Cryptoeconomics: Social & Cultural Implications
Since the origin of Bitcoin was born on the internet under a pseudonym, which is environed with mysteries till today, the cryptoculture is…
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Since the origin of Bitcoin was born on the internet under a pseudonym, which is environed with mysteries till today, the cryptoculture is…
As humanity is spending more and more time online, the concept of a digital identity is even more meaningful (GWI, DataReportal, 2022). A digital identity is, in simple terms, an electronic system that proves a specific person is who he or she claims to be and distinguishes entities from each other. A straightforward variant of this is the so-called user/password paradigm, often referred to as basic authentication. Here the user needs to create a combination of a username and a password. In practice, this leads to security inconsistencies, like reused passwords for different platforms or very simple passwords that are easy to guess. However, there are additional applications like password managers, which enable the use of more secure passwords and storing them in a secure enclave.
A further approach for such identity systems is the so-called social Single-Sign-On [SSO] solution. Technically there are relaying on protocols like SAML2, OAuth2/OpenID, etc., and allow the user to login with an identity he or she was already created beforehand in another centralized platform. Examples of such solutions in a consumer-focused domain are the social SSO variants like Sign-In with Google or Sign-In with Facebook, which use the identities from a Google or Facebook account for the verification to an external service. The user experience is much better, allowing a user to register and log in into all supported services with a simple button click while also maintaining the security that is implemented in the identification standard. The downside of this variant for an identity system is indeed the central trusted authority, which is holding the user ́s identity.
The American computer security specialist Zooko Wilcox-O’Hearn created the concept of the Zooko’s triangle in early 2001. In similarity to the blockchain trilemma, Wilcox- O’Hearn pointed out that it is improbable to create an identity system that is human-readable, secure, and decentralized at the same time (Wilcox-O’Hearn, 2001).
Self-Sovereign Identity claims to solve Zooko’s triangle. Ethereum has two types of accounts, one is the so-called externally owned account [EOA], and the other one is a contract account. While the contract accounts are controlled by their smart contract code, and EOA is controlled by a private key. Ethereum is using an Elliptic Curve Digital Signature Algorithm [ECDSA] variant to create the public key from the private key. The actual Ethereum address is then generated as a Keccak-256 hash from that public key55 (Wood, 2014). The underlying mechanism Ethereum is using is fulfilling the secure and decentralized perspectives from Zooko’s triangle, while the third perspective is still missing. That is where the Ethereum Name Service [ENS] comes into play.
The ENS project was started in 2017 at the Ethereum Foundation and was organized into a separate organization in 2018. The development is driven by the Singaporean non-profit True Names LTD, and the project itself is claimed to be a public good. ENS is the missing piece to make Ethereum accounts human-readable and therefore solve Zooko’s triangle. In simple means, ENS is a set of smart contracts that resolve a human-readable name to an Ethereum account address. For example, the ENS name floberlin.eth resolves to the wallet address 0xb56238d0225c7e6155591916167c138a4be2babc and can be used in decentralized application for identification purposes. This concept is even further developed with the addition of Sign-In With Ethereum, which is currently discussed and standardized in EIP-4361.
As this short overview of the self sovereign identify shows, there are already meaningful projects that try to create a possible authentication method on a public decentralized structure that is not only compatible with today’s standards but also protects the privacy of the users and most importantly puts the identity back into your own hands, away from the concept that external companies have sovereignty over your digital self.
If you like the ideas and theories examined here, feel free to subscribe and stay tuned for more stuff like that! Cheers, Flo.
Twitter: https://twitter.com/floberlin_eth
LinkedIn: https://www.linkedin.com/in/florian-lueffe-6a87969a/
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Cryptoeconomics: Self-Sovereign Identity was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.
A famous technological issue of the current state of blockchain technology is the so-called blockchain trilemma, firstly introduced by Vitalik Buterin. The trilemma states that creating a scalable, secure, and decentralized blockchain is hard — but not impossible. In fact, many of the current blockchain systems are inferior in one of these points while at least trying to optimize the two other dimensions.
