Tulip of the year: DeFi

Frankly, I don’t really understand the latest Nakamotoan Tulip, ‘decentralized finance’ AKA DeFi.  As far as I can tell, it’s basically just unregulated, unregulatable, lending.  Why is this a thing at all, let along a good thing?  Why would anybody lend unknown people “money” (or at least digital tokens that aspire to be “money”), no matter what the interest rate?

I assume that the answer is usually something to do with tax evasion and money laundering.

As Shiv Malik puts it, “DeFi Mania Proves We Learned Nothing From the ICO Run-Up” [3].   One of the things he is referring to is a strange maneuver completed this week, which some call a DeFi “Vampire” attack [2]. I don’t completely understand this “attack”, but the result is that one DeFi group pumped and dumped a competitor, with the effect of sucking out hundreds of millions of its assets.  Kewl!

The “coolness” is multiplied by the timing, because the founders who directed this assault cashed out immediately, passing the organization (and some would say, criminal liability) to some chumps volunteer community leaders [1].

The other unlearned lessons Malik refers to is the unreflective enthusiasm for what is basically a speculative bubble.  These pools of assets are being used to lend money to “invest” in, wait for it, buying more assets.  One form of this is called ‘yield farming’, which basically is just fiddling around with multiple pools of money, borrowing and lending to capture tiny differences in interest rates.  I guess this can work, at least for a while.  But it has no particular use except for moving around these digital tokens.

The point, of course, is that this junk activity is not only economically useless activity, it is 100% guaranteed to inflate a bubble that will pop very soon now.

What Hath Satoshi Wrought?

Aside from the innate exuberance of the Nakamotoan crowd, this bubble is happening because there are no grown ups involved. It isn’t clear what the legal framework is,or should be, or who should regulate these activities.  But, as Donna Redel and Olta Andon put it, “Regulators Are Circling” [4].

In short, there is little question that DeFi has to be the prohibitive leader for the Crypto Tulip of the Year Award this year.

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1. Brady Dale (2020) SushiSwap Migration Ushers in Era of ‘Protocol Politicians. Coindesk, https://www.coindesk.com/sushiswap-migration-defi-protocol-politicians
2. Bradley Keoun, Omkar Godbole, and Sebastian Sinclair (2020) First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags. Coindesk, https://www.coindesk.com/first-mover-defi-vampire-sushiswap-uniswap-bitmex-basis
3. Shiv Malik (2020) DeFi Mania Proves We Learned Nothing From the ICO Run-Up. Coindesk, https://www.coindesk.com/defi-mania-ico-bubble
4. Donna Redel and Olta Andoni (2020) DeFi Is Just Like the ICO Boom and Regulators Are Circling. Coindesk, https://www.coindesk.com/defi-ico-boom-regulators-circling

 

Cryptocurrency Thursday

IoT Attacks on Electricity Markets

Hey, let’s mash up two trendy technologies, Internet of (Insecure) Things, and automated electricity markets, e.g., using blockchain technology (e.g., this, this, this, this).

What could possibly go wrong?

This summer, researchers from Georgia Tech report on a possible security breach which could let hackers manipulate electricity markets for fun and profit [1].

The basic idea is that if hackers gain control of a large number of network connected devices, AKA “smart devices” AKA the Internet of Things, they can manipulate the use of electricity by turning many devices on and off.

The electricity grid is highly tuned, and these days is managed with sophisticated models that predict power use.  The operators purchase power to meet projected use.  When actual use exceeds projections, the grid operator will purchase electricity on a real time market.  The latter will generally cost a lot more, so there is a premium on getting the projections correct.

The “IoTSkimmer” attack is pretty simple.  A hacker that controls a large number of IoT devices can fiddle with the overall consumption of electricity.  Even a relatively small change can exceed the finely tuned projections from models.

This could be used to economically damage the grid, competitors, and users, by triggering expensive purchases. It could also be used to economically benefit power providers, by triggering extra purchases.

