Cryptography

Privacy-focused blockchain network closes Aztec Connect tool

Aztec Network said the research made with Aztec Connect would be usable and critical to developing a next-generation blockchain.

Privacy-oriented blockchain platform Aztec is preparing to shut down Aztec Connect, the network’s privacy infrastructure serving as the encryption layer for Ethereum.

Aztec Network officially announced the upcoming closure of Aztec Connect, and plans to disable Aztec Connect deposits from front-ends like zk.money and zkpay.finance on March 17.

According to a blog post by Aztec, users will be able to withdraw their funds from Aztec Connect with no fees for one year. “While withdrawals will always be possible, they will become significantly more burdensome after March 21, 2024,” Aztec said, recommending users withdraw funds as soon as possible. Since it launched in July 2022, Aztec Connect has amassed more than 100,000 users, the announcement notes.

From March 2024, Aztec will no longer run a sequencer, meaning the current system will no longer publish rollup blocks processing Aztec Connect transactions. “Contract permissions will be renounced, and all rollup functionality will be ceased,” the announcement reads.

As Aztec has fully open-sourced the entire Aztec Connect protocol, the firm encourages the Aztec community to fork, deploy and operate a new version of the system. “We’d love to see an independently-operated Aztec Connect and are ready to fund it,” Aztec said.

According to the announcement, the shutdown of Aztec Connect marks a milestone in the development of a decentralized general-use encrypted blockchain. Before launching Aztec Connect in July 2022, Aztec first experimented with using a zk-Rollup with Aztec 1, which was “slow, inefficient, costly” and limited in functionality to “basic private transfers.”

Source: Aztec

Aztec emphasized that the research made with Aztec Connect will be usable and critical to the development of a next-generation blockchain, providing a basis for a fully programmable version of encrypted rollups, adding:

“It’s undeniable that Aztec Connect was an important stepping stone towards realizing our ultimate goal. It’s now time for us to focus fully on that goal: a decentralized general-use encrypted blockchain.”

After closing Aztec Connect, Aztec plans to focus on developing the universal zero-knowledge language known as Noir and the next-generation encrypted blockchain.

Related: Crypto projects respond to privacy coin ban in Dubai

The news comes amid ConsenSys preparing to release its zero-knowledge Ethereum Virtual Machine rollup on a public testnet on March 28. The launch will follow more than four years of research, potentially enabling faster transactions, higher throughput and better security of settlements on the Ethereum blockchain.

Manta Network conducts record-breaking trusted setup ceremony, 4,000+ contribute

A trusted setup ceremony is an initial process needed to secure systems that utilize zero-knowledge proofs.

Manta Network recently completed the largest trusted setup ceremony ever, with over 4,000 people participating, according to a press release provided to Cointelegraph. The setup was done in order to help create MantaPay, an app that intends to allow for private payments between individuals.

According to the company, MantaPay will run on the Polkadot parachain Manta Network and on the Kusama parachain Calamari. It will use zero-knowledge proofs to ensure that only the sender and recipient of each payment will be able to view the payment.

Setting up a zero-knowledge-proof system requires multiple parties to participate in a ceremony called a “trusted setup.” This process ensures that the shared secret upon which the system relies is eventually thrown away, removing the ability of an attacker to create fake proofs at any point in the future. The more people who participate in a trusted setup, the more secure the resulting system is.

MantaPay’s trusted setup was the largest ever recorded, with over 10,000 registrations and 4,328 contributions. The contributors came from a total of 177 countries, according to the team’s press release. The registration process first began on Oct. 10, 2022, and the first contributions were made on Nov. 28, 2022.

Polkadot founder Gavin Wood expressed excitement for Manta Network’s accomplishment. He argued that similar processes could pave the way toward decentralized web identity systems in the future, stating:

“The widespread adoption of a self-sovereign web3 relies in large part on the innovation of trustless privacy preserving mechanisms such as zero-knowledge proofs. I’m thrilled to see the forefront of that innovation happening in the Polkadot ecosystem. Manta Network’s recent record-breaking trusted setup and the upcoming launch of MantaPay showcase the tremendous innovation in this field.”

The entire ceremony took almost two months to complete. During the registration phase, registrants were asked to download a piece of software that generated a 12-word mnemonic phrase for them. When the contribution phase became open, each participant had to then run the software a second time and enter their seed words into it. This generated a cryptographic result that was sent to the servers, according to an explanatory blog post from the team.

Related: Solana Dapp allows users to make secret messages to each other

Users should have then thrown away these seed words once the task was completed. If even a single contributor threw away their seed words, the resulting system should be impossible to crack. Kenny Li, chief operating officer of Manta Network, put it this way:

“Everyone participating in the trusted setup only knows a piece of the information, so if only one participant keeps their piece secret, the entire scheme is secured and cannot be regenerated. […] The more participants there are, the better the security of the scheme.”

Now that the trusted setup is complete, Manta Network’s next step is to release the MantaPay app itself. The developers have not announced when the app will be published, but they have hinted that more information about this will be coming soon.

Cast your vote now!

Zero-knowledge proofs were first proposed in 1985 by cryptographers Shafi Goldwasser, Silvio Micali and Charles Rackoff. In the blockchain world, these proofs are best known for being used in Starkware’s StarkEx and Immutable X platforms, which are layer 2s of Ethereum.

Manta Network intends to use this technology to increase privacy in payment systems. It made waves in the venture capital funding world, having raised $1.1 million in February and another $5.5 million in October.

