---
# System prepended metadata

title: Reality Check
tags: [Welcome to web3, ' tezos']

---

---
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!)

