The CDM is based on game theory and economic mechanism design and takes a completely new approach to transaction validation: Proof of Honesty (PoH).
As a result, the CDM offers users Strategically Provable Security (SPS), in effect, 100% Byzantine Fault Tolerance (BFT). Geeq.io 2 1. Trusting such data is equivalent to trusting in both the honesty and the security competence of the central authority. Blockchains are append-only, distributed ledgers. No central authority owns or controls the data. Users send requests to write new records to a set of decentralized, often anonymous, nodes 2 who must come to a consensus on their validity. Once a record is written to a block and committed to the chain, it becomes both immutable and nonrefutable. The cryptographic signatures and recursive hashing of blocks make it impossible to delete, alter, or claim that one never agreed to the contents of a record. If copies of the chain are stored in many places, it becomes almost impossible to censor or prevent access to the data it contains. Blockchains allow agents to cooperate without the need to trust in the honesty or good behavior of one another or any third party. Ethereum s smart contracts permit even more sophisticated interactions between users without the need for mutual trust. 3 Unfortunately, the promise that blockchain holds for creating decentralized and trustless ways to share information and improve distributed business processes is limited by several factors. Some approaches (Bitcoin and Ethereum, for example) have high transactions fees that are a consequence of their security models. The ability to scale to large numbers of transactions per second, fix bugs, and upgrade to better and more flexible protocols is also limited on existing blockchain platforms. GeeqChain offers a new approach to blockchain based on game theory and economic mechanism design. GeeqChain is secure, cheap, fast, and scalable. Depending on the blockchain and approach to validation, nodes are called miners, stakeholders, delegates, or voters, among other terms. Humans (who we call agents) own these computers and make them available to the net - work. One agent may be the owner of several nodes, or may simply be a user who makes transactions on the blockchain but does not provide validation services. 3 It should be noted, however, that the Ethereum smart contracts have also led to a number of significant security issues. For example, on June 17, 2016, a coding error in the smart contract supporting the DAO resulted in a theft of 3.4M ETH worth $53M. More recently (November 6, 2017), a coding error in the Ethereum smart contract supporting Parity s multi-signature cryptocurrency wallets locked up accounts holding over 500k ETH worth over $150M. 2 3 privacy protection desired. The protocol allows the creation of an ecosystem of federated chains that can safely share GeeqCoins, but which can support very different types of internal business logic. Outstanding Problems with Existing Blockchains Blockchain has the potential to profoundly transform the way we work, transact, and share information. As a technology, however, blockchain is immature and several significant problems need to be solved before this potential can be achieved. 2.1 Security All the advantages that blockchain offer depend on honest transaction verification and blockwriting. Bitcoin and Ethereum use a network of miners and a Proof of Work (PoW) protocol to establish the integrity of their ledgers. In the case of Bitcoin, block-writing rewards and transactions fees create incentives for honest behavior. Provided that more than 50% of the miners are moved by these incentives, the chain is difficult to corrupt. 4 As a result, the Bitcoin protocol is said to have a Byzantine Fault Tolerance (BFT) of 50% 5. We discuss the value of BFT as a measure of security in more detail below. In PoW protocols, nodes are generally run by anonymous agents. The principle of one CPU, one vote, applies. Any agent who is willing to bear the computational cost of trying to mine a block can join the validation network anonymously and as an equal. The hope is that the computational cost deters Sybil attacks in which many fake identities are created in order to gain majority control of the validation process. If votes must be paid for with work, then it should be too costly to mount such an attack. Many pools have chosen to self-identify which makes them vulnerable to pressure from state-actors or others. Mining pools are so concentrated at this point that if no more than three were to collude, they could mount a successful 51% attack. In effect, Bitcoin is not validated by thousands of independent nodes but depends instead on the honesty of three or fewer agents. Put another way, if Bitcoin has 10,000 nodes, an attack by only three agents would be successful. In a real sense, this means that the BFT of Bitcoin is only 3⁄10,000 or.03%. 4 More accurately, if miners controlling more than 50% of the network s hashing power are honest, then the chain is difficult to hijack. This is called a 51% attack. 