These manipulations would be relatively small and likely would difficult to distinguish from the normal operation of the market.  It is possible that such attacks have already occurred and could not be recognized.

Is this attack feasible?  The researchers show that it seems quite doable.  They report that IoT botnets can be rented—no special expertise needed.

Countermeasures include data sharing and analysis of markets.   Obviously, better security and control of IoT devices can only help.  Since this attack mainly works by suborning high wattage devices, it is important (and feasible) to secure and monitory these relative power hogs.

What does this have to do with blockchains?

This attack doesn’t really depend on blockchains one way or the other.  But a peer-to-peer energy market using blockchain technology to implement microtransactions would be especially vulnerable to this attack, because “decentralized” means “out of control”.

Blockchain technology is pretty good for creating highly responsive markets, but has absolutely no defense against an attack like IoTSkimmer.  The suborned devices are undetectable by the blockchain, so all their microtransactions are equally valid.  And a fully automated market executing “smart contracts” will happily hum along, rapidly executing the attack with no humans involved.

To be fair, if the transactions are recorded on a blockchain, it might be easier for participants to analyze the market and, at least retrospectively, identify attacks.

But overall, blockchain enabled peer-to-peer electricity trading seems like a pretty risky business, at least when connected to the ubiquitous grid.

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1. Tohid Shekari and Raheem Beyah, IoT Skimmer: Energy Market Manipulation through High-Wattage IoT Botnets, in Black Hat USA 2020. 2020. https://i.blackhat.com/USA-20/Wednesday/us-20-Shekari-IoT-Skimmer-Energy-Market-Manipulation-Through-High-Wattage-IoT-Botnets.pdf
2. John Toon, Baking and Boiling Botnets Could Drive Energy Market Swings and Damage, in Georgia Tech – News, August 4, 2020. https://rh.gatech.edu/news/637497/baking-and-boiling-botnets-could-drive-energy-market-swings-and-damage

 

A “Virtual Power Plant” Concept

The folks at Power Ledger are still plugging away with their blockchain based power management technologies.  <<link earlier>> The basic idea is to enable individual and local solar and wind installations to sell and trade power with the grid or with consumers, using blockchain technology to manage the many small transactions this entails.

Blockchain or no, this software-centric technology certainly opens the door for a lot of different ways to manage power systems.  As  Jemma Green puts it, “Digitising the solar revolution” [1]. The blockchain part of the system enables a variety of transactions, including peer-ro-peer.  But it also potentially lets other software monitor and manipulate power production and transfers.

One of the interesting ideas from Power Ledger is a “Virtual Power Plant”.  This uses the software to coordinate a collection of small scale (roof tops and small arrays) and storage into a single, moderate scale “virtual” power plant.  So you and your neighbors can gang together to store and sell any leftover solar power you generate in quantities large enough to be meaningful.

Cool!

I really like the idea.  Of course, you don’t specifically need blockchain to do it, but blockchain probably works reasonably well in this case.

I do have to point out that this concept, along with a lot of the innovations implemented by Power Ledger, depend on the legal regulatory rules for power grids.  PL is located in Australia, and is working within their laws which mostly encourage community solar projects like these. Most of Europe has similar policies.

However, the US has a patchwork, state by state.  Worse, this summer sees a stealthy attempt to remove local control from these policies, with the effect of outlawing such systems everywhere in the US [2].    We’ll have to see what happens on this.

Blockchain is said to be “censorship proof”, but this is a case where regressive government policies will completely defeat community and individual power trading, blockchain or no.  So watch out.

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1. Jemma Green, Digitising the solar revolution, in Energy Storage News, July 1, 2020. https://www.energy-storage.news/blogs/digitising-the-solar-revolution
2. Hilary Lewis, Comments demonstrate strong support for local control of solar policies, in Vote Solar, June 16, 2020. https://votesolar.org/usa/other-states/updates/comments-demonstrate-strong-support-local-control-solar-policies/

Demystifying Stablecoins

This month Jeremy Clark, Didem Demirag, and Seyedehmahsa Moosavi write about “Demystifying stablecoins” [1].

