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Cornell IC3 Researchers Propose Solution to Bitcoin’s Multisig “Paralysis” Problem

Owning cryptocurrency comes with its own set of challenges. One of the biggest of those challenges is managing the private keys that enable you to spend funds. Lose your private keys, and your money is gone.

In a business environment, a common way to manage funds owned by multiple people is via what’s called a multisignature (multisig) address, a type of smart contract requiring two or more parties to sign off on a transaction to move the funds. 

This can be problematic, however. Let’s say you have a three-of-three multisig that requires you and two business partners to sign off on a transaction. If one person dies, disappears or becomes incapacitated, those assets become frozen — a risk some might feel uncomfortable with when dealing with tens of thousands of dollars or more.   

One way to ameliorate that risk might be to opt for a two-of-three multisig, where only two instead of all three individuals need to sign off on a transaction. But that’s not a complete solution either. Two players could conspire against the other one and run off with the money.

What now? If your funds are on the Ethereum blockchain, you could write a smart contract that would allow you to free the funds if one person in your trio disappeared.

However, Bitcoin with its limited scripting language makes things more difficult. “This seems like an unsolvable problem if you think about the traditional tools,” said Ari Juels, a professor at Cornell Tech and co-director of the Cornell Initiative for Cryptocurrencies and Contracts (IC3).

Paralysis Proofs

In a paper titled “Paralysis Proofs: How to Prevent Your Bitcoin from Vanishing,” researchers Fan Zhang, Phil Daian, Iddo Bentov and Ari Juels from the IC3 outline how to deal with what happens when a party is unable, or unwilling, to sign off on a multisig transaction in Bitcoin. The solution involves a combination of blockchain technology and trusted hardware — Intel SGX, in this case.   

Trusted hardware allows you to run code inside a protected enclave. Even a computer’s own operating system is unable to access data inside an enclave, so if your computer were to be hacked, the code in the enclave would remain secure.

IC3’s solution proposes replacing a trusted third party, such as a lawyer or a bank, who would put money in an escrow, with a trusted hardware solution that retains control of a master key to the funds.  

If one of the three people in the contract dies, the other two initiate a “paralysis proof.” That proof is based on a challenge sent to the missing third person. If the missing person responds to the challenge, the money stays put. If the missing person does not respond, the trusted hardware releases the funds to the remaining two players.  

Trusted hardware is only part of the solution, however. If the third person were to try and respond to the challenge request with an indication she is still alive, conceivably, the other players could intercept that message. To ensure that does not happen, the second half of IC3’s solution involves sending the message via the blockchain, which provides a tamper-proof and censorship-resistant medium.    

“By combining these two [methods], we can achieve the exact properties we’re after,” Juels explained to eBits.Co. “We can enable trusted hardware to determine whether or not somebody is alive, and there is no way to prevent a relevant message from getting transmitted if it is coming through the blockchain.”   

How It Works

Put simply, this is how to achieve a paralysis proof as outlined by the IC3 researchers:

  • Two players suspect a third is dead, so they post a challenge on the blockchain. The challenge consists of a tiny “dust” UTXO that the third person must spend within a certain period of time, say 24 hours, to prove she is alive.
  • The two players also get a “seize” transaction they may post to the blockchain later to collect the funds, if the third person does not respond to the challenge.
  • If the third person sends back a response by spending the UTXO, the game is over; the two others are not able to take control of the funds.  
  • Alternatively, if the third person does not return an “alive” signal by spending the UTXO before the time-out, then the two others can use the “seize” transaction to take control of the funds.  

This not the only use case for a paralysis-proof system. Juels thinks the solution would work well in any situation that called for a controlled access to private keys that could not otherwise be maintained on a blockchain. “It is actually a very general scheme you could use for lots of other purposes,” he said.   

For instance, a paralysis-proof system could be used as a dead man’s switch for control over the release (or decryption) of leaked information or a journalist’s raw materials. It could also be used in numerous ways to control daily spending limits from a common pool of money or as a conditioned expenditure based on an outside event (as reported by an oracle), like a student getting good grades or a salesperson meeting a sales quota.   