3 4 One must wonder why these pools do not, in fact, merge. In any industry, mergers create market power. At worst, the merged firm could simply proceed as if it was still four separate firms and make exactly $4X. Taking advantage of monopoly pricing or economies of scale, however, would certainly bring profits above $4X. Merging is in the interest of the shareholders of all four firms. On the other hand, the merged pool would be able to mount a successful 51% attack and take over the Bitcoin blockchain, gaining whatever additional profits this might entail. The fact that they do not choose to do so must mean that something besides the PoW protocol is keeping them honest. The most likely candidate is the fear that stealing bitcoins would result in a hard fork 6 that would prevent the merged pool from profiting from their theft. In other words, to the extent that PoW blockchains are trustworthy, it is only because of the belief that code is law is a lie. It is in fact the threat to break protocol, not the protocol itself, that keep Bitcoin and Ethereum safe. Proof of Stake (PoS) is the other main approach to verification. Several banks, for example, might set up a private blockchain in which the members vote on whether a new block is correct and should be added to the chain. Stake can also be established by posting a bond (money, tokens, work, provision of resources such as storage or bandwidth, participation in network activities, etc.) and voting power is then distributed in proportion to the stake. It is possible to allow free entry of anonymous validators in these cases. 7 Depending on the implementation, PoS approaches are both cheaper and more scalable than PoW. Unfortunately, PoS depends on the majority of stakeholders behaving honestly. The number of voting stakeholders (tens or hundreds) is typically much smaller than the number of validating nodes (tens of thousands) used by PoW blockchains. This makes collusion by validators much more likely and so it is not clear how much confidence a claim of 50% BFT should give us. 8 6 In this case, the hard fork would involve breaking protocol and ignoring the validated blocks containing transac - tions that were judged as stealing coins. New blocks would be added starting from the last honest block. This is usually because the group has a different vision of the best path forward.
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Hard forks are especially problematic in context of blockchain because it breaks the rule that code is law by creating a fork with new laws and protocols.
Even if the motivations are pure, if you can break the law for good, you can break the law for bad. Hard forks are very corrosive to the trustless, anonymous, distributed nature of blockchain. See footnote 23 for some additional discussion. 7 There are also many hybrid approaches that use combinations of PoW and PoS or even more complicated means of choosing agents to verify transactions. 8 If a fixed set of stakeholders validate a blockchain, then honest behavior depends on the incentive structure faced by these specific agents. For example, one might be confident that the reputational damage of dishonest behavior would be enough to make Bank of America or Deutsche Bank behave correctly. Thus, protocols that use escrowed tokens or Proof of Effort of some kind may end up systematically choosing dishonest validators. BFT loses its meaning as a measure of security in such cases. It is seen as even more unlikely that 5 out of 8, or 26 out of 50, would simultaneously become dishonest. 9 There are two problems with this. First, as above, if the identity of the validators is known, they can be pressured by state-actors to break validation protocol in support of legal judgments or state policy. Even if stake-holders are numerous and anonymous, we run into the same concentration problem that we see in PoW protocols. If the profit a validator gets from posting a bond is worth it, why not post the same stake under many identities? At worst, each identity makes enough profit to pay for the cost of posting the bond. Creating enough identities to gain the majority of the total voting stake makes it possible for a single real-world agent to take over the blockchain. Again, it is only the threat of out-of-protocol actions that creates a disincentive to make such an attempt. 2.2 High Cost Visa and Mastercard charge merchants a fee of about 25 plus 2.5% of the value of the transaction to use their networks. These transactions costs are very high, certainly too high to make it practical for a customer to make a micropayment of a few cents to a merchant or content provider. One of the great promises of blockchain-based cryptocurrencies is that they will make financial transactions more efficient. The Ethereum and Bitcoin platforms have transactions costs that range from tens of cents to tens of dollars. Blockchains that depend on PoW protocols must have very large networks of validating nodes. Users ultimately bear the costs of having thousands of nodes using electricity and wasting CPU cycles to solve the cryptographic puzzles required, to win block rewards and validate transactions. 11 In other words, high transactions costs are baked into PoW based cryptocurrencies. 9 Of course, Proof of Stake begs the question of why a blockchain is needed at all. If a group of firms mutually trust one another, why is there a need to create an immutable record validated by a complicated PoS algorithm? 