Yes, please.  ‘Splain away. : – )

“Stablecoins promise the functionality of Bitcoin without the roller-coaster ride of its exchange rate.” ([1], p. 41)

The idea is simple enough, but existing systems are poorly—very poorly—documented.

“Many white papers are obfuscated with jargon—terms left undefined and used inconsistently across other projects and the financial literature. In other cases, system components appear to be mislabeled.” ([1], p. 41)

The researchers examined 25 existing “stablecoin” projects, and present a classification of what turns out to be a spectrum of technologies.

One type of stablecoin is a “backed” coin, which directly or indirectly represents other assets.  Importantly, some stablecoins are “redeemable” in the backing asset and others are not.

The other major type is what they term “intervention-based”.  In this model, the value of the digital currency against other assets is maintained by manipulation of the money supply or speculative bidding.  (I’ll note that the money supply approach recapitulates the history of conventional banking, which abandoned the process long ago because it doesn’t work.)

“In summary, some stablecoins tokenize a low-volatility coin and bring it onto the blockchain. Others generally play one of two tricks: The first is to expand and contract the amount of currency to stabilize the value; the second is to turn two high-volatility coins (for example, of the underlying cryptocurrency) into one stablecoin and one extremely volatile coin. This last trick is similar to other financial assets that do not reduce over-all risk but instead push it from one tranche of the asset to another” ([1], p. 48)

There is one more type of stablecoin that will be coming soon: a central bank issued coin.  This would try to get the advantages of low overhead transactions, while managing the value through conventional “fiat” mechanisms.

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This is a really nice article (and there is a longer white paper with more details).

My own conclusion is—watch out!

Watch out—the terminology is murky and there are considerable differences in “stablecoins” that can be difficult to discern.

Watch out –the documentation is horrible and / or fraudulent, so you may not be able to tell what you are getting.

Watch out—the legal and regulatory environment is extremely risky.  Dubious products such as Tether thrive despite serious legal problems, while products that try to be legitimate such as Gemini or Libra, crash on the rocks of regulatory resistance.

So, basically: watch out!

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1. Jeremy Clark, Didem Demirag, and Seyedehmahsa Moosavi, Demystifying stablecoins. Communications of the ACM, 63 (7):40–46, 2020. https://doi.org/10.1145/3386275

 

Cryptocurrency Thursday

 

 

NREL Experiments With Blockchain

One of the classic use cases for Nakamotoan blockchain is machine-to-machine microtransactions, and one extremely interesting possibility is managing electricity in microgrids. The idea is to use a blockchain to track peer to peer power purchases, e.g., to enable consumers to purchase power from local small scale solar installations.

There has been a lot of talk, and a certain amount of Incubator level development (e.g., this, this, this), but not much actual researchy research.  I.e., looking at what it would take to make it really work in the real world, how to measure how well it would work, and so on.

So it is very good to see work from the US National Energy Research Laboratory (NREL) looking at this use case in detail [2].

Specifically, NREL is looking at the function currently implemented by utilities that manage the distribution of electricity.  This requires coordination of production and use, not just now but estimates of ongoing and future needs.  This coordination requires a lot of trust between the parties.

At the lowest level, NREL is looking at automatically handling the distribution of power from distributed sources, such as roof top solar arrays.  They envision smart appliances that decide when to buy from a local source or from the grid, using cryptocurrency to execute the purchases.

The trick, of course, is to manage what could be a wildly freewheeling market.  (Imagine, for example, a roof top with a bit of cheap electricity to export.  If every building in the city suddenly jump to get that power (and not buy from elsewhere), there could be a huge swing, followed by a cascade of failure when most of the requests cannot be served.)