“Basically, you can a rich set of conditions around the expenditure of money using the fact that a trusted hardware kind of acts like a trusted third party,” said Juels.

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Dispatch Labs CTO Zane Witherspoon Explains How His Platform Created an Innovative Incubator Model

Dispatch is a platform promising zero transaction fees and a speed of tens of thousands of transactions per second (TPS). Is this platform a theoretical pipedream or worth a look? Find out more in this exclusive Merkle interview with Zane Witherspoon, co-founder and CTO of Dispatch Labs.

The Merkle: Can you tell us briefly about Dispatch Labs and how you got involved?

Zane Witherspoon: Dispatch Labs is a new chain built as a platform for data-driven DApps.

I was organizing the San Francisco Ethereum meetups when I met Matt McGraw and Patrick Wickstrom for the first time. We started talking about an idea of theirs for royalty leakage tracking using blockchain. It was probably the most boring thing you could do with such a new and exciting technology. We kept in touch, and started thinking about music. I’m a musician and Matt and I both have many artist friends, making us very familiar with the problems of artists and distribution costs.

We set out to make a content marketplace built on the blockchain, empowering artists to distribute their own music without middlemen taking a cut [of] their profits and bringing music to consumers for less. When we looked at platforms, we realized no blockchain could handle this quantity of data. That’s when we started working on building an underlying protocol and [it’s] how Dispatch Labs was born. A platform with speeds robust enough to support streaming music also had many other possible uses: AI, IoT, machine learning, streaming video, health records and data transfer, and more.

Both Matt and Patrick saw the bigger picture faster than I did, and as we built the platform, they brought up the idea of a consultancy. Patrick had spent years as a consultant at [PricewaterhouseCoopers] and Matt had helped many startups find major success, and [they] wanted to bring in people we could support as a consultancy and also introduce to our platform. I was so against it at first, but I couldn’t have been more wrong. We ended up forming a governing organization called The Bureau with Constellation Labs, a DAG protocol based on reusable smart contracts.

The Bureau became our innovation hub and governing organization, and our underlying protocols, Dispatch Labs and Constellation became the spokes. The Bureau lets us work with interesting blockchain projects, [supporting] their success as startups. In this structure, the Bureau builds out our connections, Constellation’s DAG works well at data intake, and Dispatch powers data collection and processing.

The Bureau at work inside Dispatch Labs’ San Francisco office

The Merkle: What kinds of partnerships does Dispatch have for getting new users and businesses on its platform? I saw you recently partnered with Utopi, offering a streaming video service.

Witherspoon: While we’re pretty blockchain-agnostic as far as how our Bureau clients develop their projects, many of them are excited to build on Dispatch because of the resources we can provide them and the influence they can have in the development of the protocol.

Nanovision is putting open medical data on the blockchain. This shared data would help to bring faster FDA approval for new prescription drugs. Nanovision also partnered with ARM processors to offer nanochip devices that could store your personal molecular health data on Dispatch.

Bucket seeks to remove coins from the fiat economy. Metal change like coins create a wasteful transportation cycle for companies to cash out at banks, and coin counter machines take a huge cut of consumers’ money for their service. 

The Merkle: You came up with a unique protocol known as Delegated Asynchronous Proof of Stake. How is this different from traditional Proof of Stake, and why was it necessary?

Witherspoon: Traditional blockchains have a hard cap [on the number of] transactions per second. This means the number of transactions is always limited by the number of blocks per second and the number of transactions per block. DAGs are one solution, but they are hindered by the shared quantity of data needed to be stored. DAGs like Nano and IOTA require you to keep a copy of the chain, meaning each individual has their own chain and keeps track of everyone else’s transaction.

Our solution was to apply a hybrid decentralized solution like Delegated Proof of Stake (DPoS), with a smaller quorum of elected validators, to a DAG structure to prevent bottlenecking like we see on traditional blockchains. We DAG-ized DPoS, removing the TPS bottleneck. In Delegated Asynchronous Proof of Stake (DAPoS), the bottleneck becomes the validators themselves. So as validator algorithms and hardware get better, the TPS of the network can scale up with them.