10 Since all the participating banks are in the same sector, their economic fortunes are highly correlated. In a recession or financial crisis, all banks are likely to be under financial pressure, the threat of bankruptcy, and the possibility of being taken over by the federal reserve. Bank officers might be willing to take desperate measures to survive. The threat of a lost reputa - tion is not much of a deterrent to a bank or any firm facing extinction. 11 The bitcoin protocol creates a cryptographic puzzle for miners to solve at the beginning of each block. This puzzle can only solved by brute force, trial and error. Miners run computers (more often, large clusters of purpose built computers) to find the solution. Solving the puzzle produces what is called a nonce. Once the nonce is found, it can be used by anyone to quickly verify that the puzzle has been correctly solved. It is estimated each block requires that hashing operations (guesses) to find the nonce, requiring a total of 35 TWh (terawatt hours) per year. At $0.10 per kwh, this means it cost approximately $3.5B to validate the bitcoin blockchain in 2017, although wholesale electricity costs are be considerably lower in certain regions. The environmental implications of this waste are the 5 6 Solutions based on PoS blockchains such as Hyperledger fabric have a different set of problems. It is true that using a relatively small number of stake-holders decreases the computational (and other) costs of validating transactions. If only ten or twenty stake-holders are to be trusted with the job of validating millions or billions of dollars in transactions, however, they must be carefully screened. As a result, their identities are known and users must ultimately trust that the screening process is effective and will remain so. This runs completely contrary to the underlying idea of blockchain as a trustless, decentralized, and distributed ledger technology. Some approaches to PoS involve larger numbers of stakeholders, but require that they choose to give their share of the voting power to a smaller number of delegates. This speeds transaction confirmation since a relatively small number of nodes/stakeholders are actually doing the work of verification. Such systems are only secure, however, to the extent that the bonds posted by the stakeholders are large in comparison to what they could gain by acting dishonestly. Since posting bonds is costly, these PoS approaches also bake in an inescapable level of transactions costs (similar to those discussed for PoW protocols). In short, there is no such thing as a free lunch. Either transactions costs are high, or validation is in the hands of a small number of possibly nonanonymous agents. Unless a solution can be found, cryptocurrencies will never be secure enough to offer a serious challenge to the conventional banking system. 2.3 Scalability Both the Ethereum and Bitcoin blockchains are operating near maximum capacity. The Ethereum blockchain writes blocks about every 12 seconds and currently processes between 4 and 7 transactions per second (with an estimated maximum rate of 15 per second). Bitcoin writes blocks every 10 minutes and processes 2 to 4 transactions per second (with an estimated maximum rate of 7 per second). Neither protocol would be able to scale up to the 2000 transactions per second handled by the Visa network, which has an estimated maximum rate of 56,000 per second. Bitcoin s proposed solution to this problem is called the lightning network and is similar to Ethereum s raiden network. Essentially, users are required to lockup tokens on the main Bitcoin or Ethereum blockchains to serve as security for transactions that agents agree to off of the mainchain. These off-chain transactions are not validated or committed by the mining pool, but there is a degree of security provided by a system of smart contracts. This allows both parties to cancel or alter transactions until they mutually agree that a transaction is final. There are a great many problems with this approach, but we will not go into detail here. Fees also must be paid to bring the results of activities on these side networks back to the mainchains. In a sense, these networks allow users to place value on debit cards that they can use to same regardless of the cost of electricity. 12 For example, see John Ratcliff s analysis of the lightning network at: 6 7 execute transactions quickly and cheaply without involving the bank (the main-chains in this case). However, this requires that the bank both issue the cards and redeem them, in order to return whatever value they contain back to the users main-chain account. As discussed in the previous section, PoS based solutions either use a small number of validators or run into the same scaling issues as PoW approaches. Iota s tangle protocol is another approach to increasing transaction capacity. It is not actually based on blockchain, but instead relies on repeated validation of transactions by individual nodes. The BFT of tangle is not clear, and it appears to be open to strategic manipulation on a number of fronts. 13 Micropayments are only one use case where high transaction volumes are likely.
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For example, stock exchanges and other financial markets could only be moved to blockchains if they had the capacity to handle hundreds or thousands of transactions per second.
