This is epicenter Bitcoin, episode 102 with guest flavian. Shalom. This episode of epicenter, Bitcoin is brought you by shape-shift, with no account or sign up. Required is the easiest way to
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first order. And by high dot mean protect yourself. Hackers and Safeguard your identity online with a first-class. VPN put a high dot me slash epicenter and sign up for a free account today. Hi, welcome to Epson or Bitcoin the show, which talks about the Technologies, projects and startups, driving decentralization, and the global cryptocurrency Revolution, my name is Sebastian with you. And my name is Brian fog and rain. We're here today, with Flavia shallow Flavia is one of our
recurring. Guest is here for the second time. We already had come on last August to talk about a coin prism in Flavia has this great town of just putting our project after project after project. And he's put out the new project, which is very interesting. It's called open chain and we wanted to get him on to talk about that and look forward to catching up. So, thanks for coming on, Flavia. Yeah. Thanks for having me. Yeah.
We were joking before that. You're basically like a machine no, like producing projects because the first time he The actually on you already had two projects and I think we only really talked about one of them. So you already had to prediction Market predictions and then you had a caller coins, right? So you came up with the you'd invented this sort of I guess most popular color, coin protocol open assets and then you also doing this exchange or wallet colored coins wallet,
right? And that block Explorer so already you had a lot. Going on back then. I think in French politics, they call this export exporting a French talents outside of the national boundaries. Yeah, yeah. I live in Ireland so I don't live in France anymore but still French. I'm So tell us about what's this what's the status with those project? How is open houses doing? What about their the wallet and what about your prediction
Market? Yes oh well it basically discovered Bitcoin I think now more than two years ago I kind of you know I've always been passionate about prediction markets and the time I wanted to build one as a side project as for a fun project but like the the issue you know, was like exit accepting payments also. Did you not pay out to users who win the predictions? So this was kind of always liked the the problem with building a prediction market.
So when I heard about Bitcoin, I start started to look into it and then the more I looked into it, the more I thought I was the perfect thing to use for prediction market. So basically, I built a the prediction markets called predictions, it still exists today so you can place, you know, you can place money and different predictions, you know, there's politics economics, you know scars.
You know, a lot of different things and yes, it works completely with Bitcoin. So that was my first project that's what got me into Bitcoin. So that was in 2013 after that I kind of you know when you start learning about Bitcoin you you know some people they get really sucked into it. So that happened to me and I started to read a lot about it started to read about all the different projects that that were happening around Bitcoin and I discovered colored coins.
So the Time. That was kind of the first application, like the first blockchain 2.0 or like, you know, like the first thing that wasn't currency that that had been described. And so that was pretty exciting. They were, you know, some people talking about it at conferences at the time, but was kind of early stage.
So there was no, there was no like product at the time that existed, that was just a small group of people talking about it on forums and I kind of, you know, had like A vision of, you know like having digital assets on the blockchain using the blockchain for transacting so at the time because there was nothing that existed and I felt like this was you know something
that had a good future. I started to work on you know incarnate coins and basically I kind of designed protocol like a new protocol that that didn't exist at the time there was, you know, just a few drafts of different protocols that were the white paper as well. Think metallic wrote the white paper. But nothing was really, you know, satisfactory for the use cases that I wanted to that.
I had in mind basically so I develop this open assets so that's the name of the protocol and, you know, because it's just a protocol. Nobody was really, you know, nobody could use it without programming stuff.
So basically, in order to bootstrap the adoption I built this wallet which which is called coin prism and so it is this is also like the name of the company now so we can presume is basically Well, it which is web-based where people can, you know, send receive Bitcoins as well as colored coins and they can even create their own colored coins. So it's everything is guided through user interface. So it takes a few minutes and it's pretty easy.
And yeah, after that, we built an API which allows people to programmatically interact with colored coins, Mobile wallet, is to suppose we talked about that last time we talked to, with I was on your show, but yeah, like a Oh, well it for inter it bunch of other things like support for cold storage and so on. And yeah. So and then now last week actually, so we just launched a new new product which is called open chair before we get into that.
I'm curious. So what's the kind of Attraction you seeing with coin prison and open assets? Because it seemed like to get a big getting, you know, quite a bit of attention and projects being built on? Yeah. So I mean so, Open. Open assets was sort of, I think the first protocol that was sort of usable and had Tools around it, that was launched at the time and this Head Start kind of was very useful for adoption of
open assets. And so initially it was like just, you know, startups or just small like project like groups of people who were trying to do things and experimenting. So we have like the first week after lunch, we had the crowd sale which was the hair salon in Australia, which wanted to Raise some money to open a new store so they use going prison for that was just a week after lunch.
So that the that kind of small projects and over time, you know, as interest picked up on blockchain technology, which kind of happened in the past, in the past, six to 12 months, I would say people started to also pick up interest in independent set and just the fact that it was like a simple protocol which was easy to re-implement. There's no, there's no vendor In pretty much because, you know, you don't have to use coin prism
to use open assets. It's like there's plenty of Open Source tools that exist in different languages. It's like very wide. So it people started to get interested into that. Also at the time when ready to wanted to make crypto note, they actually shows up and I said to do that. Well, then after there was some changes in management and they decided they don't want to work with cryptocurrency anymore. So that kind of fell apart, but I was kind of the big project that started to look into it.
It and more recently, there was well, there's basically change.com which is a, it's an API provider, but they're pivoting heavily towards digital assets. So they also adopted open assets and they work with NASDAQ and the basically nasdaq's experimenting now with open assets for their private Market platform. So this is, this is really as big as it can get.
There's also Overstock, which is building their 2-0 platform so that they probably use a mix of technology and they say they want to be blocked like blockchain, added nasty. In quotes but they're using for the first thing they did they created a crypto bond for like a corporate bond for Overstock the company, a five million dollar Bond and they created it on open
assets. So you can actually find the transaction on the blockchain which has like you know open a set marker and so on which shows the the five million dollars Bond being transacted. So you know now it's it's getting picked up by lot of bigger companies so it's not really something for small companies to play with anymore. It's like something with a lot of traction.