Cryptosat launches second ‘cryptographically-equipped’ satellite using SpaceX rocket

The addition to the satellite constellation was part of efforts to make space a “new battleground in the quest for bulletproof cryptography” by expanding computational power.

The company behind a crypto-satellite module launched in May has announced that an additional piece of its blockchain-related infrastructure went into Earth orbit.

According to an announcement, one of SpaceX’s Falcon 9 launch vehicles carried a “cryptographically-equipped” Cryptosat satellite — called Crypto2 — into orbit on Jan. 3. The addition of Crypto2 to the firm’s satellite constellation was part of efforts to make space a “new battleground in the quest for bulletproof cryptography” by expanding its computational power.

“The launch of Crypto2 gives us more availability and more powerful spec to support the growing portfolio of use cases in our development pipeline,” said Cryptosat co-founder Yonatan Winetraub.

Speaking to Cointelegraph, Winetraub said some of the use cases the firm was exploring with the satellites include data encrypted to a public key and retrieving a signed timestamp for applications like smart contracts. In addition, the satellite is capable of generating a cryptographic key pair and releasing a private key after a given amount of time in an effort to prevent “premature decryption.”

SpaceX launched the module as part of its Transporter 6 mission, which lifted off from Cape Canaveral Space Force Station at 2:56 pm UTC on Jan. 3. In addition to the Cryptosat payload, the Falcon 9 rocket carried 114 satellites into orbit for various operators worldwide.

SpaceX Transporter-6 Mission launch on Jan. 3. Source: YouTube

Cointelegraph reported in May that the Crypto1 — the first satellite Cryptosat launched — aimed to facilitate blockchain applications by providing a physically unreachable, tamper-proof platform. The technology behind the satellite had been previously trialed on the International Space Station, or ISS.

“There’s a lot of need for this,” said Cryptosat co-founder Yan Michalevsky in May. “If we’re looking into protocols, especially in Web3, there are whole financial systems and smart contract systems, kind of digital legal agreements that depend on the trustworthiness of the cryptography behind it.”

Related: Bitcoin in space is good for user privacy, says Adam Back

Other private crypto firms, including SpaceChain and Blockstream, have turned to space as an alternative solution for blockchain validation, multisignature wallets and verifiable time-delay functions. In 2019, SpaceChain sent tech to the ISS aimed at demonstrating the receipt, authorization and retransmission of blockchain-based transactions. Similarly, a crypto user in Brazil used Blockstream’s satellite network to establish a Bitcoin (BTC) node in Earth orbit.

Binance Proof-of-Reserve pledge gains support following FTX crisis

The call for a more detailed disclosure of liquidity through the use of Proof-of-Reserves has been backed by many high-profile industry figures.

Following the liquidity crisis and acquisition of cryptocurrency exchange FTX, Binance CEO Changpeng “CZ” Zhao said his exchange will soon start a Proof-of-Reserves audit system to allow verification of its digital asset holdings.

In a Nov. 8 Twitter post, Zhao pledged to implement a Proof-of-Reserve mechanism at Binance to provide “full transparency” through the use of Merkle Trees — a data structure used to encode blockchain data more efficiently and securely.

A Proof-of-Reserve audit is ordinarily conducted by an independent third party to ensure the custodian’s assets are owned as claimed.

The Binance CEO’s intention to implement Proof-of-Reserves comes after Binance agreed to buy rival cryptocurrency exchange FTX on Nov. 8, who’s been rumored to be on the brink of financial collapse despite CEO Sam Bankman-Fried initially dismissing the claims.

Cointelegraph contacted Binance to confirm if the exchange had begun implementing a Proof-of-Reserve system but did not immediately receive a response.

Chainlink CEO Sergey Nazarov expressed his views in a Nov. 8 tweet that a cryptographic-based Proof-of-Reserves mechanism could paint investors with a more clear picture of the solvency situation of a trading venue or financial firm, and “is becoming the new industry standard.”

Meanwhile, crypto exchange Kraken has already implemented its “advanced cryptographic accounting procedure” to allow users to verify their token balances since Feb. 2022.

Crypto exchange OKX also announced its plans to roll out a Merkle tree-based Proof-of-Reserves audit system in a Nov. 8 Twitter post —- something they consider to be an “important step” in establishing a “baseline trust” in the industry.

Related: Binance’s FTX acquisition seen as chess move by crypto community

The idea of more Proof-of-Reserve audits received near-full backing from the Twitter community, with crypto industry figures weighing in on the move by Binance.

Host of The Daily Gwei podcast Anthony Sassano and founder of open-source crypto exchange ShapeShift Erik Voorhees both suggested Proof-of-Reserves are already integrated into decentralized finance (DeFi) and automated by smart contracts.

The founder of crypto market intelligence platform Messari, Ryan Selkis, took things one step further, arguing that regulators should direct their attention to focus on the more centralized players in the industry.

But not all agreed. Antonio Juliano, founder of crypto derivatives trading platform dYdX, argued that a Proof-of-Reserves wouldn’t disclose all necessary information needed to verify an exchange’s holdings. 


What is Humanode human-powered blockchain?

Humanode is the decentralized crypto-biometric network based on 1 human = 1 node = 1 vote ethos that brings Sybil resistance to the crypto space.

The future of blockchain and biometrics merge

The merge of blockchain and biometrics has cogent potential. A new emerging ecosystem based on it is here to improve human life as such.