Furthermore, the actual transfer likely will use part of the utility grid, which is already in use.  So the utility needs to know what’s going on, and there needs to be ways to make sure that things aren’t overloaded or otherwise messed up.  No utility can support thousands of roof top sources intermittently sending and receiving electricity without warning.

If I understand what they are doing, NREL is using blockchain as a part of a system that allows a utility to easily set up management systems for many sources.  At least some of their work is based on Ethereum, and, I’m sure utilizes “smart contract” technology to implement peer to peer transactions.  They also rely on cryptography for security and identity.

Glancing at the write ups, it looks to me like the technology is not necessarily the hard part here.  They are imagining a world where “utilities could integrate many different types of DER with core operational tools […] securely and efficiently.”

I.e., with bazillions of devices producing and consuming electricity, the grid will need to be bazilliions of virtual mini-grids, managing small parts and coordinating with all the other parts.  And these parts need to be trustworthy and trusted, but they cannot be centrally controlled as today’s grids are.

Aside from the question of whether the utility actually wants to do this, there is a long way to go to make this real.  I can see that some kind of blockchain technology could be very useful as a cheap, open way to exchange data including payments.

Of course, one wonders whether using a global blockchain such as Ethereum is really the way to do.  I mean, even if it were feasible, do you want every utility transaction in the world on a single public ledger?  So maybe there needs to be permissioned blockchains, probably regional.  I.e., parallel to the organization of the physical grids.

The NREL and related work a good step, exploring exactly how this all might be done, in the context of real grid utilities.

As a side note, I’ll point out that the thing grid utilities dislike more than anything is “disruption”.    So don’t talk about “disrupting electricity” or whatever. : – )

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1. Dylan S. Cutler, Ted Kwasnik, Sivasathya Pradha Balamurugan, Samuel S. Booth, Bethany F. Sparn, and Karen Hsu. A Demonstration of Blockchain-Based Energy Transactions between Laboratory Test Homes, 2018. https://www.osti.gov/biblio/1524316-demonstration-blockchain-based-energy-transactions-between-laboratory-test-homes
2. Wayne Hicks, Blockchain: Not Just for Bitcoin, in NREL – News, May 14, 2020. https://www.nrel.gov/news/features/2020/blockchain-not-just-for-bitcoin-nrel-researchers-demonstrate-collaborative-energy-transactions.html

 

Cryptocurrency Thursday

Ahmed and Pathan Ask, Can Blockchains Be Trusted?

The entire point of a Nakamotoan blockchain is that it is “trustless” technology, so it is ironic, not to say confusing, to read the headline, “Blockchain: Can It Be Trusted?” [1].

In fact, Ahmed and Pathan are talking about other claims for Nakamotoan blockchains, namely security and privacy of data on the blockchain.  In particular, they are concerned with the security of financial applications, especially “smart contracts”, implemented with blockchains.

Readers of this blog are well aware that these applications have experienced a plethora of oopsies.  A & P summarize the state of play.

First of all, they point out a fundamental trade off between performance and scale versus security.  Here they refer in part to the many variants of the Nakamotoan “consensus” protocols.  In general, these protocols trade latency for security, and in any case any single protocol is not ideal for all types of transactions.  (Old hands like myself tend to think that blockchain technology simply cannot scale without morphing into something completely different, i.e., non-Nakamotoan.)

“Although there are plenty of research works in scalable security, there is a significant lack of such research and development for the blockchain environment.” ([1], p. 33)

Most financial applications rely on executable code in the form of “smart contracts”.  These aren’t necessarily especially smart, and certainly aren’t particularly novel.  Databases use stored programs all the time, and obviously every digital system has digital logic.

Stated that way, it is hardly surprising to discover that these “smart contracts” have bugs.  All software has bugs, and no amount of semi-religious marketing hype will change that fact.

But, of course, in a decentralized blockchain system, no one is in charge, so the bugs can run free—at the speed of the Internet. Even better, once deployed on the write-once, “censorship proof” blockchain, the code cannot be fixed or erased.