Now, and so all this, all this interest interaction around the open assets protocol, is it generating any business for corn prison at all or is or they just implementing the open standard which is open assets? Yeah. So it's much like those big companies. Mostly they usually, you know, they want they want to deal with like bigger companies are going present at the moment is quite small. So they so they usually they
rather hire their own people. Their own Engineers to work on, on the technology and re-implement their own stack, which works Open assets, which is what Overstock data think they have like, a team of Engineers working on that. So they, you know, because it's such a simple protocol, it's easy to build your own tools around it.
So that's what they're doing. We still doing some Consulting with some companies which are interested you know in yeah, independent sets so that there is still some business here but yeah, it's definitely it's marketing. That's expanding so it's it's going to grow very fast at some point. So so wave The NASDAQ example you mentioned, they want to use colored coins on for their private chains. But then how does that work?
Because color coins is a protocol that runs on top of Bitcoin. You know, what exactly they have in mind or how that's supposed to play out much luck. So, I think NASDAQ they want to use it for settlement. So in their private Market platform, they have they don't have so many companies that I think they have about 60 companies. It's just private companies.
It's like so It did from their big, you know, public exchange where, you know, obviously you have like thousands of companies and there's like millions of transactions per day, but there are private Market platform is like a test bed for them. So they have a smaller amount of transactions and think they can use it for settlements, so they can probably every day, or even every 10 minutes, they can adjust accounts, but obviously, I think they might de probably will retain the keys for that.
So you won't be able to join the exchange and, you know, Pate as an anonymous user because obviously there's a lot of regulations that that would be violated if you if you were doing that. But basically I think that use it for settlement. It's not clear exactly what they plan to do because obviously a lot of it is still hasn't been really discussed yet. But yeah, so at least in the initial press release they said they were experimenting with the
benefits. Is this where the idea for open chain originated is there, is there some correlations there? Because it seems kind of similar from From the open chain protocol. Yes, so open chain. So basically, so so I've been talking to a number of companies for some time and usually there's some some questions that keep coming back and so one of those questions is scalability so as we all know Bitcoin has unlimited scalability because of you know, the fact that it uses proof of work and this
distributed architecture. So it's limited to more or less 7 transactions per second. So this is always a question that comes back and, you know, there's ways to address it with it open assets by using, you know, lightning networks, this type of things but basically you end up building a lot of things, you know, a lot of complicated layers on top of it.
And so yeah open chain solves that problem by just not doing all of these complicated things and just, you know, stepping aside proof-of-work, you know, stepping inside the Bitcoin blockchain even and doing transactions of change directly. That's one question that always comes back. And another one is the control of the transaction. So, you know, NASDAQ, they cannot afford having transactions being completely open onto the network. And letting anybody do any kind of transactions?
They, you know, there's a lot of regulations that requires them to know if all the parties involved to its kind of, has to work in a closed loop. And then there's some, you know, there's some other restrictions, you know, maybe the, you know, the the trading can only happen. During day time, for example, I don't know if that's the case for private Market but might be.
So in that case, you know, that's another type of thing that they need to be able to restrict there's plenty of rules that they can actually enforce easily on the Bitcoin blockchain. So that's why open chain kind of provides the way to do that. So the way that I sort of see this, I mean I we've been we've been researching this for the for last a while Brian and discussing it.
The way that I would explain it in one sentence and I'd like to know if you think this is correct is It's a distributed database that gets blocked. Stamped. Every 10 minutes to the blockchain. Is that sort of accurate or parts missing there. You mean open chain? Yeah, yeah. So it's basically a yeah, it's a database basically, it's actually built on a database you know because databases have been around for decades. They kind of work now we're pretty well. So it's a database except we add
on top of that. We had basically her shoulder transactions and every 10 minutes, we take the cumulative. Of hash of all of that and we put it in the Bitcoin blockchain. So the Bitcoin blockchain is irreversible, you know, as we know because of proof of work and it's very expensive to reverse the transaction. So this kind of ensures the immutability of everything that happened, you know, as part of this cumulative hash.
So it kind of protects against their, you know, reversibility of the of The Ledger while still providing the same scalable scalability as you get from a, you know, a simpler system. Yeah, I mean, I think there's a lot to talk. But then we want to come back. So we have we have a lot of questions, sort of regarding you need the security, the consensus because you start getting interesting discussions. I mean, save Asia said they sentence me before as well.
But you know, when I read through it, I was like, well, it's not actually this should be database, right? It's actually Center. I said, wait, which makes sense when the what you are aiming for is scalability, right? Because as soon as you start having this issue with consensus process, it was called ability because Seems almost, I mean, much more difficult at least, but maybe before we get to that, let's talk a little bit about sort of, what's the structure of
open chain. How is what's the architecture of the protocol? Yeah, so the the idea behind it is for every organization that's issuing an asset. They would run their own instance of open chain. So if I take the example of, let's say Starbucks coupons, like, you know, which you can spend for, you know, dollars at Starbucks, they're issued by Starbucks, what Starbucks would
run their own instance. And that instance would control other transactions where you have Starbucks coupons, and on the other side, maybe you have Well, maybe you have Macy's coupons and those Macy's coupons are controlled by an instance that that's controlled by Macy's. And you know, you that way, you know, Macy's has complete control over what happens to their point. So they can set rules, you know, you can put its expiration dates, you can, you know, you can freeze an account.
If it turns out gift card as been you know stolen from the store and you know you want to be able to block the points that were on the card. So you know this is a lot of fraud with give Guards. So you can you can set the rules that that much, your business needs basically. And so we have many different instances.
So you know, every organization has their own instance and then you can connect instances to each other when you want to have, let's say you want to swap Macy's coupon for a Starbucks coupon, then you will have they would have to be connected in some degree in some way. So either they're directly connected to each other or they're connected to a third
chain. Are you can do this webs but basically, you can form a like a sort of a mesh network of different chain, open chain instances and the, you know, transact assets depending on which connections exist. Our show today is brought to you by our friends at shape shape, shape shift is the fast and easy way to trade altcoins. They now Support over 50 different cryptocurrencies which includes all the non scam coins that you have ever heard of.