The current crypto paradigm is dominated by power- and capital-based schemes. Appearing as an alternative, Sybil-resistant human-based protocols allow reorienting the systems away from such technocratic and oligopolistic narratives, providing true decentralization and democracy.

Infrastructures based on human biometrics combined with blockchain are capable of creating innovative decentralized human-based digital verification layers and stable financial networks that rely on the existence of human life itself. 

Biometric-based blockchain projects formalize a new framework for a prosperous and regenerative world, each in its own unique way. Some of them specialize in identity verification for blockchain services, some of them provide solutions for metaverse authentication, and some are interested in improving things like universal basic income (UBI). Be that as it may, they accelerate a new possible human future where inevitable uniqueness and equality are the main powers.

Humanode features

Humanode embraces a number of exclusive features that help the project achieve its goals.

First and foremost, Humanode provides biometric Sybil resistance. With ensured decentralized biometric identification based on liveness detection, the network is owned and operated by real unique humans. 

Humanode accelerates the spread of equality since each user can only create one identity, meaning that they can only launch one node and hence has a single vote. This means truly equal co-ownership of the network with equal distribution of power and fees among users.

Also, Humanode leverages self-sovereign and decentralized identity (DID) to give users full control over their digital personal data. All data is decentralized, encrypted and kept fully and securely on-chain. 

Pseudonymity means that Humanode users can freely interact with the network without having to reveal their identity but only by proving they are real human beings. Furthermore, there will be no more concerns about data privacy, as Humanode uses crypto-biometrics to protect biometric data that never leaves users’ devices.

The need for a common device such as a smartphone or a PC to launch a human node means broader accessibility and fast and user-friendly biometric authentication brings usability to the system. Being a Substrate-based platform, Humanode is also interoperable with the broader Ethereum ecosystem making it accessible to thousands of passionate developers.

Moreover, Humanode’s crypto-biometric processing scheme alongside 1 human = 1 vote DAO infrastructure is easy to integrate through the direct Application Programming Interface (API), bringing Sybil resistance, decentralization and more advantages to any chain. 

And, last but not least, Humanode introduces a cost-based fee system that denominates transaction fees in United States dollar, based on the actual use of resources. Pegging the USD value not only ensures that Humanode’s (HMND) volatility does not affect resource costs, but also provides a more intuitive user experience

What is crypto-biometrics and how does it work?

Crypto-biometrics is a mix of innovative advanced technologies, which includes blockchain, encryption, cybersecurity, zero-knowledge proofs, biometrics and liveness detection.

To meet the security and privacy requirements of protecting particularly sensitive personal biometric data in a globally distributed system that runs on nodes connected to thousands of human beings, simply encoding the biometric information is not enough.  

Humanode utilizes crypto-biometric identification mechanisms that are based on a combination of various technologies and exist at the intersection of the disciplines such as mathematics, information security, cybersecurity, biometrics, liveness detection, zk proofs, homomorphic encryption and, of course, blockchain.

To become a human node, users need to prove that they are real living human beings and not deep fakes, photos, masks or something else. To do so, users go through live video-based 3D face scans and liveness detection. During this process, the 3D face mapping vector of the neural network is converted to numerical values and encrypted. After that, the public and private keys are created and, at that point, users can launch their nodes. 

For registered Humanode users, once they log in after biometric identity verification, the 1 to n search and matching operation happens in an encrypted space. And, because it is zk-based, the only piece of information that is searched for and is given out is whether the user is registered.

 

How does Humanode work?

Humanode is a project that gracefully combines different technological stacks including blockchain and biometrics. 

Humanode tech encompasses a bunch of layers such as a blockchain layer represented by a Substrate module: a biometric authorization module based on cryptographically secure neural networks for the private classification of three-dimensional (3D) templates of users’ faces, a private liveness detection mechanism for identifying real human beings, a Vortex decentralized autonomous organization (DAO) and a monetary algorithm named Fath, where monetary supply reacts to real value growth and emission is proportional.

Let’s look at them in more detail.

Substrate framework

Humanode is a layer-1 blockchain whose architecture lies on the Substrate open-source framework that allows the quick development of highly customized blockchains. Substrate, the brainchild of the Parity team, provides interoperability within the Polkadot and Kusama ecosystems as well as an environment for the creation and deployment of general-purpose or specialized blockchain networks with remarkably varied parameters and sound capabilities. Being a Substrate-based chain, Humanode benefits from it and from the high throughput and scalability inherent to the Polkadot ecosystem. 

Consensus agnostic protocol 

One of the interesting features of Humanode is consensus agnosticism, which is the ability to change the network’s consensus mechanism if the Humanode DAO approves it. It derives from the necessity for constant research on the most suitable consensus for a leaderless system with equal validation power of nodes. Different consensus mechanisms have numerous pros and cons which constantly change. A swappable consensus mechanism allows the system to evolve and not be limited by a single unchangeable framework. 

EVM-compatible smart-contract layer

On top of that, Humanode is Ethereum-compatible. Due to an Ethereum Virtual Machine (EVM) pallet, Humanode can use existing Ethereum development tools and take advantage of smart contracts development, supported by several popular languages including Solidity and WebAssembly. On the other hand, Humanode can provide private biometric processing and Sybil-resistance to numerous Ethereum-based decentralized applications (DApps) including decentralized finance (DeFi) and play-to-earn (GameFi) projects, NFT solutions, DAOs, metaverses and others.

