Blockchain – Simply Put, with Some Digital Asset Applications

2021-03-17

Lee-Bath Nelson  

Beeple first 5000 days zoom on part - digital art ownership on blockchain

By now, everyone has probably heard of blockchain and its most famous use: Bitcoin, the first crypto currency. But what is blockchain in simple terms and what digital asset applications is it most suitable for? When is it appropriate for additive manufacturing and under what conditions? We will attempt to address all this in this post.

Distributed Networks

Before we talk about blockchain, we need to talk about the kind of network it operates in – namely a distributed network. A distributed network is a collection of nodes (computers, devices, etc), connected through a messaging system, each operating independently of the other (so far this is could be the internet, for example), AND together they can perform distributed tasks correctly. In the general case, the messaging system is asynchronous which means that messages are not transmitted at fixed times and do not require both sides of the message to be available at the time of transmission. In the people world, a group of students, that have no leader, collectively creating a project, each in their own house, is like a distributed network. They know what the project is, each student does some of the work (which can be anything from nothing to the entire project) to reach an agreed goal (the finished project). Clearly, it is easier to achieve this if there were a leader that assigned parts to each student and also made sure that all the parts fit together, but the downside of that is that if the leader is sick or misbehaves, the entire project fails. Similarly, if all the people were in one room it would be easier to coordinate – but this is also a vulnerability as losing electricity in this room or the inability of some individuals to get there jeopardizes the entire project. Centralization is always a potential failure point and vulnerability – distributed networks are so attractive because they have no centralization, no potential single point of failure. So long as the network has enough working computers so it can collectively perform a task and agree on the result (agreeing on something is called consensus), it is working properly. In some cases, we also want to make sure it doesn’t take too long for this to happen – which can be difficult if different computers or different communication lines operate at different speeds – researchers are working on this.

The concept of distributed networks was researched in academia since the 80s. I have personally had the privilege of being part of this research body with a series of papers that examined the resilience of asynchronous distributed networks to attacks – these are networks where the messaging is asynchronous, like email, whatsapp, or text message, as opposed to synchronous messaging such as in-person meetings or group audio/video calls or hourly news broadcasts. These papers proved that, theoretically speaking, a distributed network is resilient to attacks if and only if it can perform consensus in all circumstances, including under attack. This means that if you have a technology that allows the network to reach consensus (agreement) then it will be resilient. This is not as easy as it may seem – some node may be much faster than others and subnetworks may decide on different outcomes at exactly the same time (for example all the EU computers will agree to use the metric system while UK based computers will agree to use the imperial system – in this case consensus is not reached, they must all agree on the same system). Consensus algorithms are quite complex, despite the simplicity of the concept, not unlike cryptography – one of our favorite security experts, Shai Halevi, has said about a cryptographic equation: “It was elegant math with real world applications, but it was also hairy and disgusting”. Halevi is currently researching how to use blockchain to keep secrets – fascinating stuff!

HP MJF Color Chainlinks

Blockchain in Plain English

So, what is Blockchain? Blockchain is a technology that is able to maintain a database on a distributed network of computers. Each computer stores a copy of the database and uses a specific algorithm to verify and agree (consensus) on additional records to be added to the immutable database (this database is also known as a ledger). The immutability of the ledger means that once an entry was verified and agreed upon it cannot be erased. The way that the verification and consensus algorithms are constructed is based on making it easy to correctly verify and very costly to insert false data to the ledger. This is similar to checking that a door is locked by a key I have in my hand (just insert and unlock) – which is much easier than finding the key that unlocks a specific door out of all the possible keys in the world. However, as is clear in this description, it is not fool proof – for example we might be able to extract information from the key hole and then only check a much smaller group of keys that fit that information. Also, in order to achieve such a gap in difficulty between verifying and hacking, many nodes are needed in the network to prevent a malicious player from overtaking the network completely (control 51% of the nodes in the network) and agreeing with itself (consensus) to corrupt the ledger however it wants.

Another issue is every computer holds a copy of all the records in the database – that’s a lot of computers! This is great for transparent data (see example of digital art ownership below) but not so great if we’re talking about companies’ commercial information such as how many spare parts were 3D printed last month, and where. Additional (other) cryptographic methods can be applied to increase opaqueness and safeguard information but there is a limit to what can be done without losing the ability to easily verify (or losing the distributed nature of blockchain).