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it's a simple architecture. So, so Bitcoin needs a peer-to-peer system because there is no Central Authority obviously so essentially the Bitcoins are issued by the protocol itself through consensus so you don't have a central Authority. So the network needs to needs to
be peer-to-peer. That's that Something you have to have but peer-to-peer are, you know, it's it's a nice tool but there's also like some issues with peer-to-peer because it's very, you know, consuming in terms of requiring like in terms of resources. So it consumes a lot of bandwidth because you need to you have such redundancy that there's a lot of bandwidth. It's latency usually would be higher in peer-to-peer systems because it's harder to obtain
mais. So we basically also like another big reason When their big issue is phones, for example, or like mobile devices, they, it's hard for them to connect to a peer-to-peer Network because usually your mobile network will only, you know, will block some ports and they won't let you connect to you know for example the Bitcoin Network or if you know turn the torrent like a BitTorrent or any kind of P2P Network. So it's harder for mobile devices to connect to, to a peer-to-peer Network.
So we've basically taken a simpler approach, and we've just using a client-server architecture because we only have one note that validates a given asset.
So that's node can be a server and it's actually in the interest of the of the organization, you know, of having a note that trans well, that's highly available and so on. So Starbucks has like a big interest in, you know, keeping that node running and having lot of bandwidth and so on. So they're the ones who are going to pay for it, but the end users are not going.
I have to pay for it, they're just connect to a server because, you know, the end-user shouldn't have to pay for being able to use gift cards, like Starbucks gift cards, and Starbucks doesn't even want to have the end users pay for it.
So, it's better alignment of the of the cost essentially, and it's easier for devices, like lightweight devices, like mobile phone, to connect to it. Because, well, basically, it's just exposing HTTP, interfaces, and pretty much every device the world that's connected to the internet can connect through it. To be, so it's much easier interface to connect to for lightweight device. So, in this example of Starbucks points, Starbucks would be the validator node.
So they have a an open chain instance, which is just like an npm, like it's a node implementation and the participants. So the customers would be Observer nodes. Yes. So so there's this concept of of observing notes. So So an observing note, connects to a validating note and it receives it receives a copy of all the transactions as
they get validated. So basically there's a choosing web socket so you can actually have an observing node which is implemented in your browser if you want to but you basically connect to this web socket and you receive all the transactions that they get confirmed and that allows you to reconstruct a complete copy of The Ledger. So you have your own copy of The Ledger, you can verify everything.
You can calculate the cumulative hash and compare it to what's in the Bitcoin blockchain to ensure that the integrity's, you know, that everything is, you know, there's still Integrity still have the correct copy and nothing has been reverted. And the observing notes, they have the ability also to examine every transaction they can't verify digital signatures, they can also verify who's doing what.
So, there's this concept in open chain, where the validator can Define when you're when you own the validator, you can Define administrators. So you define a public is which which are the public is of the administrators of the instance and those administrators can do things that At normal users going to do. So they can, for example, issue tokens the, you know, by default normal users can't issue token, although you can also configure it so that normal users can
issue tokens. But, you know, they can also make transactions from two accounts that they don't necessarily own. Because, you know, in case of fraud, for example, they might want to revert transaction, they can also affect permissions, so they can remove the permission on an account, so that this account can is not allowed to trade anymore. If If they want to freeze an account. Let's say so when you do that,
it's visible. That this transaction, let's say a transaction freezing, an account has been signed by the administrator so all the Observer can see that, you know, the administrator Frozen account or the administrator revert, to the transaction. And, you know, basically it kind of keeps them honest, right? If the validator, that's something that, you know, they start freezing lot of accounts, The observables Observers would notice and two things can
happen. The first One is they might lose trust. So if their customers they might they might lose. Trust stop using the service and the state's second thing is the customers. If they believe that something illegal happened, they can actually use The Ledger, the copy of The Ledger in court as an evidence that the administrator did that because everything is digitally signed. There's the signature of the administrator, and this can hold.
This can be used as an evidence in court, so it kind of keeps the validators honest. So, but then it's okay. Like the Starbucks model would with the customers or the the customers are Starbucks. Speedy's. Validator nodes or these Observer nodes, or should it be some auditing party? Like Deloitte or something like that? Which is auditing.
The, the validators copy of the blockchain or not at the blockchain but if their Ledger. Yeah, so the customers can be observers but they don't have to. They can also just be just like with lions if he talked about the case of Starbucks. I mean, if you talk about scalability, right? Right. Then you start having huge volumes of transactions. Oh yeah. Do that. Customers would run. Observer knows as make sense.
No. Because they would have the same number of data, the same volume, that would be coming in. Yeah, I mean, if you're usually a suppose long term, it would be firms. That would be like auditing firms. Maybe that would be doing that for the users. You know, it could be like a consumer protection company, like, organizations that exist. In some countries. They could No check that the ledgers are working properly, but yeah, like, yeah.
It's depending on the scale, the number of transactions. Yeah, the end users might or might not be able to do that, but at least the it's possible for someone to do it at least. So maybe it's going to take some more money. Maybe it's going to take some resources to do, but at least it's possible to do it. Yeah, I think this is this is interesting though because we've had this discussion profile,
right? So there's this been Bitcoin and there's a whole philosophy around Bitcoin and then there's been a lot of work on On permission blockchains. And then a lot of people sort of say our permission blockchain or at least if you read Reddit, then people that are permission. Blockchain is just a database and this is a sort of like nonsensical statement, right? Because you still have a consensus process that ministers has rules, you know.
So, but but it obviously isn't the same thing as peer-to-peer Network. We're sort of anybody could join in the consensus process, right? So that's it. That's a clear difference. But then of course you can say, well, I mean, in some cases is that even necessary? Like do you even need to have, you know, 10 entities like administrating the process together and you know, voting on blocks or whatnot? Or can you just stop like, get
rid of that? And instead, you know, again some, you know, enormous scalability and speed and cost savings as well, right? And then I mean, open chain is, is that right? It goes. Go sort of to The Very extreme to say, what? We don't need a consensus process, like, there's no peer-to-peer Network here. This is just a database with digital signatures. So, you know, you see who this water. I mean, at least someone sees it and and then, okay, you can, you can put an observer note in
there. So, let's say somebody has has a record of what that sees there. And then of course you do get some Um, security aspects. Again, I mean, how much? Of course, that depends a lot on who runs the Observer. What exactly is the is being done, but it's interesting because then, you know, in a ways is this to what extent?
This is this coming from Bitcoin and blockchain and this or to what extent is this something that you could do completely independently and is not actually that related Yeah.
