You can’t drink that much beer with someone and not completely trust them. It’s known as the bond of the pissheads — a completely organic trust network as sturdy as a blockchain. It’s a trust network with a great UX that anyone can understand and get behind. . . and it tastes great! So next meal time, crack a beer with a mate and cheers to the only trust that matters, or even exists — the trust of friendship experienced through ritualized drinking and unmediated interpersonal communication.

Final Note: This trust problem doesn’t apply just to personal identity. It also applies to the provisioners of a trust network and the relationship between the users and the networks themselves. It’s a cultural blind spot that pervades the blockchain space. The parts of the world where people have the leisure time and financial affluence to play with trustless decentralized value networks, are dominated by generally trustworthy, fair entities effectively provisioning their own trust networks. Building these trustless systems is constructing an entirely different, parallel network-of networks along side one that has evolved over thousands of years. Not only that, but it is doing so using an incredibly alien medium and a frail identity mapping infrastructure.

At ConsenSys, the uPort team — a team of nearly 20 — has been grappling with exactly this problem for nearly two years. They have built some great stuff, but progress has been far slower than many expected. uPort is currently finding itself deployed in service to the trust networks it was conceived of to replace. This is not a dis — it’s the right move. If you cant beat them, join them. One day, hopefully in our lifetimes, the nation state/corporate tyrants will be saying that about us.

Happiness is a Narrative-Based Trust Network was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.

As scalability and connectivity solutions begin to take shape in the decentralized space, the eventual reach of blockchain or distributed ledger technology (DLT) has come a bit more into focus, and a breakthrough that originally seemed to have potential implications for financial transfers appears to be on the cusp of transforming the next generation of many of the world’s largest industries.

The realization of these advancements will likely depend on the extent of interconnectivity, as organizations and thought leaders are now debating the risks and benefits of private permissioned chains versus the use of connections via larger public networks. This debate between public and private isn’t new. Brian Forde, the Director of Digital Currency at the MIT Media Lab, noted in a recent PC Magazine piece that “a private blockchain is an intranet, and a public blockchain is the Internet.” He states that, “the world was changed by the Internet, not a bunch of intranets. Where companies will be disrupted the most is not by private blockchains but public ones.”

Still, with recent scalability breakthroughs from private ledgers like Microsoft’s Coco or @quorum, and with differentiated public chains for specializing in monetary transfer, anonymity, and distributed computing, many in the industry realize that there may not one clear ‘winner.’ Bitcoin, for example, will likely continue to exist even if Ethereum’s development achieves scalability via proof of stake, privacy through zero-knowledge proofs (zkSnarks) and sharding for a light-weight and more distributed platform. These multiple public chains that could become siloed intranets serving different communities and industries just as private permission chains would. Thus there is already a race underway to implement a settlement layer to facilitate interchain communication.

Projects like Cosmos and Tendermint, the Polkadot Network, and the recently unveiled Plasma Network hold the potential keys to linking both private and public ledgers, thereby allowing secure data transfer and inter-chain contract execution between networks without unnecessarily exposing private data, thus connecting these intranets into a new internet.

In past decades, security concerns and the fear of associating with bad actors on a larger internet kept many companies to localized networks, but the demand for non-localized user access and intra-party communication led to the widespread internet adoption that we all enjoy today.

Ethereum’s co-creator Vitalik Buterin weighed in on the likely direction of the industry this week via TheNextWeb’s open Q&A session, in which he stated that “public chains do indeed have more long-term potential.” He expanded on the idea stating, “I expect in the long term we’ll see every possible combination of public and private emerge, including pure consortium chains, consortium chains connected to public chains via relays, consortium chains with fraud proofs enforced on public chains (ie. Plasma and similar systems), purely public chains, and so forth.”

The basic tenets of providing information only to trusted parties with the right access layers, all while being able to confirm transactions with otherwise zero proof is already underway via projects like ZCash and Ethereum’s coming implementation zkSnarks as part of the Metropolis hard-forks.

Buterin noted this move as well, citing that “the challenge right now is to get the scalability of public chains higher, and come up with better answers for privacy challenges. Many people talk about consortium chains where data is encrypted so that only people who need to see a piece of data can see the data.”

The idea of need-to-know access has crossover interest between industries. The health information industry is a primary example. While digitization of health records would see wide-ranging benefits, concerns around the safekeeping of private patient medical information has led to legal and other barriers. The fear that a large medical or healthcare conglomerate may have information exposed or hacked due to a single point of failure could be alleviated by advancements in decentralization. Other benefits, such as the easing of record transfers between medical professionals across locations, could be made achievable as well. Specifically, private offices and companies with permissioned chains connected to larger public ledgers could protect private data while allowing for layered need-to-know access with the right matching of user/provider credentials. For example, a general practitioner with a medical ID code from an accredited institution, when matched with the ID code from a patient’s insurance card could grant access to certain top level information like major allergic reactions in case of emergencies when health records are not immediately available. With given patient consent, the need to manually request data transfers between offices could be removed as well. Case in point, a consenting patient’s dental insurance ID could be accessed by a new accredited dentist, and the matching of the two IDs would grant read/write access to dental-only records.

Of course, banking implications are also wide-ranging. A John Doe’s transfer from Santander to his mother Jane’s account at JPMorgan Chase could today take days to settle. Intra-bank projects based on permissioned versions of Ethereum are being explored and developed for their potential to decrease security risks and increase transaction speeds for individual banks, but the ability to connect and sync with others in banking industry while protecting private data has major user experience implications like instant transaction settlement and the availability of fiat funds via DLT.

Larger and more widely-used public networks are inherently more heavily tested and come with a lower the risk of breach over time. Bitcoin is, in a sense, an eight-year-old 70-billion dollar bug bounty. Critical issues and points of failure in code are more likely to exist when networks receive limited testing or are less stressed by good and bad actors, as each line of code adds potential attack vectors as we’ve learned from recent parity bugs, and through single fatal error that resulted in the 2016 DAO debacle.

Permissioned chains signal the beginnings of industry adoption and will remain private in the short term in the name of safety and privacy, but over time they would become self-limiting. Open-sourced and long-tested decentralized networks will always correlate with true interconnectivity, and isn’t that the goal of distribution after all?

The Distributed Future: How the Eventual Migration from Permissioned to Permissionless Ledgers Will… was originally published in The Ether Review on Medium, where people are continuing the conversation by highlighting and responding to this story.