Using Extensible Blockchain to Sign Digital Documents and Copyrighted Materials

It should be apparent to anyone who has watched the progress of Bitcoin that it behaves as a virtual commodity.  It also is fungible in that one Bitcoin can be exchanged for an equal quantity anywhere in the World.

The success of bitcoin comes from its Blockchain software design.

Every Bitcoin has a unique signature that follows it through its travels from one Wallet to another.  That 'fingerprint' never goes away and remains an indelible  and essential property.

The bitcoin's ownership cannot be transferred from one owner more than once, much as a Dollar with a unique serial number is physically exchanged on a transaction.  The serial number follows the life of that dollar and is always associated with it at any point in time.

So, we see clearly that bitcoin does indeed work, and we see indirectly that the underlying extensible blockchain can be applied to other scenarios.

Digital Legal documents, copyrighted documents, books, images, videos, audio files all can benefit from using the blockchain technology.

Imagine if the MPAA and RIAA dispensed with their legal campaign to protect copyrighted works and turned to blockchain technology.

In a blockchain server for music for example, each discrete copy of an 'album' or 'song' would contain an embedded fingerprint to live with the copyrighted material for its entire life in the music equivalent of a bitcoin 'ledger'.

That discrete quantity would then become protected by its identity in the global ledger as is the case for bitcoin.  And that music could not be dispensed twice or its in-built encrypted ledger cross-check would return an error to stop the work from being used in more than one instance.

Music might be a blockchain with attributes only for transfer of ownership of just once.

Other kinds of documents might lend to having ownership transferrable multiple times, such as works of art.

This is my thought process and I hope that we as a global society move in this direction.  It affords solutions to reduce and eliminate much of the current costs imposed on businesses which need to protect their copyrighted and Legal materials and eliminate theft of said materials entirely.

-- Dietrich

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Extensible Blockchain for a New Digital Rights Management Standard

When I was younger and had a true passion for music as most kids do, I went out and bought the traditional Long Playing (LP) record, brought it home, tore off the shrink wrap, and mounted the LP on the platter of my hi-fi system, kicked up and enjoyed listening usually with a beer in hand. (Image credit: Wikipedia.org)

Nobody was trying to steal music at the time.  There was really no way to copy an LP without expensive reel-to-reel stereo playback systems and the price of such equipment was a barrier to even trying to dub a copy. (Image right credit: Wikipedia.org)

The music industry enjoyed a long period of profitability through the 70's until the advent of compact cassette tapes. (Image credit: Wikipedia.org)

The music industry naturally began producing music on cassettes, first 8 track, then mini-cassettes which became more common.

When the first integrated chip solid-state stereo system came out, I had to have it.  I even went into debt, maxing out my credit card, the American Way.  Nobody knew what integrated chips were in the late 70's, but I did.  I even got a matching cassette deck from the same manufacturer with magneto actuated drives.  It was convenient to take the LPs I had purchased and dub them onto a blank cassette so I could listen to them on my new cassette stereo car radio.  That was fun and it seemed 'reasonable' to me and I never felt I was stealing anything.

Of course, the music industry caught onto the fact that some were 'abusing' the privilege of dubbing in an effort to steal copyrighted material.  The abuse was there waiting to happen and only needed a 'technology' to happen.  That was cassettes and the beginning of Digital Rights Management (DRM) began to form in the minds of the MPAA RIAA industry giants. (Image Credit: Wikipedia.org)

During the early 80's SONY introduced BetaMAX cassettes for video recording along side a competing VHS cassette format.  The latter won out as the 'de facto' format for video entertainment and became ubiquitous overnight.  In America,  everyone had a VHS player and the video rental industry exploded.  Soon, the MPAA began releasing movies on VHS cassette.  There was money to be made.  But the potential for 'black market' boot leg copies of cassettes was there.  It grew because it was relatively easy to dub one cassette to another in mass production style once the criminals got their hands on the same production equipment used by the MPAA.  Something had to be done.  Enter the CD-ROM. (Image credit: Wikipedia.org)

During the 90's both the MPAA and RIAA dropped LP and cassettes in favor of CD-ROM.
Putting music albums and movies on CDs was exceedingly profitable.  Of course, as the personal computer became cheaper, inclusion of a CD drive became standard equipment.

So, the urge to copy music and videos never really went away with the death of cassettes.  The momentum might have slowed, but a rebound during the 90's was seen in an overnight explosion of a new multimedia music format: mp3.  It was a compact, lossy format, which made audio files relatively small and thus convenient for download before broadband became prevalent.  In these days, 56k modems were as much bandwidth as one could get.  In the absence of broadband, there was no practical way to download very large CD iso image files.  So, that curbed copying CDs over the Internet.  But mp3 websites flourished.