So look out.  A & P document that hundreds of millions of financial losses have occurred because of buggy contracts, and describe a few of the prominent types of problems.  (There are plenty more not in this article.)

They conclude with a conventional “more research is needed”, and the advice:

“Any organization that plans to incorporate blockchain must answer the following questions:

› How do we design and develop secure smart contracts?

› How do we identify vulnerabili- ties in smart contracts?

› What are the mitigation strate- gies for zero-day vulnerabilities (in case they are exploited)? “ ([1], p  35)

The problem is, no one knows how to write “secure” smart contracts, any more than we know how to write bug free software.  And the “mitigation” measures generally mean a layer of (“centralized”) human supervision that basically negates the point of the blockchain in the first place.

I’ll add another point.  A & P mainly concern themselves with the blockchain itself.  But security and privacy are end-to-end properties, and many of the problems stem from the “non-blockchain” parts of the system, including the highly faulty and untrustworthy humans in the game.

Worst of all, using a blockchain rather than an alternative technology may make the end-to-end problems harder for many reasons.

“Can it be Trusted?”  No more than any other software, and that’s not a lot.  And using blockchain technology ties the hands of systems in many ways that can make things worse.

I’m not sure how much more research can help.

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1. M. Ahmed and A. K. Pathan, Blockchain: Can It Be Trusted? Computer, 53 (4):31-35, 2020.  https://ieeexplore.ieee.org/document/9062357

 

Cryptocurrency Thursday

 

bTz: Crypto Ooopsie of the Month

One of the “features” of Nakamotoa’s Alternative Universe is that it replicates all the features of conventional systems, without adult supervision.  For true believers, this is not only a good thing, it is nearly the only thing.

So, the Nakmaotoan Alternative Universe has electronic trading, which looks the same as conventional trading. This is called “Distributed Finance”, and goes by the terrifying tack DeFi. But inside, the systems are unregulated (or “self-regulated”).  Caveat Emptor.   You are on your own.

And with the genius of the Internet (which I certainly helped boot up), the systems are all talking to each other, and generally “the system” is actually a bunch of independent components working together to do your biz.  At light speed.  Without guardrails or seat belts.

What could possibly go wrong?

(If you actually worry about such questions, you probably spend time studying the history of financial systems and regulations.  But who’s got time for all that.  Move fast, break things, apologize later.)

This winter the Ethereum community was treated to a wonderful demonstration of life in the Nakmotoan Alternative Universe of DeFi.

In a particularly embarrassing incident, a decentralized finance project reassuringly named “bZx” was showing off their stuff at a hackathon in Denver.  During this strut session, they were hacked, and the attackers walked off with hundreds of thousands of dollars worth of digital assets [1].  Ooops.

As William Foxley  reports that the attack was somewhat complicated.  The attackers borrowed over 2 million dollars in a “flash loan” (which I assume means no collateral and no diligence, due or otherwise).   Then they bought a million dollars worth of short contracts on one exchange, and dumped the shares on another.

The sell off was targeted and succeeded in manipulating the “oracle” that sets prices for bZt, and they were able to exploit the swing to make big money off the short.

I don’t have precise information about the timing (see this perhaps), but I’m pretty sure this all happened in a few seconds, bing-bang-boom.

As Foxley put it, this attack “Reveal[ed the] Experimental Nature of Decentralized Finance.”

One of the problems seems to be the use of “oracles”, which are, well, systems that you have to trust.  It isn’t clear, but the experimental system may have had only one such oracle, which was exploited by the attack.  In any case, the fact that no one  knows for sure what oracle or oracles might ahve been involved indicates the opacity of the system.

Here’s the good news:  the system worked almost exactly how it was supposed to.  There was one bug that should have stopped the trade, maybe.

These transactions were done with “smart contracts” without need for human intervention.  No pesky paperwork, and “the man” was nowhere to be seen.  So the brakes were all software.  (What could possibly go wrong.)