Private biometric search and matching 

As for Humanode’s biometrics stack, it seems like the privacy and security of biometric data have been among the most critical aspects of the project. 

Due to the private classification of images of users’ faces, the system guarantees the images’ privacy, performing all operations without the users’ biometrics data having to leave the device. The only device needed to pass biometric authentication is a smartphone with a camera. Once users scan their faces, they become human nodes. The whole process is private and secure. All the Humanode system cares about is if the user is a unique human being, if they are registered and if they are alive. 

Decentralized liveness detection

A technique that ensures that the biometric sample is submitted from a real live person, a substantial security feature that mitigates the vulnerability of biometric systems to spoofing attacks, is called liveness detection. Biometric liveness refers to the use of computer vision technology to detect the actual presence of a living user rather than a representation such as a photograph or a mask, video or screen, a fake silicon fingerprint or other spoof artifacts. 

Biometrics accuracy grew tremendously in the last decade. Currently, the possibility of a match between two different people is 1 to 125,000,000, and the possibility of spoofing an identity without a real human in front of the camera is 1 to 80,000. And, these numbers are constantly improving.

For its first version of the crypto-biometric identification solution, which utilizes secure enclaves for some portions of the process, Humanode integrates FaceTec’s face biometrics and liveness detection. Humanode’s first testnet was launched in January 2021 and the official testnet 1 with liveness detection and the updated technical stack was launched in September 2021. Since then, there have been additional testnets deployed with more than 10,000 people becoming human nodes.

Vortex DAO

Currently, there are three types of nodes in the Humanode ecosystem. First, human nodes who have passed biometric authentication and received a fraction of the network transaction fees. Then, there are delegators: nodes that opt to delegate their voting power to so-called governors. Governors are nodes that participate in Humanode’s governance and must meet certain governing requirements. 

Each of these node types forms an important part of Humanode’s governance DAO named Vortex. Unlike other projects, which allow nodes to accumulate voting power based on how much capital they have or delegate, the Humanode platform ensures that all nodes are equal in terms of validation and voting power, bringing true equality between peers in a decentralized environment.

Fath monetary algorithm and rebalancing system

Humanode implements the Fath hypothesis as the basis for the circulation of HMND Humanode token (HMND). Fath is a monetary algorithm with a proportional distribution of issued tokens. It is an alternative to modern fiat credit-cycle financial networks and capital-based public blockchains.

What problems does Humanode solve?

Humanode brings decentralization, Sybil resistance and innovative governance models to the blockchain industry using biometric technology.

In its very foundations, the Humanode project aims to bring accessibility, inclusivity and innovation in the tech and crypto spaces and economics as a whole. The project is an alternative to the majority of blockchain networks that are based on consensus algorithms such as proof-of-work (PoW) and proof-of-stake (PoS) that currently dominate the field. 

It is known that PoW and PoS are decentralized technologically but not power-wise, granting voting rights and rewards in proportion to users’ economic investments in an activity or resource, stake or computational power, leading to capital-based oligopolies and mining pools. 

In contrast to PoW and PoS, Humanode utilizes facial recognition biometrics with the combination of proof-of-uniqueness and proof-of-existence — efficient tools capable of creating a decentralized protocol to counter malicious attacks on online platforms. The most spread attacks on peer-to-peer networks are Sybil attacks with the utilization of multiple fake virtual identities or, in the case of cryptocurrencies, nodes. 

The Humanode system is designed to check and ensure that every person in the network is unique and has a singular identity. Human nodes are created through crypto-biometric authentication which is a combination of cryptographically secure matching and liveness detection mechanisms verifying the uniqueness and existence of real human beings.

Bringing equality and Sybil resistance to the system, Humanode design guarantees every individual the same amount of voting power and rewards, creating a democratic and fair peer-to-peer structure.

What is Humanode?

Humanode is the first human-powered crypto-biometric network, where 1 human = 1 node = 1 vote.

Humanode is a new-age decentralized crypto-biometric network that integrates pioneering cryptography with private biometrics and blockchain technology. The project aims to create a strong and sustainable decentralized system that is grounded on the existence of unique human beings.

The Humanode project was conceived by the co-founders of Paradigm research institute in 2017. They were one of the many who were optimistic about the Web 3 potential but, at the same time, were stumped by the fact that mining cartels and validator oligopolies seemed to dominate the crypto market. By using human biometrics as the stake, the founders of Humanode saw the possibility of creating a truly decentralized network of equals.

Humanode enables a range of new use cases while solving problems with existing ones. 

With Humanode enabling the pseudonymous biometric DIDs tied to various online services, many spheres stand to benefit from such as insurance, financial services that involve credit score, trading, marketplaces, yield farming and many others including airdrops, healthcare, metaverse authentication and nonfungible token (NFT) ownership.

 

Tech’s good intentions and why Satoshi’s new ‘social order’ foundered

Bitcoin’s creator seemed to succeed where others failed — initially. What did he do differently? He rotated record-keepers.

All revolutions have their dogmas, and the cryptocurrency/blockchain insurgency is no different. It’s an article of faith among crypto adherents that decentralization will solve many of society’s ills, including the problem of governance. 

Vili Lehdonvirta — an Oxford University social scientist, book author, and former software developer — disagrees.

“The underlying technology will change and it’s already changing,” he told Cointelegraph last week. “It’s becoming less blockchain-like, less like the original idea of a trustless system,” especially after the Ethereum Merge, where corporate-like ‘staking’ entities will be needed to “uphold the integrity of the chain,” in his view.