It's it's kind of a departure from from Bitcoin and blockchain I guess it's uses some of the ideas that weren't pioneered by Bitcoin sort of as you know Bitcoin the core feature of Bitcoin is censorship resistance and it's been designed in a way that it enables censorship censorship resistance and the transparency is part of you know that you need transparency to enable that. But you know it still is Still use useful to have a transparent Ledger, even though you don't
need censorship resistance. Obviously, it's not as necessary because, you know, people have been doing that today for, you know, for a while without transparency, and it works to some degree. It's not necessary, but it's still a nice thing to have and also digital signatures are used today. I mean, they've been used for a while now but not completely across the board, you know, like There's always a bunch of systems that don't rely rely completely on trust and do digital signatures.
So if you use something where it's they are enforced across the board and it kind of increases security. Also, there's this idea of using the blockchain for immutability or publishing the hash, which is it's kind of a small thing but it's still very nice to have but you know it chooses some of the ideas of Bitcoin. But yeah, it's still very different from cryptocurrency. So the important ideas and you see being used here, Our digital signatures.
So the idea that I guess every transaction is associated with the public key and sign so you I guess you see where it comes from and what is that is that the most important aspect here that you sort of taking from Bitcoin? So there's the yeah like the transparency is very important, the fact that anybody can become an observer and replicate The Ledger is I think is very important.
Oughtn't. There's also the fact that, you know, it's a simple API, it's, you know, it's easy to program against which you know systems tend to be very complicated that they have load of bells and whistles, but here like the core, the core API is very simple.
Yeah. And also the immutability is also a nice feature, but yeah, obviously there's no censorship resistance because it's like the assets, the assets were talking about, you know, you can always go to the company that holds Those assets like Starbucks, if you're the government and force them to do something, or they go to prison. So in that case they're going to find a way to do it. Even if the technology prevents them from doing it, they're going to find a way one way or another.
So the either technology is going to help them do it or it's going to, you know, slow them do it. But in at the end of the day, it doesn't matter. It's going to happen because they, you know, they they're still biting the do. Right. Right. So and of course, one of the interesting aspects, Stu and and consequences of that. And I think that's the sort of a logical decision you made there where is that you get rid of blocks, right? So it's not a blockchain because we're why do you need blocks,
right? So you need blocks, of course, if like let's say there's there's different parties administering, this process, right? And you know, they may have received stuff in different orders and somehow they've come to agreement, right? So you bundle them all together and you're sent me around and then somehow they all say, okay, this is status. But of course, if there's a sin Real server, but what's the point of a block, right? You don't need a block.
Yeah, absolutely. And the blocks essentially, the introduce a delay because when you submit a transaction to a system that's based on blogs, like, you know, Bitcoin you have to wait for the next block for confirmation. So it is, first of all, it's not synchronous. You have to wait for confirmation which is a different event, so it takes time and even some systems like some systems based on proof of stake. They are produced The Block time to like few seconds sometimes.
But even few seconds is still a long time for some of some applications, like trading. For example, is something where every millisecond counts. So if you have confirmation time of two seconds, you cannot use it for like, you know, markets and trading because it's, it's too slow. So, you know, if you do synchronous confirmation. So, basically eliminate the blocks and confirm instantly, then then it becomes usable for this type of applications.
Let's take a short break so I can take you to Paris.
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unplugged at Ledger wallet.com. And when you use the code epicenter at checkout, you'll get 10% off your order. By the way that code works on their entire range of products. So we'd like to thank Ledger for their support of epicenter. Bitcoin. Let's get sound this topic of consensus. One thing that we mentioned earlier is, before the show, is this idea that, you know, the valid, the observer in our roads could do real-time auditing.
So in, in this case, of Of Starbucks or perhaps, like, you want to do a stock exchange rather than having auditing at the end of the month or the end of the year, you could have auditing happening in real-time. And the value of having the hash of all the transactions added to the blockchain, every 10 minutes is that you can point to that transaction in that hash. And all of the Observer nodes can say, okay this come to a consensus I guess without knowing each other that all
these transactions happen. Because you know, there's The proof of it in the blockchain. Does does this imply that you could have multiple observers? I don't necessarily know each other and You can still validate that these transactions took place and then what is to stop? The validating node from sending different copies of The Ledger to the different Observer notes? Yeah, it's a good question. Yeah.
But you can definitely have multiple observers that don't know about each other and actually it's even possible to have observers expose the transaction stream so that you have like a second level of observers that connect to the first level of observers. And, you know, it kind of built sort of a graph or three. I would say, where, you know, you can actually scale out nicely like this.
You know, you would have just for, let's say for observers at the first level, then you have 16 at the second level and then in the 64, the third level. So it's it's it's much easier to scale this way and what? Yeah, you're right that The Observers could send different versions to different observers, but if they do that, the cumulative, hash, for those different observers would be different and one of those Observers with realize that the cumulative hash doesn't match
what's in the blockchain. So the blockchain is like that part that everybody has to agree on. You know. It is. That's the one thing that ensures that there's only one
version of History, right? And so in your dock in the documentation, you mentioned that you can do or you can do like a large volumes of transactions and those transactions get the passion to the blockchain and which comes up to if you do once, if you hash If you send the hash, once every block that comes up of ten dollars a month or something like that, what would be some of the criteria that would push an organization to say role? Rather than push.
These two every block will push them to every 10 blocks or every 100 blocks because you can you can also you can also adjust that, right? Oh yeah. You cannot just a frequency depending on your needs, you know? If you don't have a lot of transactions, maybe you know, over ten blocks is enough. If you do it every ten blocks, you actually save 90% of the cost. So Like $10 for every block
according to the current fees. I mean the fees vary over time if you you know you divide it by 10, if you do it only every ten blocks, you know, if you do it once every day then you you're going to pay less than a dollar per month. And this is, you know, there's no point in any case, there's no point having more ink anchors than more than one anchor per block because it doesn't add anything. You know, the block is like a it's like a snapshot in time.
So you know if you have two anchors at the same time as you need, Doesn't bring more so you don't need to have more than one per block but you know what the the maximum resolution you can have is one per block and it gives you the same level of irreversibility as you get with Bitcoin because with Bitcoin you have to wait 10 minutes before you know that the transaction is in irreversible. So it's the same level of irreversibilities. So so, you know you mentioned
that? Yeah, you can have instant confirmations, right? So essentially, I mean tried, like, let's say I make a transaction. I send it to The validator. And now, of course, if the ballot because the valid isn't charged, you can immediately say, okay, you know, like just actually proved right. But that also means there is no security there, right? Because he could throw it out again and but there's nothing. I mean the chain would be perfectly valid, right?