For example, while Solana has 1.764 active validator nodes and relatively high hardware requirements to run a validator node, Ethereum has currently 2.201 active execution clients and 323.264 consensus clients, while there are developments to run the full Ethereum node setup on a small single-board computer like a Raspberry Pi. This shows that Solana performs better — which is the case regarding the transaction throughput — than Ethereum but is also much more centralized regarding the number of validators in the network.
Polkadot and Cosmos are also trying to overcome the blockchain trilemma. Instead of having only one generic blockchain for every application scenario, they aim to create an application-specific blockchain that can focus on their specific application scenario.
Ethereum ́s scalability issue is quite noticeable in the high transaction fees required to perform any invoke actions on the Ethereum mainnet, especially during high network usage. Currently, there are two significant concepts for scaling Ethereum in the future: on-chain scaling and off-chain scaling. While the first option requires changes to the Ethereum protocol, the second one is primarily independent of the core protocol.
Sharding is the foremost approach for on-chain scaling. The concept of sharding is borrowed from a database design concept, where the data of the database is split horizontally and then stored on different physical machines, depending on which user group needs to access the specific data more frequently. That initially allows having small databases for specific user groups while still having a unique data model. The advantages are higher availability, faster queries, more bandwidth, and a higher workload made possible due to the parallelization of queries. Applying this design pattern to the Ethereum blockchain could lead to similar advantages and is the current approach for the on-chain scaling. The roadmap also includes an iterative proceeding where, as of 30/05/2022, two proposals are discussed in the Ethereum community.
The options for off-chain scaling are a bit brighter. Currently, the solutions with the highest user adaption are rollups and sidechains. The Polygon PoS Chain is one of the most used sidechains of Ethereum. The Indian-based company behind the Polygon PoS Chain, namely Polygon Technology, has the value proposition to support the Ethereum blockchain’s scaling opportunities in the future with various solutions. Through its current design, the Polygon PoS Chain does not inherit the security of Ethereum itself because its own set of validator nodes is validating the network’s transactions. That leads to a more centralized EVM-compatible blockchain, which is much cheaper to use in terms of transaction fees.
On the other hand, rollups inherit the security and decentralization aspects of the Ethereum block- chain. The most popular general-purpose rollup solutions as of 30/05/2022 based on the TVL are Arbitrum and Optimism. Rollups on Ethereum can also have a specific purpose, e.g., dYdX is a rollup solution, especially for the purpose of being an exchange. While Arbitrum and Optimism are so-called optimistic rollup solutions, dYdX is a zero-knowledge rollup. Without going too much into detail about the specific implementation of either of the rollup solutions, which also are referred to as layer two solutions, both variants work — as the name suggested — in that way that a batch of transactions is rolled up — or in other words — committed to the Ethereum mainnet from an external resource.
An optimistic rollup solution works as it assumes transactions made by an external sequencer are valid by default and only runs a computation proof in the event of fraud. Therefore, these solutions need to implement a system that can submit a transaction in the same state used in the original rollup transaction to the Ethereum mainnet and prove its correctness.
A zero-knowledge proof runs an off-chain computation for a transaction batch leveraging a crypto- graphic proof called zk-snark. This proof can then be easily verified by the Ethereum blockchain, proving the transaction validity state. A zk-snark proof is a mathematically complex calculation; therefore, as of 30/05/2022, there are no generic-usage zk-rollup solutions in a production-ready state.
There are many approaches for solving the blockchain trilemma. Currently, there is no clear winner whether it will be the approach of Polkadot and Cosmos with different application blockchains or the approach of ethereum with additional L2 protocols to ensure better scalability. In the end, the ecosystem that can be best adapted and used by people will win.
If you like the ideas and theories examined here, feel free to subscribe and stay tuned for more stuff like that! Cheers, Flo.
Twitter: https://twitter.com/floberlin_eth
LinkedIn: https://www.linkedin.com/in/florian-lueffe-6a87969a/
Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing
Cryptoeconomics: Technological Challenges was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.