Indeed, crypto networks generally could be moving in the direction of centralized digital platforms, “maintained by a bunch of people whom you have to trust, but hopefully you can also hold to account if they turn out to be untrustworthy.”

Lehdonvirta’s new book, Cloud Empires, published by MIT Press, is in part a meditation on the perishability of ideology and/or good intentions. Its subjects are the 21st century’s massive digital platforms like Amazon, Uber and eBay, among others.

Many follow a similar life cycle: Charismatic founders who set out to change the world, guide their enterprises on a dazzling growth path but then crash against a hard wall of reality. They survive this collision, but not always for the better.

Subtitled “How digital platforms are overtaking the State and how we can regain control,” the book has an illuminating chapter on Satoshi Nakamoto and the blockchain technology he created: Its origins, adoption, metamorphosis and ultimate realization that cryptographically secured digital networks couldn’t entirely replace “untrustworthy” human authorities on matters of governance.

There’s Amazon founder Jeff Bezos, “once hailed as a hero who created an ideal business environment for countless independent merchants,” but who eventually transforms into a digital monopolist, turning on merchants, indeed, “extracting extortionate fees and outright stealing lucrative business lines from them.”

Appearing, too, is Uber co-founder Travis Kalanick, initially as a “fierce advocate of free-market solutions,” but he’s later seen fixing fares and regulating the number of cars on the streets. There’s Pierre Omidyar, creator of “the world’s first online reputation system,” who realizes in time that a “bad rep” alone won’t deter malefactors. His enterprise, eBay, evolves “into a central authority that formally regulates its marketplace.”

A social order without institutions

As for Satoshi, blockchain’s elusive pseudonymous founder known to the world principally through a nine-page white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” published in 2008. “Nakamoto was bothered by how people still had to rely on powerful and opaque financial institutions to manage their finances,” writes Lehdonvirta, a professor of economic sociology and digital social research at the Oxford Internet Institute at the University of Oxford. 

He positions Nakamoto in a line of Digital Age libertarians, beginning with John Barlow, the cyberlibertarian “who dreamed of a virtual society in which order emerged independently of the authority of territorial states.” Nakamoto here is viewed through a political scientist’s lens. Lehdonvirta writes:

“Nakamoto was not interested in making the institutions more democratic. Instead, he wanted to resuscitate the Barlowian dream of a digital social order that wouldn’t need such institutions in the first place — no bureaucrats, no politicians who inevitably betrayed their electorates’ trust, no elections rigged by corporations, no corporate overlords. Nakamoto still thought that such a social order could be created with technology — and in particular, with cryptographic technology.”

Satoshi wasn’t the first to seek “political liberation” through cryptography. A subculture of “cypherpunks” and “crypto-anarchists” had been propounding that creed for decades, “But after years of work, they still had not succeeded in building viable payment platforms.”

Recent: How decentralized exchanges have evolved and why it’s good for users

Yet, Satoshi appears to succeed where others failed — at first, anyway. What did he do differently? The short answer: He rotated record-keepers.

This revelation may seem underwhelming, especially as crypto miners have been vilified in recent years as would-be monopolists and eco-sinners. But, in Lehdonvirta’s telling, Bitcoin’s miners are really just network administrators, i.e., “record-keepers.” Their job, as originally conceived, was:

“To go through recently issued payment instructions, check that they were valid, and collate them into a record known as a block — an official record of transactions that could be used to determine who owned what in the system. Of course, the administrator would not have to check transactions by hand: all the work would be done automatically by the peer-to-peer ‘banking software’ running on their computer.”

After about 10 minutes, “the next randomly appointed administrator would take over, double check the previous block of records, and append their own block to it, forming a chain of blocks.”

Rotating judges each day

What makes this Bitcoin genesis story different — a sort of tour de force, arguably — is the author’s ability to put Satoshi in historical context. Nakamoto was wrestling with a classic governance quandary — “who is guarding the guardians” — one that goes back to the ancient Greeks. 

The city-state of Athens grappled with this problem 2,600 years ago at the time of Solon the Lawgiver. Lehdonvirta writes, “Instead of trying to make government administrators more trustworthy, he [Solon] took a different approach: he wanted to make trustworthiness matter less.”

Solon even had a machine to do this — a piece of ancient Greek technology called a “kleroterion,” or “allotment machine,” was a huge slab of stone with carved slots or matrices that was filled with bronze plates inscribed with the names of Athenian citizens. These were randomly selected each day by bouncing white and black balls:

“Using the kleroterion, random people were selected to serve as government administrators in ancient Athens. Magistrates were appointed in this fashion annually. Judges were re-selected every morning.”

Cloud Empires compares Nakamoto’s ledger validators with the kleroterion:

“The responsibility for checking balances could circulate randomly between users, a little like how administrator posts circulated randomly between citizens in ancient Athens. Where Athenians used the kleroterion to rotate administrators every twenty-four hours, Nakamoto’s scheme used an algorithm to rotate the administrator approximately every ten minutes…”

The justification in both instances was to avoid the corruption that inevitably comes with the concentration of power:

“Just like in ancient Athens, this constant circulation of responsibility meant that the administration would be extremely difficult to corrupt. […] As long as a majority of the peers remained honest, the platform could maintain orderly records without any single trusted authority. Belief in good intentions was replaced with technological certainty. The problem of trust appeared to be solved.”