If you wanted to find a copy of any song, it only took a few minutes to locate an mp3 on the Internet.  It was free for the download.  But that didn't last more than a year or so before aggressive Congressional legal action was taken against websites distributing pirated music.

In the end, the RIAA won out.  Then, in subsequent years, came along formats which allowed copying videos from CD.  Windows Media Format (wmv), Audio Video Format (avi) were perhaps the most popular until a superior format MPEG/4 came along.  As computer hardware and software became more sophisticated and the n'er-do-wells found ways around standard CD copyright protection, it became child's play to rip a copy of any CD or newer higher capacity Digital Video Disc (DVD) using decoder software utilities.

Very quickly, the criminals learned that they could set up servers 'off shore' shielded from legal action since there weren't treaties (yet) in place that would allow an MPAA or RIAA to legally pursue individuals internationally.

Websites like The Pirate Bay soon became dominant players (facilitators, accessories to the crime) in the theft of music, video and other copyrighted materials.

Theft of licensed music and movies was rampant.  It became a veritable 'free-for-all' where one could easily find any music, any video in minutes, simply download and consume without legal recourse. (Image credit: Wikipedia.org)


It has only been during the last five years or so that the RIAA/MPAA have been successful in introducing new laws on the books that make such theft illegal with severe fines.  They have enjoined ISPs to act as 'police' on the Internet gateways using deep packet inspection technology to detect when a theft is taking place.  The coordinated actions have been effective, but a costly deterrent.

Yet, as pirate websites relocate to avoid the long hand of the law and new technologies like Tor and BitTorrent decentralized Peer-to-Peer (P2P) with Distributed Hash Tables (DHT) are now coming into play, shielded by Secure Sockets Layer (SSL) tunnel encryption, it has become all the more difficult for the music and video industry to track down copyright violators who are learning and applying these new avoidance mechanisms.

The high cost to protect electronic copyrighted materials, i.e., music, video, ebooks, and the like, is being now being passed onto both distributors (like Pandora, Spotify, iTunes, Google Play) and legitimate consumers who want their music but must pay 'the pirate tax' reflected in higher prices.

An intricate web of Licensing and Cross-Licensing agreements made with distributing ISPs is mind-boggling and exacts a huge burden of operational overhead legal costs.

The MPAA/RIAA are not keeping pace with changes in technology.
DRM doesn't work.  It never will.

Let's go back to the LP.  Why did it work?  Because, by and large, nobody could dub a copy from the media, a vinyl record etched with wavy grooves.  It was effective and discouraged theft for many years.

A New DRM Solution

I read an interesting story a few months back in the Financial Times which really makes a lot of sense.

As many readers may know, Bitcoin is a relatively new technology and is classified as a cryptocurrency.  The technology essentially allows an electronic format (Wallet) to uniquely track, on a global basis, a quantity of value, with its own unique, secure fingerprint, guaranteed to never be duplicated.

I am an advocate of Bitcoin and have written about it here on LA and why it will grow explosively in the next year or so.  Bitcoin essentially behaves as a store of value, or, to be more precise, a commodity.  Oil, Corn, Copper, Wheat, Aluminum, Gold, Silver, Soybeans, all are commodities and 'trade' with a store of value brokered daily in their respective regulated trading markets.  Everyone is happy as the system works.  A quantity of said commodity is traded, bought, sold, in exchange for the respective country denominated
currency that represents its intrinsic fungible value at the point of trade.  It's fungible because a quantity of commodity can be moved and sold anywhere for its current value.

Bitcoin behaves this way because of its wallet properties.  Specifically, the underlying software uses something called a blockchain ledger which when embedded with a quantity of bitcoin guarantees that store of value uniquely and the owner of bitcoin stores a private encryption key to that bitcoin until they are ready to 'spend' it or, to be more technically correct, trade it.

Best of breed companies like Coinbase are positioning themselves as the 'middle-man', if you will, on the Internet, providing the needed 'go-between' from the consumer who holds a quantity of bitcoin in their wallet to facilitate purchases of participating web merchants who offer goods that can be now purchased with bitcoin.

The catch is, Coinbase is the 'middle-man' acting transparently to bridge a trade of your bitcoin, which they convert to your respective country's denominated currency, say  U.S. Dollars, which Coinbase then pushes (a legal IRS designated 'Currency Emitter') to the participating merchant in payment on behalf of the purchaser (you).

Wikipedia's definition for Fungibility:

Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. For example, since one ounce of gold is equivalent to any other ounce of gold, gold is fungible. Other fungible commodities include sweet crude oil, company shares, bonds, precious metals, and currencies. Fungibility refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not relate to the exchange of one commodity for another different commodity.