I mean it's true that if you have like the chain hashed in between, you know, then the hash, you know, you can't throw out things that let's say before the hash I mean, you could throw them out but at least it would be noticed, people would say, okay, well, what happened here, but otherwise, if I other than just sort of do whatever they want with it, right? They can they can go back and change the sequence of transactions or they can just block incoming transactions.
I think that's what you mean. Brian. Is that incoming transactions? Get just thrown out. You could you could put a transaction and say like add it to the to the chain of transactions but then later take it out again. Yeah. So blocking a transaction is kind of there. Right. If they want to block it as long as you tell you that it's been blocked, it's fine.
But yeah, they could, like you said, they could accept the transaction, tell you that it got accepted and 10 minutes later when they published the hash then that transaction is not in the chain anymore. So yeah, if you don't trust the validator, you might need to wait for 10 minutes to be sure that the transaction has been confirmed. But usually, in this kind of setup, the end user would trust, the validator, which was the company.
Because the validator, you know, you would trust Starbucks to you know, tell you when the transactions are confirmed for their point is that there's no points ready for them to cheat on that right? I mean another small question so
how would you so? So they put the hash in the blockchain, how would you know black is it possible to see if the which hashes or like tie together with previous hashes or like does that you have to see that from somewhere else someone else's go and say okay these are The has just that belong to that
open chain. So basically you, when you configure your opinion instance, you give it to the private key of a Bitcoin address, which should have some funds and then the, the hashes are published from that address. So like the fees are taken from that to dress. And so, actually, we have one a dress like this for for the test instance that we have. So, so far there has been like five or six anchors since since when we rebooted it.
Like a couple of days ago so you know every time you know every like every so often he publishes a harsh there and every basically every instance would have a different address that they would use. So that's how you identify. That's a nice way of handling that but yeah. So now I was just saying you need to keep finding that address with Bitcoin to pay those transaction fees.
Yeah, yeah. So you need you need like to fund it like for like 10 then depending on the fees you know ten twenty dollars per month to make sure that you can still publish the hash there. So it's using up return. It's pretty simple. It's just or per turn and then change. And then some some goes to the fees as well. But it's a very small transaction but you still need to pee like a small amount of
fees. And what's nice about this is that you can always look at that address and you can just see the list of transactions basically in in one big one address. Yeah, exactly. Yeah. You can see the list and then every anchor has also the number of transactions that are encapsulated into that hash. So you can track, you know, like what stage Every anchor is that. Let's take a short break and talk about height of me. Hi dummy is a VPN provider and if you don't know yet, why you
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Sebastian million. I'm stealing your great question, Sebastian, he made an increased even interesting observation before and so, well, let me let me take a step back. So one of the things that a Terry's, right? We do is that you say okay, you sort of take the consensus really put it in a smart contract, right? So, you could have like, let's say one party in control or you could have multiple parties, so it seems like here as well. Okay. You, maybe you say it's fine.
If just Starbucks is in charge because, you know, they can always refused to give me the coffee anyway, but maybe also, you say, well, I don't want to Starbucks in control. I want. Maybe these three entities in control, or like you might want to have all kinds of rules regarding that. So it's the same as able to pinpoint your well, could you run an open chain as a distributed application? Would that be possible? That's might be possible. Yeah.
I haven't really thought in that direction but it might be possible. Yeah. But going back to like having multiple parties controlling, let's say Starbucks transactions or let's say for the purpose of this example. Let's say it's like paper Lee. There's like a PayPal chain and you have other companies validating the PayPal change it. So you have also like visa and MasterCard. And then on the PayPal chain.
So people chain kind of controls the funds, you have on PayPal, and Alice makes a payment to Bob like $100. So Bob has $100 and then PayPal decides that the transaction was fraud or something in the derivative transaction but visa and MasterCard don't agree. So the Visa and MasterCard refused to take that transaction. So they essentially Fork assuming that you would have like this consensus, you know, with PayPal visa and MasterCard.
Visa and MasterCard would Fork into a Version of History, where the reversal didn't happen. So but still has a hundred hundred dollars, but as far as PayPal is concerned, Bob doesn't have a hundred dollars anymore. So when Bob comes to to PayPal and tries to withdraw his hundred dollars, he says okay I'm the main chain I'm supposed to have a hundred dollars to
give me those hundred dollars. You know I want to withdraw into my bank account paper is going to say no because you know as far as we know, you don't have $100 the transaction was reverted so and there's nothing that the user can do it. You can say, okay, we look but like the other Isn't the main chain. Think that I have $100, right? The end up by the end of the day you need to to resolve this. In course, maybe or, you know, that's the only way. So it doesn't really change the bottom.
Well, I don't think I agree with you, and I think in the example, you gave that would would be an indication that the chain and the contracts, you know, if we talked about this being an, like, a smart contract land, or the chain wasn't set up properly, right? Because if, if it's a thing where we're like the ultimate judge of, you have $100 with PayPal or not, it's just PayPal. Well, yeah, then PayPal should be able to make that decision. But other things, you know, you
may have different rules, right? Or you may have multiple parties being in charge or So so then you might still have a process of like let's say, for example, payment is reversed but, you know, maybe you encode who gets to choose in that process, like where does it go? You know, I mean I think there's all kinds of things you can do. I mean, you certainly right that it's crucial for these kind of things that they're sort of the state of the chain is in accordance with the state of,
you know, the legal stage. So you know someone controls the sort of the reality they have to be able to Those changes in the chain. Otherwise it becomes irrelevant what you have on there. It's Tricky though. Because at the end of the day, those hundred dollars are going to leave on someone's bank account, you know, maybe okay in my case it's PayPal's bank account.
So people has all the controls but even if it's a bank account, that's controlled by the three companies, it means that in that case, you have some kind of legal structure which encompasses Visa, Mastercard and PayPal, and in that case, that legal structure becomes the legal structure that can be. That can maintain the ledger so you can of always have to have an owner. You cannot really have an asset that's being. I mean, as far as I know, as far
as loading is law is concerned. You cannot really have an essay that belongs to many people at the same time, there has to be one legal owner, that legal owner, is the one that would be in control of their later. But, you know, maybe laws will change in the future and maybe it's possible to have this kind of setup, but it's still very tricky. Yeah, it's definitely true that It's tricky to get these things,
right? I was gonna talk about, The I want to talk about the technical implementation, so, can you describe how a company would Implement an open chain server? Yeah, so I mean like if we're going to take Nicole detail, so we have documentation website. It's dogs that open change.org and there's like a lot of documentation and there's one document that explains how to deploy an instance.
