--- tags: Welcome to web3, tezos title: Reality Check --- # DLT Reality check ## Blockchain - The blockchain is a ledger - One can write ledger entries in it - Things the blockchain does - Reliably timestamps entries - Offers a single source of truth on the order and content of entries - Executes *simple* smart contract logic with an audit trail on the ledger - On external call - Things it does not do - Serve web pages - Store files - Run artificial intelligence logic - Act on real world data by itself - Initiate an action without external call - etc. ## Oracles - Write real world data onto the blockchain - Weather data - Asset prices - etc. - It is expensive to write a datastream on chain - Centralized oracle - Single, trusted entity providing the data - Decentralized oracle - Some form of consensus system for multiple data providers - More robust, doesn't require trust in a single entity - More complex ## Wallets and accounts - NOT anonymous - Cannot be used as true indentity ## Tokens - Represent objects (NFTs) or amounts (fungible tokens) - 'Ownable' (pseudonymously, through wallet) - Can be transferrable or locked - Creation dependent on a pre-determined framework - Destruction dependent on pre-determined framework - Token smart contract - Is a record of the 'ownership' history of one or multiple digital assets - Understands - 'Ownership' - 'Alice has X' - Transfer of ownership - 'Alice gives X to Bob' - 'Now Alice doesn't have X, and Bob has X' - Metadata - Description of the asset - Where the asset is stored (for NFTs) - May include instructions on re-sale royalty payments (only instructions, not enforcement!) - Does NOT understand - Sale - Sale price - Value - Identity - Theft - Loss - All transfers of ownership are transparent and auditable - Except for 'anonymized tokens' - These are built to make transfers anonymous and account balances opaque - Technologically complex - Face various regulatory issues - Sale / auction system - Can process the exchange of two tokens for each other - Eg. an NFT for a price in a stablecoin - Ensures neither party can defraud the other - Usual process of a sale - I transfer the NFT to the sale platform - A buyer pays the price to the sale platform - The sale platform - Transfers the NFT to the buyer - Transfers royalties to beneficiaries as set in the metadata - Transfers the rest of the sale price to me - Can be centralized platform, with off-chain logic - Requires a level of trust in the platform - Handles royalty instructions voluntarily - Voluntary on the side of the platform, not on the side of the seller / buyer - Can be fully on-chain, decentralized - Implemented by smart contract - Fully trustless - !!! On Tezos, currently incapable of handling royalty instructions !!! - This is due to a fundamental technical limitation in the way token standards are implemented :( - The seller can honor the royalty rules though - It's fully voluntary and manual - However, *not* honoring it will be visible to all for all time (transparency) - Centralized sale / auction platforms ## Badges and certificates - Two approaches - NFTs - linked to a wallet address - Certificate registries - The case against badges as NFTs - NFTs represent movable objects - The movable object representing it is just an artifact - A college degree is not the paper it's printed on - A law is not the paper it was signed on - A medal of bravery is not the piece of cloth and metal one can pin on their uniform - Speech-as-an-act - It exists as part of our shared social reality - It is not subject to ownership - The person who is president does not *own* their presidency - They have been pronounced president through some process (speech-as-an-act) - They can be removed from office through set processes - Conclusion: the movable object *does not need to be recreated* for badges on chain - It arguably shouldn't be (~ artificial exhaust smoke for electric cars) - - Cryptographic document store technology - A smart contract which - Controls authorization of signing keys for issuance and revocation - Tracks issuance and revocation certificates - Facilitates searchability of these - Issuing new documents (via Merkle trees of salted certificate hashes) - Excellent storage economy and privacy - Any number of documents can be issued at once with only one, small chain write - eg. all the degrees of a college graduation year - Implicit timestamping through the blockchain - Fully auditable - In case of a successful attack, illicitly issued certificates are easy to identify - Revocation of certificates (via Hash maps of salted certificate hashes) - One operation per revoked certificate - More expensive than issuance, but needed for searchability - Globally accessible and searchable - This is a *big* improvement over non-blockchain cryptographic solutions - Erroneous or malicious revocations can be withdrawn - Certificates held off-chain in secure storage - Certificates can be verified on-chain - Challenges - Needs identity to tie to - Name & Birthdate - GDPR clear because it's offchain and hashes are salted - SSI? - Need secure storage platform - Mobile 'card wallet' - USB stick :P - Secure web storage (UX, GDPR) - Existing standard - OpenBadges ------------------ LAS ## Keep in mind - It is expensive to write a lot of data on the blockchain Treat blockchain as a form of verification and registration ## Wallets and accounts - NOT anonymous - Cannot be used as true indentity ## Payment Enable fiat to crypto - Need a KYC provider (possible) - Or you need do it yourself, but requieres legal certainty about KYC (harder) Crypto payment - If you are a custodian, you need to process all payments (VAT, etc) - If you make it non-custodial (smart contracts interacting) you only need to tax your income Nothing in this document is official legal advice, always consult with your own lawyer ## Tokens - Represent objects (NFTs) or amounts (fungible tokens) - 'Ownable' (pseudonymously, through wallet) - Can be transferrable or locked - Creation dependent on a pre-determined framework - Destruction dependent on pre-determined framework - Token smart contract - Is a record of the 'ownership' history of one or multiple digital assets - Understands - 'Ownership' - 'Alice has X' - Transfer of ownership - 'Alice gives X to Bob' - 'Now Alice doesn't have X, and Bob has X' - Metadata - Description of the asset - Where the asset is stored (for NFTs) - May include instructions on re-sale royalty payments (only instructions, not enforcement!)