Here’s more good news:  this was probably legal.  “DefFi” is unregulated, so who knows what, if any, legal framework applies.

So, congratulations bZx, on a successful demonstration of “Decentralized Finance”.

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1. William Foxley (2020) Exploit During ETHDenver Reveals Experimental Nature of Decentralized Finance. Coindesk, https://www.coindesk.com/exploit-during-ethdenver-reveals-experimental-nature-of-decentralized-finance

 

 

Cryptocurrency Thursday

Smart Contracts Are No Where Near Best Practices

Nakamotoan cryptocurrencies and blockchains are often described as “innovative”, indeed “disruptive”.  It may or may not be “disruptive”, but much of the technology is not new at all.  Worse, a lot of the technology was whipped together with no reference to decades of relevant research, which means it is naive, often catastrophically so.   (The notion that “smart contracts” can, even in principle, be error free is just silly.)

One of the worst cases of childish ignorance are the so-called “smart contracts”.  These are basically computer programs, no more and no less.  The most common forms are designed to execute in a virtual machine which both defines the language and limits the possible actions of the program.

If this sounds familiar, that’s because it is widely used for decades.  There is a vast literature which informs best practices.  Sadly, “smart contracts” don’t, and mostly can’t, implement these best practices.  (And let’s not get me started on the concept of code that can never be modified or deleted, which I have referred to as the “insane clown school of software engineering”.)

Last spring Florian Daniel and Luca Guida consider blockchains in light of experience from “Service Oriented Architectures”, which have been the flavor of the month for some 20 years now [1].  SOAs involve independent components that interact through logical interfaces which are often defined as, yes, contracts.

The authors show that Nakamotoan “smart contracts” can indeed be seen as SOAs, though the implementations, especially in the case of Bitcoin, are crude and lack key features.  This finding is not surprising, because the whole idea of SOA is to abstract and virtualize away the details of the networks and platforms.  So it is perfectly possible to implement using a distributed write-once ledger, i.e., a Nakamotoan blockchain.

Daniel and Guida identify some significant areas missing from the Nakamotoan technology.  And by “significant”, I mean, “necessary or else it won’t really work”.  Their list is:

• Cost awareness
• Performance
• Interoperability and standardization
• Composition
• Search, discovery and reuse

Everyone knows that Nakamotoan blockchains are inefficient, but it is somewhat ironic that they have no general mechanism “to properly communicate and negotiate” service levels.  There is a lot of effort put into dinking with the perceived incentives in the protocols (e.g., fees and payouts), but little concept of programmatically negotiating or even inquiring about cost and performance.

To date, Nakamotoan “smart contracts” have little interoperability, and therefore it is difficult or impossible to compose a service from components.  These things are hard, and cannot be whacked together by a few guys donating their time—it is necessary to create, or better, use existing, standards.

This lack of standards and interoperability is evident in the proliferation of contracts and libraries and the use of opaque, essentially monolithic codes.  These dapps are, ironically, neither decentralized nor trustless.

The last bullet–search, discovery, resuse–is particularly important, and is very well known to me.  (The work I did at the turn of the century is still relevant to this topic [2].)  If smart contracts are going to be useful, then there has to be a way to discover them, to discover what they do, and to discover how to use them.  These are extremely difficult problems that have nothing at all to do with the specifics of ledgers or mining, and everything to do with having good metadata, which requires deep understanding of the logic of components.  I haven’t seen anything that suggests that Nakamotoans even understand that these problems exist.

I will say that Nakamotoan cryptocurrencies do have potential to make distributed components work better than they do now.  A blockchain is a really good way to distribute directories of services and also to implement micropayments that might make both discovery and use of components more sustainable.  On the latter point, there should be a tiny registration fee to publish a component in the directory, and may be a usage fee for a module.  Cryptocurrency is a great way to do such payments.