That quantity of value moves from your Coinbase bitcoin wallet to the transaction broker (Coinbase) who now own that quantity of bitcoin.  You cannot reuse that bitcoin.  (Being a broker, Coinbase takes a small 'transaction discount' on your trade of bitcoin to them and that's where they profit.)

The key here is, nobody questions the secure electronic transfer of ownership.  It left your wallet and as far as you are concerned, payment for goods was made.

Blockchain Extensibility

Here's a passage from the Financial Times article Bitcoin is far more than a currency for speculators (subscription required) for your consideration:

"...Old-fashioned financial services are thus an obvious target for Bitcoin-like networks. But there could be wider applications in the future, as the technology evolves. Nakamoto’s use of cryptography to assign and transfer ownership of online tokens creates possibilities that reach beyond payments. 

One is the idea of “smart contracts”, suggested by Nick Szabo, a computer scientist and former law professor (Mr Szabo is among those suspected of being Mr Nakamoto, which he denies). They would be completed with cryptography – for example, by giving a person who buys a car digital keys. 

Another is that people could gain ownership rights to digital goods similar to physical ones – lending or trading them as they want. At the moment companies tend to restrict digital rights to online goods because they are so simple to replicate – one item can be copied millions of times from the original source. 

Bitcoin solves this for currencies – it provides a method for the effective transfer of ownership. Once a Bitcoin is handed to someone else, the first holder cannot spend it again. If the same kind of transfer were achieved for other digital items, ownership would be meaningful." (...)

Conclusion

The idea of having music, videos, books, art, writings, etc. embedded with blockchain in such a way that 'Smart Licensing' could be guaranteed as much as Bitcoin ownership is currently guaranteed, is worthy of consideration.

Making a new standard that extends blockchain to incorporate the other attributes needed for tracking copyrighted works would open up new wide-spread markets for different products and services as well as copyrighted and patentable works for the world.

The extensibility of blockchain.info to facilitate such is key.

Once such a presumed technology 'plugin' extension is thoroughly field tested and production ready, certified by the International Standards Organization (ISO), every entity using the technology could rely on the underlying functionality to guarantee uniqueness and ownership of electronic media of all kinds.

It would remove all doubt as to whether or not an item is registered to its proper owner or not.  This is the central issue and blockchain ledger extensibility is the solution.  Music, Video, legal contracts, books, software, could all be treated the same, theft would be eliminated as well, and as important, the current tremendous costs exacted for Digital Rights Management would no longer be necessary.

-- Dietrich

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Bitcoin is NOT Money -- it's a Commodity

by Dietrich Schmitz

Bitcoin is NOT Money.  It is a 'virtual commodity'.

If the title of this story seems confusing, you are not alone.  It confused me for a while but after several months of research and study, I have come to fully agree with how Finland and China both reached the same conclusion: Bitcoin is NOT money -- it's a commodity.  Consensus is building around the globe and all indications point to Bitcoin becoming uniformally treated as such, which is good as it removes the current cloud of 'legal uncertainty' surrounding its ongoing use.

You may, then, be wondering if this makes using Bitcoin less attractive to use for, say, making on-line web payments.  Quite the opposite.  If you've read my previous post Use Bitcoin: Credit Cards Weren't Designed for the Internet, you'd have reached the conclusion that making payment at web merchants which accept bitcoin payment through intermediaries such as Coinbase is infinitely safer than the inherent security risk of using a credit card, for example.

The Federal Reserve has just rendered an official decision on treatment of Bitcoin -- Dietrich:

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Use Bitcoin: Credit Cards Weren't Designed for the Internet

by Dietrich Schmitz

Just yesterday, I registered my account at Coinbase, one of the largest most reputable, secure web Bitcoin brokers in the World.

The choice was careful and made after a period of weeks of study.  

If you don't know the history, during the past 12 months, Bitcoin has grown into a full scale 'made for the Internet' web commerce payment solution.

Credit Cards Pose Unacceptable Risk

Bitcoin stands to replace all known on-line payment methods including Credit and Debit cards, PayPal, etc. for many good reasons.  The clincher for me was the realization that credit cards simply weren't designed for the Internet. 

Think about that for a moment.  

Regardless of the safety assurances you receive from merchants, whenever you make the overt choice to pay using a credit card, you are placing trust in one or more commerce intermediaries to facilitate a transaction and also a level of trust they are keeping your secret credit card information secure on a merchant's website.  Often, that information also includes your date of birth and social security number.  This poses both a financial and identity theft risk.  That is unacceptable and the potential for global crime rings hacking websites to steal your credit and personal information is all too real as the frequency with which website attacks occur escalates.

