With BitStream, Bitcoin Use In Data Markets Is On The Rise

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The below is an excerpt from a recent edi­tion of Bit­coin Mag­a­zine Pro, Bit­coin Mag­a­zine’s pre­mi­um mar­kets newslet­ter. To be among the first to receive these insights and oth­er on-chain bit­coin mar­ket analy­sis straight to your inbox, sub­scribe now.

Robert Linus, Zero­Sync devel­op­er and cre­ator of the BitVM pro­to­col, has cre­at­ed a new pro­to­col for incor­po­rat­ing data sales and down­loads into the trust­less secu­ri­ty of Bitcoin’s blockchain, and it may open a new realm of uses for Bitcoin.

Linus has had a busy career as of late rev­o­lu­tion­iz­ing Bitcoin’s poten­tial. Although much of the buzz about Bit­coin in the main­stream is relat­ed to its mon­e­ti­za­tion and use as a finan­cial instru­ment as it increas­ing­ly becomes entan­gled with the exist­ing world of finance, Linus has under­tak­en sev­er­al impor­tant projects to max­i­mal­ly har­ness the blockchain in sur­pris­ing new areas. In addi­tion to his work at Zero­Sync to cre­ate zero-knowl­edge proofs, in Octo­ber, Linus made head­lines with his new BitVM pro­to­col: A method to cre­ate log­ic gates and com­plex com­pu­ta­tions entire­ly with­in Bitcoin’s blockchain. Such func­tion­al­i­ty, at scale, would enable Bit­coin to car­ry out smart con­tracts to the same degree as oth­er tokens like Ethereum, only with­out sac­ri­fic­ing any of Bitcoin’s decen­tral­ized characteristics. 

On Novem­ber 11, Linus announced the proof-of-con­cept for a new pro­to­col: Bit­Stream. Essen­tial­ly, the plan is to uti­lize Bitcoin’s blockchain to make atom­ic pur­chas­es of var­i­ous data pack­ages; in oth­er words, pur­chas­es that require no inter­me­di­ary and can be accept­ed or dis­put­ed by the buy­er and sell­er pure­ly using the func­tions of their con­tract. Linus’ whitepa­per goes into greater detail: He specif­i­cal­ly draws atten­tion to Nos­tr, a decen­tral­ized pro­to­col designed to cre­ate cen­sor­ship-resis­tant communications. 

Although its trust­less nature and gen­er­al aims are very adja­cent to Bitcoin’s ethos, Nos­tr does not direct­ly use Bit­coin, and Linus claims that “paid servers for plat­forms like Nos­tr often under­es­ti­mate their oper­at­ing costs when charg­ing a month­ly pay­ment for stor­ing a user’s data. Users can split their pay­ment into dai­ly or week­ly incre­ments if they don’t trust the servers, but this strat­e­gy doesn’t resolve the eco­nom­ic chal­lenges servers face. Users are pay­ing to upload their data, so servers are not paid per down­load.” He went on to state that one of the main focus­es behind Bit­Stream is the require­ment that servers are incen­tivized and com­pen­sat­ed, using a pay-for-down­load basis. 

Although Linus was quick to state some of the very easy ways that BitStream’s encryp­tion pro­to­col would be fur­ther com­pli­cat­ed, to make the ser­vice over­all more secure, he made an expla­na­tion of the basic fun­da­men­tals using a much more sim­pli­fied mod­el. Essen­tial­ly, as is extreme­ly com­mon in file encryp­tion, the ini­tial file is bro­ken into chunks to form a Merkle tree, and it then hash­es each chunk of data. The new File ID is the root of this tree, the piece of infor­ma­tion that con­tains all the hash­es and none of the orig­i­nal data. A one-time pad is then used to encrypt each of the orig­i­nal chunks, using a dif­fer­ent for­mu­la than the hash­es in the unen­crypt­ed tree. The hashed chunks and the new encryp­tions of the same chunks are then paired togeth­er, into a new tree with a new root that is shared with the server.