There exist billions of connected devices today ranging from medical and industrial sensors to household thermostats and appliances. With autonomous vehicles just over the horizon, the Internet of Things (IoT) is poised to become even more important. Even keeping ordinary records for hospitals, government agencies, or large companies might require writing many hundreds of data items into a blockchain per second. GeeqChain Basics GeeqChain is a flexible platform that is built around interoperable federated instances of blockchain tailored to different use cases. These GSCs are included in genesis blocks that are the foundation of each instance. GeeqChain also takes a novel approach to network topology and communications. When these are combined with a type of unanimity game to achieve consensus, the result is a validation protocol that offers Strategically Provable Security (SPS), 14 effectively, 100% BFT. 3.1 Genesis Blocks All instances of GeeqChain begin with a genesis block (block number 1). Blocks of validated transactions are created by nodes in the network and appended sequentially. Genesis blocks are 13 For example, see Christine Masters discussion at: https://cryptovest.com/education/not-a-iota-the-trouble-with-iotaand-how-to-fix-it/. 14 For a discussion with much greater detail, see Section 4. 7 8 created by GeeqCorp at the request of other companies who wish to build applications. This tight control has several motivations. It prevents duplication of chain, token, and controlling authority names. It ensures that the chain adheres to the CDM protocol for transaction verification. The SPS that results makes it possible for federated GeeqChains to trust in the integrity of other ledgers and to accept tokens from other GeeqChains. It fixes the rules under which the chain will operate. This is done by including copies of the GSCs in the genesis block. GeeqChains can be adapted to many purposes, using different sorts of business logic for native tokens. Users can verify that the rules are being followed by doing their own audits and verifications with the help of the GSCs written into the genesis block. Note that the business logic these GSCs contain may also rely on data records written by users into the chain in addition to token transactions. The genesis block also contains pre-mined tokens and/or sets out the rules under which tokens can be created in the future. Users know going in exactly how the token economics for any given instance of GeeqChain will work as a result. The business model of GeeqCorp involves payment of GeeqCoins to GeeqCorp accounts in various ways. These may include periodic fixed license fees, transactions fees, or small fees to update the ledger states, for example. These payments are automatic and built into the GSCs with the agreement of a client who wishes to start an instance of GeeqChain. This might seem to give GeeqCorp a great deal of power that could lead to potential abuses. However, once a genesis block is created, neither GeeqCorp nor anyone else can alter it or the operation of the chain that uses it as a foundation. There is simply no mechanism to allow such manipulations to happen. In addition, each instance of GeeqChain can produce only the type of tokens listed in the genesis block, and no other instance can produce the same token type. An implication of this is that only the original GeeqChain will produce GeeqCoin, and since these will all be pre-mined, no additional GeeqCoins can ever be created. 3.3 Network and Communications Nodes are validators of transactions submitted by users for inclusion in new blocks of the GeeqChain. Real world agents (that is, people) download and install a copy of the GeeqChain node client on a computer which can be reached at some IP address. Each active node builds, keeps, and makes available to users its own copy of the GeeqChain. 8 9 The CDM uses a unanimity rule for consensus. Knowing the state of the network and who did or did not send and receive messages is a necessary condition in order to determine unanimity. However, communicating with each and every peer would use a great deal of bandwidth. If the CDM required such extensive communication to function, it would also introduce a great many points of failure. The solution is based on two basic elements. First, the CDM uses a random hub and spoke approach. The simplest case is for a single hub to coordinate the building of each block. More complicated structures with multiple layers of hubs and random participation rules are possible and may be desirable, depending on the needs of the chain being validated. Second, the CDM uses a special GSC to handle communications between nodes, clients and users. 15 In brief, this element makes it possible to prove and verify whether messages were sent and received, and by whom. More generally, the network communications GSC closes off attack surfaces that dishonest nodes might exploit, but leaves the CDM robust to even extreme network failure. 3.4 An Example of a Consensus Game The CDM is based on game theory and economic mechanism design. 16 The unanimity game described is an example of an economic mechanism based on non-cooperative game theory. In a formal sense, the CDM is a 9 10 Agents are offered a chance to play a game in exchange for a one dollar admission fee. Each player who pays the fee is sent to a room where a word is written on the wall. Players are asked to write this word on a piece of paper. The papers are then gathered and compared. If they all have the same word, then each player is paid two dollars. If there is any disagreement about the word, all players get zero (which gives each a net payoff of negative one dollar). It is easy to see that truth-telling is a Nash equilibrium. 17 Suppose that one agent sees that all other players have reported the truth. Clearly, his best response is to tell the truth as well. Reporting the correct word gives the agent a payoff of $ 1 while any other report gives him a payoff of $ 1. Unfortunately, this game has many other Nash equilibria as well. For example, suppose that at least three players make different reports. All players would get a payoff of $ 1 in this case. Since no single player could change his report and generate unanimity, all the player s strategy choices result in a payoff of $ 1. In other words, all reports are (equally bad) best responses for any individual agent. Alternatively, all the players might get together before the game is played and agree to coordinate on one specific untrue report. In that case, each player would get a payoff of $1 and no single player would benefit from unilaterally changing his report and telling the truth. Of course, coordinating on a false report does not yield a larger payoff than coordinating on the truth, nevertheless, both are Nash equilibria. In the context of blockchain, it might be the case that players could profit substantially if they coordinated their efforts.