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1. Florian Daniel and Luca Guida, A Service-Oriented Perspective on Blockchain Smart Contracts. IEEE Internet Computing, 23 (1):46-53, 2019. https://ieeexplore.ieee.org/document/8598947
2. Robert E. McGrath.”Semantic Infrastructure for a Ubiquitous Computing Environment.” Ph. D. Dissertation, Computer Science, University of Illinois, Urbana-Champaign, 2005. http://hdl.handle.net/2142/11057

 

Cryptocurrency Thursday

Blockchain Data Management System

This summer William Foxley reported on a US Air Force contract to explore an automated data management system that uses blockchain technology [2].

Glancing at the information, this immediately rang a bell, because I worked for many years doing data management, sensor nets, and workflows, and even tried to do a P2P system to do something like this—pre-Blockchain.  So I kind of understand the problem, to say the least.

But what is the advantage of using Blockchain technology?

What Does It Do?

As far as I can tell from the company materials (Constellation Networks), the technology is a form of distributed workflow (the DAG), specifically targeted at validation of data across many sources, such as a network of sensors.  This concept has been implemented many times in many forms ([3, 4]), though it is very difficult to do in a distributed system.

For a distributed system, especially a decentralized system that incorporates data from different administrative domains, there are many hard problems of coordination.  After you get the plumbing working and data flowing, there is a big challenge of provenance and validity in general. Where did the data come from, and is it actually valid data?

It is easy to see why the Air Force would be interested in this problem.  There are zillions of sensors, databases, and programs feeding into a network that is trying to integrate and make sense of it all as quickly as possible.

Constellation’s materials indicate that their system validates data close to the source (presumably via workflows), and shares the validated results to consumers (apparently including cryptographic signatures to assure authentic results).

It looks to me as if the blockchain (and probably “smart contract”) technology is used to manage these workflows, and make the results visible to any user via the blockchain. It isn’t clear that all of the data is actually delivered via a blockchain (that would be very surprising if it worked), but I think that signed checksums probably are shared, enabling data to be filtered.

“The use of private and public DAG and Networks allows for public validation (essentially a 3rd party audit layer and redundant security) while ensuring cryptographic security and redundancy to data on the private network.” ([1], p. 1)

The advantage of a blockchain in this situation is that the network is open, fluid, and decentralized, so both producers and consumers may come and go, start and stop, and none of them necessarily knows the others on the network.  A blockchain is a good technology for posting data, and in this case, validated data.  Searching the blockchain will enable consumers to locate data that is available, even when they don’t know the details of current producers.

Do You Need A Blockchain To Do It?

As far as I can tell, the blockchains are being used as a form of global scratchpad, used to implement and coordinate a producer-consumer data flow.  This is, of course, an old idea that has been implemented with a variety of technologies.  And, speaking from personal experience, a blockchain is probably a good technology for this use, especially the use case outlined by Constellation.

Now, I’m less sold on the use of tokens to “buy” data, or the apparent use of “smart contract”-like technology.  I guess it will work, but I’m not sure if there is any particular advantage. We’ll see.

I’ll point out that this system is designed to work with multiple blockchains, including “permissioned” blockchains.  This is not the pure and simple Nakamotoan one-universal-public blockchain.  (This is one reason why I have to wonder about the tokens—is this even necessary?)

I’ll also point out that much of the value of the system is in its cryptographic certification that is used to assure the validity of data.  This is a good technology, but it works fine on a lot of different storage mechanisms.  Using blockchain technology is pretty much irrelevant to this part of the picture.

Similarly, the cryptography and signatures depend on consumers being able to know which sources to trust, which presumably will be done by directories of signatures and protocols for managing these identities.  These key management processes are tricky, and blockchain really has nothing to offer to help.  (In the case of the USAF, they already have solutions to this problem.)

Bottom Line

This is an interesting approach to a hard problem.  The use of blockchain technology seems to have some important advantages for parts of this problem.  I’m not sure how big a piece of the solution the blockchain is, or even if it could not be replaced.