People remain in charge — still 

Alas, if only it were so simple. As often happens in Cloud Empires, innovation, good intentions, and high-mindedness travel only so far before they run up against human nature. Here the defining event was The DAO Hack of 2016, “a catastrophe for The DAO and its investors but also for the entire Ethereum platform,” where an unknown attacker drained 3.6 million Ether (ETH) from The DAO project, the world’s first decentralized autonomous organization. 

The hack was reversed by a hard fork of the Ethereum network. The network basically hit the reset button, excising the ledger’s most recent transactions and resuming where things stood immediately before the attack. Ethereum co-founder Vitalik Buterin and the network’s core developers held a referendum before this radical step was taken that supported their recommendations, but opponents still maintained that this amounted to changing the rules retroactively.

“The crisis revealed how a peer-to-peer blockchain system in the end was never really ‘trustless,’” concludes Lehdonvirta. “The network may have enforced its rules with robotic impartiality, but people were still in charge of making and amending the rules. In this instance, people decided to amend the rules to confiscate a person’s holdings and return them to their previous owners. […] Funds placed in the system were still ultimately entrusted to the care of people, not cryptography. The problem of trust remained unsolved.”

According to Lehdonvirta, The DAO hack raised again the “age-old problem of political science that troubled ancient Athenians, too: The authorities protect us, but who will protect us from the authorities? How can we hold power to account?”

Resisting autocracy

In an interview with Cointelegraph last week, Lehdonvirta was asked: Given the myriad disappointments chronicled in Cloud Empires, do you see reasons to be hopeful about digital platforms? Is there anything that makes you optimistic?

“People are realizing: ‘I’m not living in the libertarian utopia that Barlow and other visionaries in Silicon Valley promised me. I’m actually living in an autocracy,’” Lehdonvirta answered. “People are realizing this and they’ve started to push back.”

He provides examples in his book. Andrew Gazdecki, an entrepreneur, bands together with other businesses when trillion-dollar company Apple threatens to close down his enterprise. “And they actually win for themselves the right to continue doing business. And that’s not the only example. We had Etsy sellers in April this year — 30,000 Etsy sellers went on strike” when that marketplace raised transaction fees for its independent sellers by 30%. “People are not taking it,” Lehdonvirta told Cointelegraph.

As for the crypto space specifically, “what’s really interesting” is that there are now a “lot of people imagining different ways of organizing society, different ways of organizing the economy,” he said.

“Maybe the underlying technology blockchain turns out to be not as useful and not as revolutionary as was originally thought, but they’re still trying to come up with new ways of organizing society,” as through decentralized autonomous organizations (DAOs), for example. “I mean, does it make that any less valuable? I think people can in some way go even further if they don’t constrain themselves by this sort of a blockchain dogma.”

He was asked about the kleroterion and ancient Greece — where did all that come from? As a “fellow” of Oxford University’s Jesus College, Lehdonvirta dines regularly with fellows from many disciplines, including historians and classicists, he explained. One lunch partner was an expert on ancient Greece who also happened to be “super curious about Bitcoin.”

“I don’t remember exactly how the kleroterion came up. I found it in my readings somewhere. But basically the connection between Bitcoin and ancient Greece came about because I dine in a college together with experts of ancient Greece.”

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As the crypto space evolves, he sees other hybrid types participating, including social scientists like himself. “I think what’s really interesting is that a lot of crypto people are becoming more and more interested in social and political science.” They’re realizing that many systems and projects are failing not because anything is wrong with the technology as such but because the governance has failed. He told Cointelegraph:

“Humanity has been developing governance systems for thousands of years. We’ve figured out some things that work and some things that don’t work. So why don’t we build on that in the same way as when we do software development.” 

Programmers don’t build everything from scratch, from primitives, after all. They use well-known libraries and components to build software. “Why not the same with governance?”

All in all, the Finnish-born social scientist seems to think that the intellectual ferment unleashed by Satoshi Nakamoto, 13 years might still evolve into something novel and useful in the organizational and governance sense, even if the technology itself never quite lives up to its high expectations.

Why quantum computing isn’t a threat to crypto… yet

Quantum computing still has a long way to go before posing a threat to blockchain technology.

Quantum computing has raised concerns about the future of cryptocurrency and blockchain technology in recent years. For example, it is commonly assumed that very sophisticated quantum computers will one day be able to crack present-day encryption, making security a serious concern for users in the blockchain space.

The SHA-256 cryptographic protocol used for Bitcoin network security is currently unbreakable by today’s computers. However, experts anticipate that within a decade, quantum computing will be able to break existing encryption protocols.

In regard to whether holders should be worried about quantum computers being a threat to cryptocurrency, Johann Polecsak, chief technology officer of QAN Platform, a layer-1 blockchain platform, told Cointelegraph:

“Definitely. Elliptic curve signatures — which are powering all major blockchains today and which are proven to be vulnerable against QC attacks — will break, which is the ONLY authentication mechanism in the system. Once it breaks, it will be literally impossible to differentiate a legitimate wallet owner and a hacker who forged a signature of one.”

If the current cryptographic hash algorithms ever get cracked, that leaves hundreds of billions worth of digital assets vulnerable to theft from malicious actors. However, despite these concerns, quantum computing still has a long way to go before becoming a viable threat to blockchain technology. 

What is quantum computing?

Contemporary computers process information and carry out computations using “bits.” Unfortunately, these bits cannot exist simultaneously in two locations and two distinct states.