And so it runs on right now the supported mode of deployment is through Docker which is like a container system. So it's an easy way to deploy applications its kind of popular at the moment. So it's the type of thing you just install Docker on your Linux machine or it also works on OS X and windows. By the way, you just install it there and then and then you just execute the few common lines that are described on the, on the, on the documentation
website. And and then, you're going to have your instance and there's a configuration file, which you can modify. And so, that configuration file today, it has a few settings that you can change. So the first one, is the public keys or dresses? The administrators. So if you want to be an administrator you would generate HD wallet. You would, you would generate a public key from that HD wallet and put that public key into the configuration file.
And so from that point on, you can use that HD. Well, it's to sign an admin transactions so you can a Bitcoin HD wallet. Yeah, so we actually open chain uses the same elliptic curve as Bitcoin so all the libraries that you can use for sending transactions with Bitcoin like Bitcoin Or Bitcoin J and so on you can use the same with open chain. So yeah. You generate HD were late and then you you sign administrative transactions with that key. So like you can, you know,
change permissions on account. Yeah. The the structure of a can see is hierarchical. So you can, you can set a permission at a, you know, at top level and that applies to all these sub accounts below that you can walk, you can do a lot of things. As the admin another city. That you can configure is whether you want to allow the end user to to issue their own
assets. So if you want to have a ledger where anybody can issue their own assets, then you can turn you just set it to true and that becomes possible.
There's a few other settings and then once this is all configured, you just set up the, the permissions on The Ledger and so permissions, they have there's a number of permissions, so there's the right to spend money so you you can associate an Accounts with a public key and give it the right to spend money, which means, then that this public key is allowed to sign transactions spending money from that account.
There's also the right to receive money, so you can by default, you can either set it to allowing everybody to receive money. So in that, case, in your account, can receive money, or you can use like more like more pattern where you have to be wait-listed to be able to receive money. So if you want to only allow your users to be able to receive money, then you use it. False by default and then you enable only some accounts, some
public keys to receive funds. And there is a few of the things you can also. So you can store what's interesting is because with Bitcoin, obviously it's a common blockchain, everybody shares the same Block Chain. So there's a lot of limitations in what data can be put in the blockchain, but with open chain because you're the one who sort of it's your service running on your server, so you're paying for the hosting cost so you can put as much data.
As you want, basically There's No Limit because, you know, you're the one and it's not even really a, you know, it's not replicated on six thousand nodes. So it's not as expensive even so you can store kilobytes or megabytes of data if you want. And you can also give the right to the users to store their own metadata. So we use that metadata for a few different things you can, for example, Define the terms of service of your instance.
So there's a special piece of data that you would put which is bit with a special name and the user. When they connect with their wallets, they will see that terms of services and they have to accept it. For example, you can. Also we also use this ability to store data to store a Asset definition on the later.
So when you create an asset you can, you can say, okay this this asset is called the epicenter of coins and it has this icon and this is the short name and so on much like you do with gold coins. Yeah exactly. Except in the case of open chain is actually stored in the later itself so it's all completely signed all the way in its part. You know, it's actually a transaction that creates that data and put it in the blockchain so it's all completely unified with colored coins.
It was a bit more complicated because we cannot put so much data in the blockchain, the Bitcoin blockchain. So instead we store the data outside of the blockchain and would refer to it with the URL. So it's not as elegant with open chain you can put their data completely indirectly. Yeah. So there's a few Few of the things you can, you can have also pointer records. So you can have an account pointing to another account with a pointing, with the pointer record.
So, whenever someone sends money to that Source account, they automatically get forwarded to the other account. Yeah, so there's plenty of things, the plenty of features like this, that can be done by using data records. Okay. And so you also have client-side libraries then, so then you can easily deploy wallets and applications that use open us or sorry that use a open chain.
Yes. So I mean we have to the the wallet has been open sourced and it's completely web-based because we're talking about HTTP apis. So it's pretty easy to program. A web-based interface to deal with that in this completely open source. And actually, we use, you know, there's no complicated things really happening in there. It's just, I would say, the most complicated thing that happens is signing the transaction. And for that, we use bit core which is the library that the
open source library from bitpay. And it's just a few lines of code with bit core. You just signed your transaction and then send it to the server. So it's actually pretty simple and, you know, it's in any language. You could deal with it pretty easily. Okay. And so regarding the capacity, so, you know, your Starbucks for instance and you deploy instance and then all of a sudden, you start getting into the thousands of transactions per second. How does the server architecture
have to scale? Is it pretty low balance? Or, you know, if you start Into those High service or transaction volumes. You have to have like perhaps, you know, a pretty hefty server or you know, distributed servers around the world that are managing these Ledger's. That are validating transactions.
Yeah, it's a very good question. So, actually open chain has kind of this, modern architecture, and we have this concept of storage engine and, you know, by default it uses a, just a simple, you know, SQL database locally, but we plan to add more support for more storage ends in engines and potentially, you would be able to store data in the like scale of databases like a Cinderella or mongodb and those are, you know, made for
scale. You know, you like Facebook and Twitter. And those guys, this tour, you know, thousands of terabytes of data in those databases and and when you will be able to use those databases as a storage engine, then yeah, it's then it's easy to implement scale out. You would have, you know, you can have like 16 notes shortly, no shorting the data and storing
hitch. Some part of the data is replicated, And so on. And so you can Ensure High availability as well as, you know, scalability scale out. So it that would be a way to scale. Basically, we rely on. Well, that is possible because I mean it seems like that or would you have to compromise on? For example, the instant confirmation, then if you start shortly. So naturally, I mean, you would, you would still commit the The the database into Cassandra.