The Merkle: What kind of security auditing are you doing to make sure the Dispatch platform works as intended?

Witherspoon: One of the markers of [the] immaturity of [the] crypto space is there’s virtually no Quality Assurance (QA) on any crypto project. We have a dedicated QA team in our engineering department focused on testing our product. We hired a team of brothers, Dennis and Dimitri Molchanenko, who invented Redwood HQ, one of the most popular QA frameworks used by the US Department of Defense and others. We’re working on our own QA, and trying to encourage the rest of the crypto community to start thinking about it early on in projects as well. We’re also planning on [having] outside code auditing closer to launch.

The Merkle: What’s the most exciting thing about working on new protocols and projects in crypto right now?

Witherspoon: I get to talk about technology and business a lot, but one of the things I’ve learned as a 21 year old CTO [is that] the tech is one thing, but so much of the time it’s the energy of people that’s the magic behind something. I know my career is young, and I constantly feel amazed and blessed to be on the founding team I am, and that Matt and Patrick have taken me under their wing. I love these guys.

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Search and Trade Directly with AirSwap: A Merkle Exclusive with Co-Founder Don Mosites

AirSwap launched last week, enabling more than a million dollars in trades on day one. Offering a way for buyers and sellers to find each other and trade directly, AirSwap isn’t like traditional or decentralized exchanges. Find out more about AirSwap in our exclusive interview with co-founder Don Mosites.

The Merkle: Hi Don, thanks for speaking with us. I first reached out to you when I was writing a piece on eBits (DEXs), and you told me that AirSwap isn’t a DEX because it’s more of a discovery service for peer-to-peer trading. How would you describe AirSwap?

Don Mosites: Thanks for having me. Yes, we don’t see AirSwap as a DEX. We believe the concept of “exchange” itself is already decentralized on the blockchain between peers. Our system lets those peers find each other and make trades directly. So technically, we’re more of a marketplace, and our platform is powered by search.

The Merkle: Could you give some background on why AirSwap is set up differently from DEXs and traditional order book setups?

Don Mosites: When my friend and co-founder Michael Oved first connected to the Ethereum community, he began to apply his experience in algorithmic trading and electronic markets to figure out decentralized trading designs. His early research revealed some limitations of decentralized order books.

Order books evolved as fast and predictable systems that prioritize and execute orders. Decentralizing this process creates a difficult coordination problem. Last year, 0x created a protocol for “relayers” to decentralize order books, which still faced race conditions, front running, and having to pay for cancels, which is a non-starter for market makers.

Seeing this, we opted to instead focus on peer-to-peer, in the spirit of the original Bitcoin white paper. With AirSwap, all three components of trade are decentralized: custody, execution, and settlement. We simply provide a peer discovery service called an Indexer, which looks and feels like a bulletin board with a search engine.

The Merkle: What are the advantages of this setup?

Don Mosites: First, AirSwap can scale with the growing token economy as market makers come online and trade more and more assets, and because trades are peer-to-peer, there are no fees on those transactions. As for pricing, given that we’re built for market makers, spreads will be tighter and you’ll see pricing comparable to centralized systems as more makers come online.

The Merkle: There are so many DEXs and centralized exchanges available today, where do you see AirSwap in all this? How do you stack up against competitors like 0x OTC and Radar Relay?

Don Mosites: We bring security, efficiency, and better pricing to decentralized trade. Just opening the platform last week, over $1 million of trades were made through the marketplace, and we had an incredibly positive community response. AirSwap offers more efficient trading and does not suffer the limitations of decentralized order books as mentioned before. Users are always in control of their assets and make trades directly, peer to peer. Because trades are direct between peers, there’s less friction, and pricing will be better than alternatives, even comparable to centralized systems.

The Merkle: What are some of the security measures you’ve taken to ensure that AirSwap is reliable for users? Are you doing any outside code auditing or other forms of security measures?

Don Mosites: We had two independent auditors look at our smart contracts available on our GitHub. We’re also confident in our security posture because we don’t handle users’ funds or settle trades. That all happens on-chain, between individuals, using smart contracts.