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For example, they could agree to write down one of their own names and then split the $1000 received.
In so doing, players would still get the $ 1 payoff for their unanimous reports but would get an equal share of $ 1000 in addition. Agents, therefore, have a positive incentive to collude, unlike the simple game first described. To fix this, we could alter the game again to allow a small amount of auditing. Suppose we required all agents to sign their reports. If the reports are unanimous, then agents get a payoff of $ 1 and $1000 goes to the person they name. However, if the reports are not unanimous, then the door to the room is opened, and the name on the wall is read. Any player who wrote down the correct name would get a payoff of $ 1 plus an equal share of a $ 1000 bonus. Players who lie would receive nothing and be banned from ever playing the game again. With this addition, truth-telling becomes a dominant strategy. That is, regardless of what other players report, it is a best response for each individual is to report the truth. Better still, truth-telling is a coalition-proof equilibrium. That is, no group or coalition of agents, including the coalition containing all the agents, could profit from lying. Even if all agents were able to agree on a false report, mechanism that implements truthful validation of blockchains in a coalition-proof equilibrium. Thus, truth-telling is always a better strategy than lying or trying to collude. In other words, truth-telling is the only coalition-proof equilibrium. As a result, there would never actually be a need to do an audit and pay the $ 1000 bonus. GeeqChain as a Solution GeeqChain has the benefit of learning from Ethereum, which in turn, had the benefit of learning from Bitcoin. Just as Ethereum solved many of the limitations embedded in the Bitcoin protocol, GeeqChain solves most of problems remaining in Ethereum. In particular, GeeqChain is secure, cheap, fast, and scalable. It can be implemented with fully anonymous verifying nodes, no centralized points of trust or failure, and any level of encryption and privacy protection desired. This can result in a fork in which two different blocks are built on top of the same initial chain by different sets of nodes in the network. Having two conflicting versions of a blockchain ledger is untenable. Something has to be done to choose which one is definitive or else users might try to spend coins on each of the chains. Since users accounts exist on both forks, such double spending would not be detected as fraudulent. The traditional solution used by Bitcoin and Ethereum requires that the next miner who completes a block adds it to the longest fork of the chain. If both forks are of equal size, the miner is allowed to choose either one. Eventually, one fork gets ahead, and the shorter fork is orphaned. All the blocks that were added after the forks diverged are ignored along with the transactions they contain. The choice of which fork to use is ultimately up to the miners who find new blocks, but protocol requires that they follow these rules. GeeqChain, using CDM, takes a completely different approach to validation called Proof of Honesty (PoH). Each node validates transactions, builds blocks, and publishes them for users to inspect. In other words, nodes, and the chains they construct, are provably honest or dishonest. If one or more forks exist, the user is able to inspect them and then decide which one he wishes to use for his transactions. GeeqChain s CDM protocol, on the other hand, makes this choice incentive compatible by leaving it to users. Without further elaboration, this simple idea gives the GeeqChain a BFT of 99%. That is, if even a single honest node exists, then users will discover it and choose to write their transactions to the chain it verifies. While this is far better than any other protocol, GeeqChain aims higher. The CDM builds on the intuition of the unanimity game described in the previous section, but turns it on its head. Specifically, the CDM achieves consensus by checking for a lack of dissent rather than attempting to affirmatively establish unanimous agreement that a block is valid. If a user or node detects any dishonesty, he can send an audit request to the network. As a result, truthful validation by all nodes is a coalition-proof equilibrium (in fact, the only one). In effect, GeeqChain is 100% BFT and offers users Strategically Provable Security (SPS) for blockchain validation. 4.2 Cost Consider a GeeqChain processing 40 transactions per second and writing blocks every 10 seconds. This is a higher transactions volume than either Bitcoin or Ethereum are capable of. Further suppose that these transactions are validated on a network consisting of 100 nodes. This is far fewer than the 32,000 or so nodes on the Ethereum network or the 10,000 or so Bitcoin nodes. On the other hand, it is greater than the 25 or so nodes that validate some implementations of the Hyperledger fabric protocol and other PoS consensus systems. Finally, suppose that an average transaction contains 0.5kB of data, roughly in line with Ethereum and Bitcoin transactions. As an example, a transaction of 1 could be validated, committed, and stored on this CDM blockchain for less than.06. In contrast, Ethereum transactions cost on the scale of 15 or more and Bitcoin transactions fees can run to several dollars. The cost per transaction scales linearly in the number of nodes. However, users may choose do due diligence on their own or use other means to decide whether a chain is honest if they wish. 12 13 We explore the implications of this fact in more detail below. 