With the Encrypt­ed ID avail­able, an auto­mat­ed process can exist where pay­ment by the sell­er is auto­mat­i­cal­ly met with the oth­er pieces of data need­ed to decrypt the actu­al file: All encrypt­ed chunks, the hash­es of all unen­crypt­ed chunks and the orig­i­nal file ID. If there is any dis­crep­an­cy between the encrypt­ed chunks and the unen­crypt­ed chunks, it will be imme­di­ate­ly evi­dent, and the buy­er can use it as a proof to the blockchain that the trans­ac­tion is some­how bogus and should be refund­ed. In this way, a secure method for trans­fer­ring files is trans­formed into a trust­less con­tract that finan­cial­ly incen­tivizes the data serv­er, all using the pow­er of Bitcoin’s blockchain.

This pro­to­col is enabled with a wide vari­ety of Bitcoin’s pay­ment chan­nels, obvi­ous­ly includ­ing the Light­ning Net­work but also sidechains like Liq­uid and sev­er­al more obscure solu­tions. It is also con­struct­ed in a sim­i­lar way to BitVM, not nec­es­sar­i­ly clog­ging up Bitcoin’s blockchain by mak­ing every step require on-chain trans­ac­tions, but ver­i­fi­ca­tion and dis­putes can eas­i­ly do this to car­ry out dis­putes. When Linus was told that Bit­Stream does for stor­age space what BitVM does for exe­cu­tion time, and asked if they could be com­bined, he replied in the affir­ma­tive and claimed that he came up with Bit­Stream first, and need­ed to fig­ure out how to gen­er­al­ize it into BitVM.

Although this pro­to­col has had both its sup­port­ers and detrac­tors, Linus was suc­cinct when he was asked on Twit­ter what makes this pro­to­col bet­ter than oth­er stor­age solu­tions? His answer: “It’s bit­coin.” Once again, Linus has fig­ured out a way to car­ry out some of the func­tions some alt­coins have cen­tered their busi­ness mod­el around, all using the num­ber one decen­tral­ized cur­ren­cy, and not even hav­ing neg­a­tive side effects. It’s in this spir­it, then, that we should con­sid­er Dura­bit: a sim­i­lar pro­to­col for using Bit­coin to incen­tivize and guar­an­tee the secu­ri­ty of data trans­fers, albeit with an anony­mous creator. 

Dura­bit is a pro­to­col built on top of one of the Internet’s most noto­ri­ous pro­to­cols, Bit­Tor­rent, the file host­ing ser­vice. Although it has gained an immense rep­u­ta­tion over its 22 years of func­tion­al­i­ty, it requires users to active­ly seed the data for fur­ther down­loads. If a file is down­loaded by users more often than it is re-seed­ed, it dis­ap­pears. Dura­bit does not pro­pose a com­plete­ly trust­less method to solve this, although it is rea­son­ably low-trust: A mint runs the pro­to­col, and accepts funds from users that wish to see a file seed­ed. The mint then makes micro-pay­outs to seed­ers at timed inter­vals, so that the mint can­not direct­ly abscond with the funds and the ini­tial investor can revoke the remain­ing funds if they feel the mint is act­ing in a dis­hon­est manner.

This pro­to­col is far more niche, and for that mat­ter less trust­less than Bit­Stream, but it nev­er­the­less opens up a tru­ly nov­el use-case in the his­to­ry of Bit­coin. Although the cry of “seed your tor­rents!” has been an essen­tial refrain for good Inter­net eti­quette for decades now, the dis­ap­pear­ance of files from the plat­form and the dif­fi­cul­ties of run­ning a pro­gram like Nos­tr show that good­will isn’t always enough. With Bit­coin, there can be an actu­al incen­tive to con­tin­ue best prac­tices and encour­age the free flow of infor­ma­tion, all with­out tying these incen­tives to an out­side authority. 

Even the most well-inten­tioned over­seer can still be pres­sured by exter­nal forces to stop the flow of data, but pro­to­cols like these show how infor­ma­tion can flow with either a tiny arbi­tra­tor or none at all. Bit­coin has a pow­er­ful abil­i­ty to trans­form the entire world of data mar­kets, and it’s all con­tained with­in the most fun­da­men­tal laws of Bitcoin’s ethos. If Bit­Stream sees wide­spread use, if fur­ther anony­mous Bit­coin­ers cre­ate pro­to­cols like Dura­bit, who knows what the pos­si­bil­i­ties are? After the com­mu­ni­ty begins to inno­vate on a new con­cept for Bit­coin, the sky’s the limit. 

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