Instead, traditional computer bits may either have the value 0 or 1. A good analogy is of a light switch being turned on or off. Therefore, if there are a pair of bits, for example, those bits can only hold one of the four potential combinations at any moment: 0-0, 0-1, 1-0 or 1-1.

From a more pragmatic point of view, the implication of this is that it is likely to take an average computer quite some time to complete complicated computations, namely those that need to take into account each and every potential configuration.

Quantum computers do not operate under the same constraints as traditional computers. Instead, they employ something that is termed quantum bits or “qubits” rather than traditional bits. These qubits can coexist in the states of 0 and 1 at the same time.

As mentioned earlier, two bits may only simultaneously hold one of four possible combinations. However, a single pair of qubits is capable of storing all four at the same time. And the number of possible options grows exponentially with each additional qubit.

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As a consequence, quantum computers can carry out many computations while simultaneously considering several different configurations. For example, consider the 54-qubit Sycamore processor that Google developed. It was able to complete a computation in 200 seconds that would have taken the most powerful supercomputer in the world 10,000 years to complete.

In simple terms, quantum computers are much faster than traditional computers since they use qubits to perform multiple calculations simultaneously. In addition, since qubits can have a value of 0, 1 or both, they are much more efficient than the binary bits system used by current computers.

Different types of quantum computing attacks

So-called storage attacks involve a malicious party attempting to steal cash by focusing on susceptible blockchain addresses, such as those where the wallet’s public key is visible on a public ledger.

Four million Bitcoin (BTC), or 25% of all BTC, are vulnerable to an attack by a quantum computer due to owners using un-hashed public keys or re-using BTC addresses. The quantum computer would have to be powerful enough to decipher the private key from the un-hashed public address. If the private key is successfully deciphered, the malicious actor can steal a user’s funds straight from their wallets.

However, experts anticipate that the computing power required to carry out these attacks would be millions of times more than the current quantum computers, which have less than 100 qubits. Nevertheless, researchers in the field of quantum computing have hypothesized that the number of qubits in use might reach 10 million during the next ten years.

In order to protect themselves against these attacks, crypto users need to avoid re-using addresses or moving their funds into addresses where the public key has not been published. This sounds good in theory, but it can prove to be too tedious for everyday users.

Someone with access to a powerful quantum computer might attempt to steal money from a blockchain transaction in transit by launching a transit attack. Because it applies to all transactions, the scope of this attack is far broader. However, carrying it out is more challenging because the attacker must complete it before the miners can execute the transaction.

Under most circumstances, an attacker has no more than a few minutes due to the confirmation time on networks like Bitcoin and Ethereum. Hackers also need billions of qubits to carry out such an attack, making the risk of a transit attack much lower than a storage attack. Nonetheless, it is still something that users should take into mind.

Protecting against assaults while in transit is not an easy task. To do this, it is necessary to switch the underlying cryptographic signature algorithm of the blockchain to one that is resistant to a quantum attack.

Measures to protect against quantum computing

There is still a significant amount of work to be done with quantum computing before it can be considered a credible threat to blockchain technology. 

In addition, blockchain technology will most likely evolve to tackle the issue of quantum security by the time quantum computers are widely available. There are already cryptocurrencies like IOTA that use directed acyclic graph (DAG) technology that is considered quantum resistant. In contrast to the blocks that make up a blockchain, directed acyclic graphs are made up of nodes and connections between them. Thus, the records of crypto transactions take the form of nodes. Then, the records of these exchanges are stacked one on top of the other.

Block lattice is another DAG-based technology that is quantum resistant. Blockchain networks like QAN Platform use the technology to enable developers to build quantum-resistant smart contracts, decentralized applications and digital assets. Lattice cryptography is resistant to quantum computers because it is based on a problem that a quantum computer might not be able to solve easily. The name given to this problem is the Shortest Vector Problem (SVP). Mathematically, the SVP is a question about finding the shortest vector in a high-dimensional lattice.

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It is thought that the SVP is difficult for quantum computers to solve due to the nature of quantum computing. Only when the states of the qubits are fully aligned can the superposition principle be used by a quantum computer. The quantum computer can use the superposition principle when the states of the qubits are perfectly aligned. Still, it must resort to more conventional methods of computation when the states are not. As a result, a quantum computer is very unlikely to succeed in solving the SVP. That’s why lattice-based encryption is secure against quantum computers.

Even traditional organizations have taken steps toward quantum security. JPMorgan and Toshiba have teamed up to develop quantum key distribution (QKD), a solution they claim to be quantum-resistant. With the use of quantum physics and cryptography, QKD makes it possible for two parties to trade confidential data while simultaneously being able to identify and foil any effort by a third party to eavesdrop on the transaction. The concept is being looked at as a potentially useful security mechanism against hypothetical blockchain attacks that quantum computers might carry out in the future.

Merkle trees vs. Verkle trees, Explained

This article helps you to understand the importance of and differences between Merkle vs. Verkle trees in blockchain.

Merkle trees vs. Verkle trees

There are many differences between both types of trees, particularly in providing Merkle proofs and Verkle proofs.

The whole set of sister nodes in a Merkle tree, including Merkle Patricia trees, constitutes evidence of a value. The proof must include all nodes in the tree with any parent node in common with the node you are attempting to prove. On the other hand, in a Verkle tree, you only need to supply the path plus a tiny bit extra as proof—you don’t even need to add sister nodes.