So, you have different. So, you know, I don't know if people are familiar with Cassandra, but there's many right modes and there's some right modes where you have, you know, delays consistency. Some of them, were you have
instant consistency. If you use there is a cyst like a system called Quorum, where you write to a majority of nodes and by doing that you ensure that there's actually you know, it works actually with consensus, you know, Cassandra, implements its own consent, This is mechanism. So when you write to majority of nodes, you know that the data is committed and even if you lose a note, you you don't do the data. So you can still, you can still have instant confirmations.
It might be a little bit slower, of course, because now you're talking to different notes. But this is the type of thing you can scale, you know, like, you know, like I said, Facebook Twitter are using those, those databases and they, they obviously have a very large scale. Today's magic word is open. Ope n head over to, let's talk Bitcoin.com to sign in enter the magic word and claim your part of the listener award. So regarding the security model and sort of linked to the Privacy model.
Could you have Have a an open chain Ledger that is behind a firewall. So you want to have sort of a private? Private Ledger. How would you prevent I guess your Observer nodes from leaking the data outside of that? You know behind that far wall, if indeed you could Yeah, so if there's plenty of models that
can work. So but the fact that it's a server means that you if you Shield it, if you put it behind a firewall, you can prevent anybody from accessing accessing it. So if you want to use it internally for your organization but you don't want to let other people accessing it, you just use it on an intranet, for example, or on into your local network and then only it's get.
Then, you can only be used with from within your organization and you can still have Observer notes but they will be inside the Organization obviously. So yes, they like the kind of architecture, you know, Network architecture that people have been doing in the past 20 years. This type of thing completely
applies. One thing that's also interesting is because it's exposing HTTP interfaces, you can put it behind cloudflare so cloudflare for, you know, I don't know if you're familiar, it's a service that provides DDOS protection, so they sort of intercept the course and then forward them to your own server. So they have a free tier Which is very good and then they have like Pro additions and so on.
But they basically protect again DDOS attacks and lot of different attacks, the provide caching and so on. And so you can, you know, if you want you can put your server behind cloudflare to protect it against the dose like everything that works with web servers. Today there's a lot of tools that works with web servers you know for 15 years a lot of things have been running on web servers everything all of this can work with open chain because it's using HTTP interfaces.
Okay, that's interesting but but sir Regarding privacy, though. If you are you, if you're using open chain behind a firewall, you'd still have to trust the lowest common denominator not not to To leak the data of your Ledger outside the system. Yeah. If you want to use it just internally, then you would not expose it at all to the outside.
And The Observers would also have to be inside you would need to make sure that you, I mean, you would, you wouldn't trillion have you wouldn't really be able to have observers outside of the network because they couldn't connect it to the validator node but yeah. And then if you you know it depends what, what the scope of that instance is supposed to be, if you want to expose it to the outside.
Then yeah, you you can. Farewell, but if you wanted to remain internal, then you need to make sure that the validator node and all the Observer notes are within the firewall. So one of the use cases that, it seems like this is tiered for, and you mentioned before is the idea of trading, right? Because you certainly right that block chains aren't very good at that, you know, I mean, Bitcoin certainly wouldn't be useful for that and then even if you take like permission chains, you
still have problems, right? As you mentioned, right? If there's a curfew second confirmation, Nation time and well, that's probably too slow. So, one of the interesting things here and I'm curious how that's going to work. Is the idea that would you in a trading, use case? Let's say we wanted to stock market with open chain, would you have a different open chain for each stock?
And would those be issued then by the company or would like, let's say NASDAQ would have like one open chain that includes all. The stock of the entire stock market. It's an interesting question. So right now, there is this, this concept of stuck depositories which is like the dtc's in the US and there's a few also in Europe and this is where the stocks are held
ultimately. So those those companies could be the ones running no punch and edger and the, you know, have people, you know, instead of having this nice. This Very tiered approach where you have like a repository then you have Brokers, and you have the exchange, you could have the depository, holding the stocks, exposing a open chain Ledger and then everybody could connect to that directly.
So you can eliminate a few intermediaries, that's one way to do it. And then you could as far as the exchanges are concerned, you know, if you're an Asda, can you your you want to run an exchange? You would have maybe second instance where you have tokens that represents It's kind of a proxy for a token on the at the dtcc, for example. So and then you still don't have to do reconciliation because everything kind of happens
automatically. You can have like, a smart contract in a way that makes sure that everything is always in sync, but still, but then you can use the NASDAQ, has the ability to have their own, sort of small instance, where all the trading happens and for let you know, to go back to your first question, if you would have different. Instances per different stocks. I mean everything is possible.
You can have multiple, you can have just one instance with many different stocks on it. But let's think for again, for scalability, just very practical reason, it would probably be better to have one server / security, but you know, different leaders, many architectures possible depending on, you know, the the creativity. So it's so that that kind of leads into the next question. No, because if you start, Having 100 chains with one chain / security. How can those interoperate?
Yeah. Basically there's a concept of Gateway so you can establish a Gateway from one chain to another. And what it does is it creates let's say you have Starbucks points on the Starbucks chain and then you want to have a like you want to have like an exchange for Starbucks point. So that's exchange for Starbucks points. You on that, on there, you would have special I'm Takin that that is a proxy for the actual Starbucks points on the the Starbucks chain.
And so you would as far as Starbucks would be, is concerned would be an account. And when someone would want to transfer Starbucks point from the main Starbucks chain onto the exchange chain, they would send it to that special accounts that you own and now you as the exchange you, you kind of on that point and you create the equivalent on the, on the exchange chain and then you give it to that. There because you can map that user different ways.
Like the easiest way to do it is by, you know, giving it to the same public key. So as you know, as long as the person has the public key, you know, that it has it because it sent the Starbucks point from that public key. So you can give it to the same public key. But on the other chain and then, on the extension, you can run
your exchange. You know, you can have rolls, you know, specifically for that exchange, and people can cash out from the exchange by sending it to again, to a special account on the Exchange chain, which unlocks the coins on the main Starbucks chain. So, what I just explained, it's actually very similar to the concept of side chains. This is actually, you know, the exchange chain would be a side chain of the main Starbucks chain.
And you can actually have a chain like an open chain instance, which would be a side chain of the Bitcoin blockchain as well. This is also possible. But so yeah let's talk about the example right because let's say you you had you know you're allowed to put Bitcoin on some
open chain. So that means you would put them in a certain account, I would be controlled, I presume by the validator of the open chain on the Bitcoin Network and then that validated with issue you a Bitcoin token on the open chain. Is that how it work? Yeah, that's how it would work.