The Merkle: What’s the number one piece of advice you’d offer to new investors in the space?

Don Mosites: Pick up a hardware wallet, because dealing in keystore files and private keys on your own is dangerous. Decentralization means security is in your hands, so you need to be very careful about how you control your assets.

The Merkle: Where do you see blockchain technology heading in the long term? What do you think will be the effects?

Don Mosites: This is a huge question, but where we can have an impact is in the reduction of expensive and fragile trust systems of exchange, replacing them with new ways for people around the world to safely transact without intermediaries.

The Merkle: What motivates the AirSwap team to create projects in this emerging market?

Don Mosites: So much about what we’re doing is powerful in how it makes us feel. As technologists, it’s incredible to put these tools to work and see a positive impact. There’s a real chance to make the world a safer and more efficient place to trade, and we think the power of that is yet to be seen.

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Hollywood Producer Andrea Iervolino Launches TaTaTu, a Blockchain-Powered Social Entertainment Platform

Since music and film became digitized, both the RPAA and Hollywood have fallen victim to a multitude of platforms that have come into existence, making content freely available and accessible to people across the world, driving down profits and revenue streams.

But, with blockchain technology, there may finally be a means by which to harmonize the digital age with the entertainment space, ensuring that content creators are protected and that brands and companies receive a fair distribution of revenues from production and content distribution.

In the hopes of balancing the equation, Hollywood producer Andrea Iervolino is launching a new blockchain-based platform, TaTaTu, that intertwines social media activity with entertainment viewing. TaTaTu is a global and social entertainment platform through which users receive rewards for watching movies, sports, gaming, and other forms of content, as well as from their friends’ viewing.

Recognized for films like End of Watch, ApocalyptoThe Merchant of Venice, and Machete, Iervolino hopes to bring Hollywood to the blockchain by integrating a 360-degree entertainment platform that ensures secure digital rights records, as well as the fair distribution of advertising revenue between users and content providers.

As the co-founder of AMBI Media Group, a multinational consortium of vertically integrated film development, production, finance and distribution companies, Iervolino’s vision is to develop a nurturing community of dedicated and engaged users who watch and create videos that can then be shared with friends and members of the community.

Harmonizing The Scale

Users

Thanks to blockchain technology, users will finally be rewarded for their social entertainment activity in an open and decentralized way – earning tokens to watch movies and other content for free, and receiving additional tokens from the movies and the content consumed by their friends.

Users can engage with their friends and be rewarded for their social media relationships by receiving digital tokens for views generated by both themselves and their friends. Token holders will also take active part in shaping the future of the platform, with the ability to vote on which content the platform should provide in a fully transparent and decentralized way.

Content Owners

The industry is no stranger to piracy and illegal downloading. Well, finally, content creators no longer have to worry about not being compensated fairly – or at all – for their work, because platforms like TaTaTu will monetize every piece of content based on effective user consumption and real-time views, providing for transparency and real-time financial reporting.

“Social networks and entertainment platforms are making huge profits by gathering data from their users and selling it to other corporations without rewarding their users,” says Iervolino. “There is a need for a platform that provides higher levels of transparency to their users, brands, and rights holders about the revenues generated and monetization of users. Audiences need free, legal and quality content with a simple user experience.”

Most content-based platform business models are centered around the idea that users need to pay for their content, which encourages users to find alternative, more cost-effective routes, ending up in the illegal marketplace (e.g., torrents and the dark web). “Well, no more, because TaTaTu is listening to the marketplace and adapting—giving free access to content and taking it one step further by rewarding users with an automatic monetization system,” says the Hollywood producer.

Brands

Advertisers can target specific audiences by placing their ads on a reliable platform with premium content. Brands get access to very detailed information about their audience. All user profiles are verified, and all the views and engagement metrics are accurate.

Encryption and Transparency

Thanks to its blockchain, TaTaTu can record each transaction in an open and incorruptible distributed ledger, ensuring that users and content providers get rewarded. A digital rights management platform will ensure that all talent, distributors, and studios have an accurate record of their work recorded and secured on the blockchain, reducing the percentage of piracy throughout the industry.

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