The first appearance of the written word dates back to Babylon 3000 BC. Actually, it wasn’t a letter, diary or novel, it was a ledger. Farmers were creating a document counting their livestock and agricultural products. An accurate ledger of assets was absolutely essential to conduct even primitive commerce. However useful a single-entry ledger had a critical flaw, it enabled double spending. Without an offsetting entry of the asset it could be resold or re-spent, thinking that the asset or product was still in inventory. The solution to this problem emerged in the 11th or 12th century in Jewish banking in Cairo or possibly Franciscan monk in Italy. Either way, double-entry bookkeeping was discovered. The advantage is that every transaction has an entry on both sides of the ledger as a debit and a credit. The system has withstood the test of time and continues to be the foundation of commerce.
Today the trusted third parties maintain the ledger, there are many trusted third parties maintaining ledgers in many forms about your money, health, credit, taxes, likes and dislikes. Some third parties have a great deal of information about you in exchange for giving you a browser, search engine, smart speaker or whatever “free” service they provide. Suddenly the question of trust has moved front and center. The “trusted” third party have violated our trust. We have been given many reasons to distrust, governments have collapsed after defaulting on their debts, Lehman reported great earning in 2008 but declared bankruptcy months later. The sub-prime collapsed caused mass unemployment and many to lose their homes. The good guys have failed us and the bad guys are using our digital economy to steal from us in new ways. Data is the new money. Information is as important as oil was in the last century and this is being stolen aggressively. Who do you trust? A 2018 survey reveals the following:
It should then be no surprise that a new currency, not bound to the trusted third party of government should be considered. It has been said that “kings never pay their debts”. Kings have the ability to default, inflated or devalue their currency. Kings have the ability to go down to the basement and just print enough currency to pay their bills. If you store your wealth in the form of the king’s currency, your wealth has been devalued to pay off the king’s debt. Modern day kings are heads of state. Gold is no longer the basis of the world’s reserve currency, the US dollar but increases in value when trust, indebtedness or irresponsible government behavior is in question.
“Trust takes years to build, seconds to break and forever to repair”Dhar Mann
Enter Satoshi Nakamoto. Satoshi, is credited with the creation of Bitcoin. The Bitcoin system is not owned by anyone and does not require a trusted third party to maintain the ledger, rather it is a permissionless, distributed ledger, that assumes that some people will try to cheat you. To restore confidence in commerce the Bitcoin design shares the immutable ledger among all the participants. Imagine that your bank distributes a full copy of your transactional accounts with you and every party you do business with, imagine further that the ledger cannot be deleted, edited or erased, the only allowed transaction is an addition to the existing record. If anyone attempted to change past transactions a built-in algorithm examining the integrity would reject the change to each existing copy of the ledger. In addition to these safeguards, Satoshi was a mathematician who used “SHA-256” hashing algorithm to protect the bitcoin system by creating a cryptographic defense. The SHA-256 is a secure hash function that is highly resistant to decryption.
Example of SHA-256 hash: “Now is the time for all good men to come to the aid of their country” Becomes “40605b8c61606cf8281b630f9422ea0000b4cf50570ddb9c2ff56bd4411589d2”
The underlying mechanism enabling Bitcoin is referred to a “Blockchain”. Unfortunately, the blockchain used by bitcoin was design specifically for managing bitcoin and nothing else. The basic blockchain design has been of great interest since it has never been successfully hacked. Bitcoin website and wallets have been accessed but not the blockchain itself.
Blockchain is private, immutable, distributed, permissionless and stored using the SHA-256 cryptography.
- The ledger is private with no names associated with each transaction but includes a public key/private key, cryptographically hashed.
- The ledger cannot be edited or erased. The contents of the ledger are immutable. If circumstance have changed the changes can be added to the end of the record, leaving all the transaction history intact.
- The ledger is distributed. There is no trusted 3rd party, rather it is distributed among all the participants in the transaction.
- The ledger is permissionless. The ledger is not curated by a person, rather transactions will be accepted if they meet the requirements of the governing algorithm.
- The ledger is encoded within a deep cryptographic hash which has yet to be hacked.
The advantages of blockchain are so compelling in a world where trust is in such short supply that banks, governments and industry are rushing to find mission critical implementation possibilities. Ether is an alternative cryptocurrency developed by Ethereum. The major difference Ethereum provides in the race to use blockchain is that it was designed with many of the same desirable characteristics of blockchain but was built to transact anything within the ledger, not just currency. Consider using blockchain to manage the purchase of a car. The parties to the transaction include you, the care dealer, your bank, your insurance company and the registry of motor vehicles. Each has a role to play and would have a copy of the ledger. When the price has been established, the ledger would include a purchase and sale agreement. Based on this agreement, the bank would provide you with a loan and payment would be made to the dealer. The insurance company would issue a policy and based on this the registry would issue a registration. All of these transactions would provide all the information they need and no more. They would each have a copy of the entire ledger but based on the algorithm would only see what was necessary, governed by public and private keys. This would be a secure, distributed transaction free of the need for trust or a trusted 3rd party and free of the usual bureaucratic friction.
Central to the implementation of the Ethereum is the “smart contract”. Consider the humble vending machine. The transaction is the poster child for disintermediation, there is only a simple agreement. If you put in enough money the machine will release the desired product. The smart contract is a simple agreement. The algorithm details the terms of the agreement, within the confines of a super secure environment. Anything can be transacted and once the rules are defined the terms of the contract are determined.
Cloudphish was designed based on a contract. Is the sender really the sender? Once the parties to the contract and the source of their email was determined the contract was simple. Like the vending machine if the currency is phony or the amount is below the purchase price is wrong the transaction is not completed. Cloudphish need a safe secure environment in which to complete the transaction. The smart contract specifies the rules and the algorithm evaluates the transaction. Since email operates in a very insecure environment the use of smart contract is a win-win solution for Cloudphish and email security.