4.3 Scalability One of the most serious limitations of existing blockchain protocols is scalability. Estimates are that the maximum number of transactions per second is 7 for Bitcoin, 15 for Ethereum, 60 for Dash, 30 for Monero, and 20 for Litecoin. Average block completion time ranges from 10 seconds to 10 minutes. Even then, transactions are not considered finalized until they are buried several blocks deep in the chain (six or more for Bitcoin and 250 or so for Ethereum). 20 Consider the GeeqChain instance described above (100 nodes and 40 transactions per second). The first question to answer is whether it would be feasible to run a GeeqChain with this configuration on standard home computers and broadband connections. The random hub and spoke network architecture implies that each validating node has an equal chance of being the hub for any given block. Thus, each node serves as hub 1% of the time. We calculate that a hub would need to upload 20MB of data in the 10 seconds allocated to build a block. This means that a hub would need to upload data at a rate of 2MB/s or 16Mb/s. According to speedtest.net, the average upload speed for US residential broadband customers in 2017 is 22.69Mb/s. This means that the average US household has a fast enough internet connection to run a hub on the network just described. For the other 99% of the time, verifiers act as ordinary nodes and receive only 200kB (.0002GB) per 10 seconds, requiring.16 Mb/s of download speed.
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21 More generally, the amount of data that a hub must upload scales linearly with the number of nodes, the number of transactions per second, and the size of transactions.
The download capacity for simple nodes scales linearly with the number and size of transactions. Home broadband connections have more than enough capacity to run an ordinary node, but hubs may present a problem. To see this, suppose there were 1000 nodes on the network and 100 transactions per second. Then hubs would need upload rates of 400Mb/s, more than most home broadband connections offer. One solution would be to run nodes and hubs on virtual machines on a cloud platform that could make this level of bandwidth available when needed. The computational load of running a GeeqChain node (or hub) is very small. 21 Recall that 1GB = 1000MB =1,000,000kB. Thus, 200kB =.2MB =.0002GB. Broadband speeds are specified in megabits per second (Mb/s). Since 1 Byte (B) equals 8 bits (b), 200kB = 1.6 Mb which in turn requires a connec - tion speed of.16 Mb/s to be transmitted in 10 seconds. 13 14 second. The efficiency of GeeqChain s network allows it to handle a larger transactions load than either Bitcoin or Ethereum. Ultimately, the number of transactions per second is only limited by the upload bandwidth available to nodes. Bitcoin, Ethereum, and most other blockchains trade only in their own native tokens. In particular, it is not possible to move a bitcoin to the Ethereum blockchain or inversely. There is only a single master chain for each of these tokens where transactions can be made and token holdings recorded. GeeqChain, in contrast, is designed to support multiple instances of federated chains that form an ecosystem in which users can choose where their tokens are parked. This federated structure gives GeeqChain a flexibility that allows it to be adapted to many use cases, some of which we discuss in the next section. These instances would share the job of validating transactions, and tokens would be able to move freely between them. Since any number of instances can be created, GeeqChain can be scaled up to handle arbitrarily large transactions loads. Moving tokens from one chain to another requires that they be destroyed on the sending chain before they are created on the receiving chain. A good way to think about moving tokens between chains is that tokens representing assets can be teleported from chain to chain. The token disappears on one chain and reappears on another. 22 On the other hand, non-token data items such as medical records could be replicated locally on several different chains without harm. The owners or creators of these replicated items might be paid fees for allowing this. 4.4 Updating Protocols without Violating Protocol Blockchain protocols are inflexible by design. Allowing trustless interactions between anonymous agents requires that the rules be well understood and unchanging (Code is Law). Unauthorized replication of tokens would completely undermine both the token economics and user confidence in the underlying blockchain. 