As often happens, we have almost become numbed to news of millions of credit cards being stolen with regularity.  Clearly, this has become a profitable business for the criminals.  And in this case, crime often does 'pay' large sums of money, all at the victims' expense, and where the criminal may be on the other side of the world immune from local prosecution.

What is Bitcoin?

You can find an abundance of information on Bitcoin just by googling it.  But, I think this video does a nice job of explaining it for starters:

Why Use Bitcoin?

The other day, I came across a story which covers the most compelling reasons for why Bitcoin should be considered for Internet commerce.  Here are the story's abstracted key points:

- It's fast (faster than Bank Transfer, faster than cc with zero confirmation) 

- It's cheap. Bitcoin transaction fees are minimal, or in some cases, free. 

- Central governments cannot take it away because Bitcoin cryptocurrency is decentralized (peer-to-peer P2P). 

- No Chargebacks. As can happen wit credit card purchases. Once a Bitcoin purchase is made it cannot be retrieved without the receiver's permission (receiver is getting Bitcoin from sender). 

- People cannot steal your information from websites. There's only a public key and private key. You own the private key inside your encrypted wallet. Credit cards are insecure and require you to provide your secret information as part of a transaction that then gets stored on the merchant's website. If a website attack is successful, then the bad guys have your credit card to use as they see fit. 

- Bitcoin is not inflationary. Unlike fiat currencies such as the U.S. Dollar that get printed however capriciously the Federal Reserve desires, Bitcoin is set at a fixed amount. The more printing (Quantitative Easing), the more likely inflation will occur. 

- It's as private as you want it to be. Sometimes, we don’t want people knowing what we have purchased. Bitcoin is a relatively private currency. On the one hand, it is transparent; thanks to the blockchain, everyone knows how much a particular bitcoin address holds in transactions. They know where those transactions came from, and where they’re sent. On the other hand, unlike conventional bank accounts, no one knows who holds a particular bitcoin address. It’s like having a clear plastic wallet with no visible owner. 

- You don't need to trust anyone. In a conventional banking system, you have to trust people to handle your money properly along the way. You have to trust the bank, for example. You might have to trust a third-party payment processor. You’ll often have to trust the merchant, too. These organizations demand important, sensitive pieces of information from you.  Because bitcoin is entirely decentralized, you need trust no one when using it. When you send a transaction, it is digitally signed, and secure. An unknown miner will verify it, and then the transaction is completed. The merchant need not even know who you are, unless you’ve arranged to tell them. 

- You own it. There is no other electronic cash system in which your account isn’t owned by someone else. Take PayPal, for example: if the company decides for some reason that your account has been misused, it has the power to freeze all of the assets held in the account, without consulting you. 

- You can 'mine' Bitcoins yourself. In spite of the amazing advances in home office colour printing technology, most national governments take a fairly dim view of you producing your own money. With bitcoin, however, it is encouraged. You can certainly buy bitcoins on the open market, but you can also mine your own if you have enough computing power.

Coinbase has the added benefit of two-factor authentication which means only I can access and make transactions.  Take a look at Coinbase's security and you'll see they are dead serious about keeping your Bitcoin safe.

I won't use Coinbase to store my personal Bitcoin Wallet.  It will facilitate making web payments, per se,  as I can 'on demand' transfer from my bank account the precise amount required for making payment to a participating Coinbase merchant.

Bitcoin-Qt

If I choose to transfer amounts and send them to my local PC, I can do so as well, using Bitcoin-Qt.  Bitcoin-Qt is available for Windows, Apple Macs, BSD variant and Linux operating systems for download here.  You'll find some good information on using Bitcoin-Qt here to help with getting up to speed.

Conclusion

I see nothing but a huge upside potential for Bitcoin and so do thousands of merchants now adopting this payment method, around the globe.

The virtue of having this payment method makes so much sense to me.  It eliminates the risk of stored secrets on the Internet.  There are none.  And one need only transfer the needed amount from cash to Bitcoin to cover the cost of a purchase.  This makes the transaction effectively behave as though it were your 'Debit' type card where the money is deducted from your Bank account directly, only you have control over how much and when that will occur.  There are no stored secrets to reveal and no intermediaries to get involved.  It's just you and your Bitcoin.

So, if you use Bitcoin for nothing else (such as its inherent cryptocurrency virtual commodity trading potential), it makes emminent sense to employ it for your Internet commerce transactions.  Close down the risk of using credit cards today -- they weren't designed for the Internet.  

Watch the below youtube Coinbase tutorial and then sign up to create your Coinbase Bitcoin account today!

-- Dietrich

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