Because of the immutability of blockchain, a large blockchain network is well suited for recording digital contracts, especially financial transactions including but not limited to trades in crypto currencies. There is a clear record of who owns how much at any given moment and it is inerasable so any hacking cannot prevent examination of the ledger up to the hack time and retracing steps. In the past hackers would prove that they hacked blockchains by inserting a record with offensive content (such as porn) into the blockchain. There was even some controversy over whether inclusion of illegal images into Bitcoin’s blockchain would render the coin illegal (spoiler: legal scholars say it won’t).

However, as with any authentication mechanism, we have to consider the solution as a whole to make sure it is secured. One example of a straight forward use of blockchain (that is not so straight forward upon closer inspection) was piloted for authentication of medicine. Pallets of pill boxes each have a unique ID which is noted on its shipping sticker. The identifier is stored by the drug company in a blockchain ledger and then when a pharmacy chain receives a pallet it can verify that these pills are original and not knock offs. A counterfeiter of pills has no way to insert the ID of their pallet onto the blockchain and therefore those pills will be recognized as counterfeit. Seems simple, but let’s think about this again. If the counterfeiter can get his hands on 1 shipping label with an ID,  he can put that ID on his own pallet. Now we need to make things more difficult and record the whereabouts of each pallet and make sure that whoever is reporting is not a counterfeiter. And so on and so forth. Not easy in this scenario and there may very well be more effective ways to handle the problem.

Beeple first 5000 days

Collecting, Digitally

More recently, blockchain provided a great solution for a market that has had a problem for a long time: digital collectors. Collectors, in general, require provenance and authenticity: a history of ownership and origin of each piece. This is true for collectors of baseball cards as much as for art collectors. For many years digital art was left out of the collectors’ game because it was hard to provide both authenticity and provenance. Meanwhile, people like Mark Cuban have been using ownership of crypto tokens (called NFTs, pronounced nifty, or Non-Fungible Tokens) on blockchains to signify ownership of digital collectibles (single or limited editions of several). Each NFT is associated with a specific digital collectible, such as this freely available video of LeBron James dunking and staring down another player. The NFT marks the ownership (which is not the same as possession) of that video. There is only 1 NFT and someone bought it for over $200k just a few weeks ago, even though everyone can see this video (for free) and potentially also have the video stored on their computer (without paying anything, legitimately). This is similar to the case where a collector owns a Picasso but lends it to a museum for everyone to enjoy. This distinction between ownership (which you can sell) and possession (which is not part of the deal) is very important for understanding what can and cannot be monitored by a blockchain when it comes to digital assets. The digital art market embraced this method starting experimentally about 4 years ago and just a few short months ago  collecting these digital art NFTs (also called Crypto Art, though that is arguably a misnomer) has boomed. The highlight came this week when auction house Christie’s auctioned an NFT associated with a work of digital artist Beeple called First 5000 Days. It sold for $69mm – yes, that’s 69 million US Dollars. You can see the image above and a zoomed in excerpt up top. Again, we can all have these files on our computers (possession) but there is only 1 owner of the associated NFT – and he paid $69mm for that honor (and presumably for the right to sell this NFT later on for a profit).

What About 3D Printable Digital Assets?

Like all financial transactions, the ordering and paying for 3D printed items can be well suited for blockchain but that is not the case for securing and ensuring correctness and repeatability of the additive manufacturing process. In order to control the entire additive manufacturing process, each step would need to be on the blockchain, including the 3D printer. Since achieving consensus is a time and resource consuming process, this is not likely any time soon. How about “just” giving a provenance for a part we have? As is clear with the art collector examples, the convenient asset to put on a blockchain is a NFT that is associated with the digital asset, not the often huge 3D printable file itself. However, this is separate from possession and unsecured, uncontrolled possession allows as much counterfeiting as the counterfeiter wants with 3D printing. The method used for digital art collection is only suited for checking provenance of a NFT – it will not control possession, it will not tell you anything about a 3D printable file you currently hold (is it authentic or not) and it certainly does not control the quality or quantity of the physical items 3D printed from this asset. Blockchain is great, but as we said earlier, sometimes you need something else altogether and this is the case with additive manufacturing. This is not to say that technology won’t evolve in the future to allow us to use additional methods that are more suited for AM. Hopefully, in the future we will be able to microscopically ascertain a fingerprint for each individual physical asset and then it can be associated with a unique NFT to ascertain its authenticity and provenance. That will be highly applicable to additive manufacturing – these are definitely #AMneeds – so we will all stay tuned for developments as they happen in this fascinating market.

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