23 For example, on November 9, 2017, bitcoin decided against a soft fork adding SegWit technology that would have improved performance by moving some unessential data off the underlying blockchain. The introduction of Bitcoin Cash through a hard fork resulted in a steep and immediate decline in bitcoin price and a sharp increase in value of the Bitcoin Cash token. Clearly, 14 15 The system of federated chains that the CDM permits provides an elegant solution to this problem. The new chain would have a genesis block with a new set of validators and GSCs, but no tokens. Users and validators on the old chain could choose to move to the new chain where the rules are different or they could stay where they are. If they choose to move their tokens, their actions are voluntary and within protocol. If they choose to stay, they can continue to live under the old rules. If enough users and nodes support the continued existence of the original chain, they can trade tokens under the original rules indefinitely. It will not be too long before 256 bit (or greater) encryption can be broken by quantum computers. This will undermine the security models of all existing blockchains and almost everything else in the cloud. Fortunately, with quantum computational approaches to breaking encryption will come new quantum-proof approaches to encrypting data. GeeqChain s federated architecture allows the creation of new quantum-ready instances of existing chains and applications for users to migrate to as quantum technology matures. This makes GeeqChain more future-proof than any existing blockchain platform. Applications In this section, we outline a number of possible applications that could be built on GeeqChain genesis blocks. 5.1 Micropayment Platform The low cost and high transactions volume of GeeqChain make it ideally suited for use as a micropayments platform. This might be implemented as part of a smart city system to allow citizens to pay for parking, bridge tolls, subway fares, items in vending machines, or minor city services. Consumers could use an instance of GeeqChain to buy entertainment, gaming, and other content on the Internet from various providers. IoT devices could make micropayments via GeeqChain to buy and sell services (CPU cycles, sharded storage, or electricity produced by solar panels, for example). If there were 100 validating nodes, each node would receive about 3M transactions per year and be paid $3k in fixed fees. The nodes collectively, and Geeq- Corp individually, each get a fee of.25% of the total transactions value, or $200k. This gives each node a revenue of $5k and a net profit of $3.2k. GeeqCorp gets a pure profit of $200k. 5.2 General Payment Platform Suppose instead that an instance of GeeqChain was deployed as a general payment platform such as PayPal or Visa/MC. Using the same very low fee structure, suppose there are 100 validating nodes, 10 transactions per second, but all transactions are over $20. This gives an annual transaction volume of over $60B. Given that Bitcoin volume in 2017 is more than $300B as of November 15, this is not an unreasonably high estimate. In this example, nodes get a revenue of $150k per year while GeeqCorp gets a net profit of $15M. 5.3 University Student ID Card Cashless Payments Thousands of universities, hospitals, and corporations with large campuses use third parties to enable cashless payment systems using ID cards. These cards may be restricted to meal plans and internal fees, extend to dollar transactions at bookstores and local businesses, and may even incorporate credit and debit card functions. CBORD is one of the major providers of such services and charges fees to participating merchants of up to 6%. Additional fees are charged for ATM use, debit card transactions, and even for recharging prepaid versions of such cards. Other cards of this type are linked directly to the VISA or MC payment networks and have standard credit card fees. A university or corporate environment offers two significant advantages that make it ideal for GeeqChain payment systems. First, all the users are known to the system and pre-vetted. This means that KYC and AML 24 compliance is comparatively easy. Second, the university or corporation stands as the guarantor of the tokenized dollars that move over the network. Banks, for example, are required to check identification documents of customers and report earnings and large movements of money to the federal government. Cryptocurrencies serve the same purpose as fiat currencies and create the same potential for illegal activities.
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The SEC and other agencies are becoming increasingly insistent that blockchain platforms also comply with these rules.
25 Of course, a university or business could default on these obligations, but then there would be legal recourse available against an established entity with a physical presence. Universities and corporations also have a strong reputa - tional incentive not to default if they wish to maintain good relations with students, alumni, employees, suppliers, and customers. In contrast, Tether (https://tether.to/) is a blockchain platform offering tokenized dollars that it claims are backed 100% by dollars on deposit in banks in Shanghai and Taipei. More than $1.3B worth of Tether tokens exist 16 We scan #blockchain based projects, evaluate token crowdsales as potential investment, provide ICO promotion services, job listings & crypto videos. This past week I attended #Consensus2018, the 4th annual technology summit in New York City, held by CoinDesk. Here is an article I’ve created that summarizes the key trends within #blockchain technology: medium.com/@geeqjohnconle…