The Verkle tree’s main idea is that a Merkle tree may be created by substituting vector commitments for the cryptographic hash functions. A Verkle tree serves the same purpose as a Merkle tree. However, they are significantly more effective in size in bytes, which is the primary distinction.

Due to their tree-like structure, Merkle proofs are simple to update in part while the Polynomial Commitments in Verkle trees call for a complete alteration of the entire curve, which would be challenging to calculate witnesses for.

People worldwide may send, receive and verify transactions with crypto wallets that can be run efficiently and simply on a personal computer or smartphone, which is the significant Merkle tree use case, possibly due to Merkle roots formed from Merkle trees. On the contrary, one of the crucial Verkle trees use cases includes substituting a vector commitment for the hashes in a Merkle tree, increasing the effectiveness of broader branching factors.

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What is the importance of Merkle and Verkle trees in blockchain?

Merkle trees are employed in Bitcoin (BTC) and other cryptocurrencies to more effectively and securely encrypt blockchain data. Verkle trees allow for smaller proof sizes, particularly important for Ethereum’s upcoming scaling upgrades.

But, how do you identify a Merkle tree? Leaf nodes, non-leaf nodes and the Merkle root are the three essential parts of a Merkle tree in the context of blockchains. Transaction hashes or transaction IDs (TXIDs) reside in leaf nodes, which can be viewed on a block explorer. Then, above the leaf nodes, a layer of non-leaf nodes is hashed together in pairs. Non-leaf nodes keep the hash of the two leaf nodes they represent below them. 

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As the tree narrows as it ascends, half as many nodes per layer are formed when non-leaf node levels continue to be hashed together in pairs. Two nodes will be present in the final non-leaf node layer, which establishes the Merkle root (used to verify the leaf nodes) and is the location of the last hashing in a Merkle tree.

The Merkle root stored in the data portion of a block can be compared to the Merkle root stored in the header, allowing the miner to identify any manipulation quickly. A Merkle proof combines the value being proved and the hashing values needed to recover the Merkle root. In addition, they support simple Payment Verification (SPV), which can be used to authenticate a transaction without downloading a complete block or blockchain. This allows using a crypto wallet or light-client node to send and receive transactions.

Verkle trees enable significantly reduced proof sizes for a large amount of data compared to Merkel trees. The proof length, typically logarithmic in the state size, impacts network communication. But, what is a Verkle proof? A Verkle proof is evidence of a large amount of data stored, which could easily be verified by anyone with the tree’s root.

The prover must offer a single proof demonstrating all parent-child links between all commitments along the paths from each leaf node to the root instead of presenting all “sister nodes” at every level in Verkle trees. Compared to ideal Merkle trees, proof sizes can be reduced by a factor of six–eight and by a factor of more than 20–30 compared to Ethereum’s current hexary Patricia trees.

What are Verkle trees and how do they work?

Similar to Merkle trees, Verkle trees allow you to organize a considerable quantity of data and create a brief “witness” of each item of data or group of related pieces that can be confirmed by someone who has access to the tree’s root.

However, Verkle trees’ most important feature is their proof-size efficiency. A Verkle tree would require less than 150 bytes to produce a proof for a tree with a billion data points, compared to a typical binary Merkle tree’s around 1 kilobyte. Verkle trees utilize a proving system called Polynomial Commitments, relying upon polynomial functions to describe data. 

But who invented Verkle trees? In 2018, John Kuszmaul introduced Verkle trees, which are still not as well known as many other significant new cryptographic structures. A Verkle tree structure resembles Ethereum’s current Merkle Patricia tree. In essence, each node has one of three properties:

  • It is empty.
  • It is a leaf node with a key and value.
  • It is an intermediate node with a defined number of children (the “width” of the tree).
  • Structure of a Verkle tree

A hash of the values of a node’s children is used to calculate the value of an intermediate node. However, Verkle trees are more expansive than Merkle Patricia trees, which is one of the distinct advantages of Verkle trees and the only substantial distinction between their structural components. The sole restriction is that if the width increases too much, proofs begin to take too long to produce. As a result, the proofs get shorter and shorter as the width increases.

What are Merkle trees and how do they work?

A binary tree that uses cryptographic hash algorithms is called a Merkle tree.

A hash tree also referred to as a Merkle tree, has labeled leaf nodes with the cryptographic hash of a data block. In addition, it has labeled non-leaf nodes with the cryptographic hash of the labels of its child nodes.

Each node generates a digest that recursively relies on all of the characteristics in its subtree, and one or more attributes are added to the leaves. In a Merkle tree structure, leaves compute their own attributes’ hash, and parents calculate the digests of their children’s concatenated left-to-right digests.

Structure of a Merkle tree

But who invented Merkle trees? Ralph Merkle developed Merkle trees in 1988 to create stronger digital signatures. Merkle trees efficiently verify the correctness and integrity of data while reducing the verification’s memory requirements. Also, compared to other data structures, Merkle trees take up less disc space, which is one of the significant advantages of Merkle trees. 

So, is Ethereum a Merkle tree? The Ethereum blockchain uses a Merkle tree called the Merkle Patricia trie, which offers a data structure that may be used to store all (key, value) bindings and is authenticated cryptographically. 

Additionally, all of the Merkle tries in the Ethereum execution layer use a Merkle Patricia Trie. The state trie updates over time as there is one global state trie. All contract data is kept in storage trie. Every block has its own transactions trie that stores (key, value) pairs. Each block contains a separate Receipts trie that is never updated.