Although it says it's possible to decentralize it's a bit because we're talking about Bitcoin, so a setup that would be interesting is to it. Actually doesn't really have to be the validator although it's probably no actually doesn't even have to To be the validator, could be a third party company or group of companies which come together, they create a multisig, address amongst all of those and and that multisig address is the Gateway.
So when you want to send Bitcoins from the main chain to the side chain, which is like that specialist open chain instance, descended to the multisig address. So it gets locked by all those. Let's say five companies and then those five, and then they, and then it took on is issued on
the side chain. Then, you know, People can trade that took and represent exactly when Bitcoin people can trade under chain and when they want to cash out the send it to an address which is again controlled by those five companies. But on the side chain and and then the five companies unlock the coins on the main chain and give it back to you on the main chain, right?
But I mean, I can see that making some sense, especially glad say, If you think one of those multisig, addresses, or something would be controlled by people running, like Observer notes on the Unchain right. Exactly. Would be, yeah, but still though, because if he say, there is an account that's like, controlled by the same three entities, let's say on the open chain, I mean, in the end every account on the open chain, you know, if if the validate, you
can reverse transactions. And yeah, but this is where this is a very good observation and what would happen is that the the five or three entities that control that multisig address They would be observing The Observer notes and if they realize that the administrator reverses transactions and they don't agree with this reversal of those transactions.
And let's say, you know, you have money that you shouldn't really have and they know like the five Observer notes agree, that you shouldn't really have that money then they just wouldn't sign the transaction when you try to cash out. So when you trade a cash out, you still get need to get the signature of those five companies and because they're observing and they realize that it was not right, that can just refuse to give you or your money because you, you have money that
you shouldn't have. So, even if the administrator reverse is transaction, then the Observer knows still have the power of controlling the coins in that multisig address. Yeah, that's right. Right. Yeah. So you could have that security that the Bitcoins would be. Yeah. Presumably reasonably secure at least if the Observer nodes, would be able to see and know what's going on, right? Because it might not, I'm not sure if it will always be
obvious. When I mean yeah I mean this service that those five companies they would run probably special software to identify any type of transaction that that's not right because you know, they would be running this type of service but this setup is actually exactly what a Federated side chain is. So this is you know this is basically you can set up a Federated site. Yeah, abscess on a train. Yeah.
So before we wrap up like to get Mimi, you're sort of your views on where the Bitcoin ecosystem is going. And we've seen a proliferation of these protocols and standards that are built on top of Bitcoin. And you know it seems like it was just yesterday that Bitcoin was going to be the currency that was going to everybody was going to use it but now we're seeing that in fact you know companies and Enterprises and Joe.
Of larger players are building all this infrastructure on top of Bitcoin and using Bitcoin, not necessarily as a payment mechanism but as rails on which other Protocols are implemented. Where do you see this going in the next five to ten years? Yeah, I think I see Bitcoin becoming more of an
infrastructure service. You know like this the fact that you can publish a hash and it becomes mutable, you know, like like open Chinese doing, it's very valuable and I think people are going to realize that You know, Bitcoin is going to. It's going to stay as a store of value just because of that that value that it provides to as an infrastructure as a currency.
I don't know if I see it as a currency because there are still a lot of problems to overcome for people to use it as you know, for payments and this type of things we need works, okay. But do user experience. You know when you try to pay in a store I mean it's not great right now.
There's a lot of progress to be done and I'm sure it is going to evolve over the next 5 years and 10 years it's like You know, it's such a long time for this type of things, you know, five years ago, Bitcoin was barely, barely existed.
So who knows? You know how the user experience will I will have improved in five to ten years but yeah, like those companies you know there's always this debate there like with the blockchain without Bitcoin versus Bitcoin, I think it's like two different use cases, two very different things. Those companies trying to build a blockchain. What they want is like, like a secure system with like nice properties like, you know, it
Ability and transparency. And digital signatures did not necessarily interested in for it, as a payment, like, as a commodity, like, Bitcoin is, but Bitcoin itself, as a commodity, is very useful for some things as well, which is not what the banks are interested in. But it's different use cases, but it's still very interesting. Like the fact that, you know, you can store the fact that it's like gold but digital you know. So if you want to buy gold it's not very easy.
If you want to buy physical goal, you have to start somewhere. So definitely using Bitcoin is a much easier way to do that, you know, Bitcoin has also has this property of censorship resistance. So I mean okay I'm it's definitely useful for some of the illegal use cases. I mean, there's I mean, I'm not saying it's a good thing but at least you know, it's useful there and just because of that, it's not going to disappear. So it definitely has its use cases.
It's just not what the banks are looking at. Or like, you know, the financial institutions are looking at. It's too different. Think think blockchain is kind of in the middle but it's like very like two different angles really but they both have their merits. Yeah. Absolutely. So when it comes to you like coin prism as a company, is your
plan. Now to build a business around open chain and also is it because for a long time it was confusing was basically mainly you, is that still the case? Or is there a larger team? Now, so it's still me the main person on the team, you know, working with like few people part time but yet like we're still looking to grow the team, you know, in the next few months.
Hopefully, but as far as far as product goes, yeah, obviously going prism and colored coins are still still around and we we want to, you know, also keep our focus on that. And as a matter of fact, will will also allow pegging And assets tokens from the main chain to, as to open chain instance. So, you know, like I was talking about using open chain as a side chain. Well, it's not only going to be for Bitcoins.
Also going to be for current coins, so and we're going to, you know, enable that kind of scenario, so that people who want kind of The Best of Both Worlds, they can use the open chain for scaling and then they can then go back to the main chain for settlement or whatnot. So it's kind of two sides of the
spectrum. Um, and we still want to, you know, to be able to have offerings on both sides, on the permission left side, which is Colonel, Cowen and Bitcoin because there's some use cases where it just works better. And then on the permission side as well because you know, there's also use cases where permission the makes more sense. So we want to again keep the offering on both sides and be able to offer to people what they what's the best solution for them? Cool great.
That sounds fantastic. Thanks so much for coming on. Flavia. Yeah, thanks for having me. Yeah. And to listen to thanks so much for listening, it's always a pleasure. And so we put out new episodes every Monday and you can subscribe to have episodes on iOS iTunes SoundCloud or of course, watch the videos in YouTube.
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