But still, as someone who tried without much success to build a system like this, I would certainly like to see how this works.  I can think of a lot of applications that can use this sort of decentralized workflow.

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1. Constellation Network Inc., Constellation tackles big data and blockchain with the U.S. Air Force 2019. https://www.prnewswire.com/news-releases/constellation-tackles-big-data-and-blockchain-with-the-us-air-force-300907244.html
2. William Foxley (2019) US Air Force Partners With Blockchain Firm to Automate Data Management. Coindesk, https://www.coindesk.com/us-air-force-partners-with-blockchain-firm-to-automate-data-management
3. P. Kumar, P. Bajcsy, D. Tcheng, D. Clutter, V. Mehra, W-W Feng, P. Sinha, and A. White, Using D2K Data Mining Platform for Understanding the Dynamic Evolution of Land-Surface Variables, in 2005 Earth-Sun System Technology Conference. 2005: College Park. http://isda.ncsa.uiuc.edu/peter/publications/conferences/2005/NASAconfJune2005.pdf
4. Bertram Ludäscher, Ilkay Altintas, Chad Berkley, Dan Higgins, Efrat Jaeger, Matthew Jones, Edward A. Lee, Jing Tao, and Yang Zhao, Scientific workflow management and the Kepler system. Concurrency and Computation: Practice and Experience, 18 (10):1039-1065, 2006. http://dx.doi.org/10.1002/cpe.994

 

 

Cryptocurrency Thursday

More Blockchains in Space

Not content with merely disrupting money and reinventing everything, many crypto enthusiasts dream of outer space.  This is hardly new, people have been talking about it for a while (e.g., earlier posts here, here, here).  But it is starting to come true.

This summer, SpaceChain (“Disrupting the Space Industry”), “the world’s first open-source blockchain-based satellite network”, is real enough (they have a satellite flying!) that they received a small grant from the European Space Agency (ESA).

They seem to have their own blockchain and cryptocurrency, though they say you can do Ethereum dapps, too.  But the network is “open”, so it is easy to create and run apps on the space network (they say).  That’s kind of neat, though I don’t really grok the economics of this.

Danny Nelson reports for Coindesk that the ESA project will investigate use cases for their orbiting blockchain [1].  Inquiring minds certainly want to know what these use cases might be.  Their white paper sketches a few though none are particularly convincing, in that they don’t really need blockchain per se [2].

Obviously, the “cryptocurrency exchange in space” use case does need a blockchain.  The case they sate for off-planet blockchain nodes is that “Blockchain technology is hosted on centralized servers on Earth and are vulnerable to hacking” and also to government controls.

Huh?  The whole point of Nakamotoan blockchains is that they are not centralized, and resistant to “censorship”.

So, the case is probably that satellites are allegedly harder to hack and disable.  That’s got to be debatable, since satellites definitely can be monkeyed with, and any ground-based application will need a ground station that will be highly visible and vulnerable.

I suspect that ESA is most interested in the in-space use cases, such as orbital manufacturing.  SpaceChain envisions that a blockchain can be a convenient and cheap way to do process control and other operations in constellations of small satellites.  This is certainly an area that needs work, but who knows if blockchains are really the right answer.

There are lots of questions. How much does it cost to run a space dapp?  (And how and who do I pay?)  How do you patch or kill a buggy space dapp?  How well do they perform?  Just how secure is this network in fact?

Whatever else, SpaceChain may give us an opportunity to get some practical experience and answers.

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1. Danny Nelson (2019) European Space Agency Backs Blockchain Satellite Project. Coindesk, https://www.coindesk.com/european-space-agency-backs-blockchain-satellite-project
2. SpaceChain, Space Chain: Community-Based Space Platform. White Paper, 2019. https://spacechain.com/wp-content/uploads/2019/07/whitepaper-290719.pdf

 

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