Onli: the non blockchain, blockchain.

8/14

Onli is not the blockchain you have been hearing about. We have been around just as long but Onli is new and different from the ground up.

One of the things we do at ONLI is called Aristotelian “first principles thinking”. This is non-obvious and it seems counter productive but when you are making a huge 10 year investment in developing a technology then you need to be absolutely sure you are going the right way. First principles thinking is a mode of inquiry that relentlessly pursues the foundations of a problem. This means, rather than starting with something cool, coming up with a solution or even writing specifications instead we thoroughly understand the why of something at the lowest level of detail before we set out to write a single line of code.

A lot of people get lost in the marketing language and use marketing terms as a jump point into the wonderful world of what if. If you want to develop a clear chain of thought you need to forget the marketing and start with rock solid definitions.

from the wikipedia: Blockchain is a distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. By design, blockchains are inherently resistant to modification of the data.

Of course this is not what is meant when most people say “ the block chain”. What is being referred to is what block chains are used for, which is to keep a ledger of transactions. What most people refer to when they say “the blockchain” is a piece of software that aggregates computing resources in order to keep a ledger of transactions. Keeping a distributed ledger is a computationally intensive process that requires a lot of processing, network, power and storage. In order to incentivize someone to contribute their expensive resources there needs to be an economic benefit. That benefit is crypto, short hand for cryptocurrency. A quick search gets you to some variation of the idea that crypto-currency is electronic money. Money is a medium of exchange. Crypto is therefore something used electronically as a medium of exchange that users exchange among themselves, similar to money. The benefit of contributing computing resources to a network keeping a ledger of transactions is something that can be used as a medium of exchange. In the case of “crypto”, what is being used as a medium of exchange is an entry in a ledger. What is being sold or transferred is a cryptographic key. A wallet is a password protected text file of keys, alphanumeric strings. Methods and schemes for doing this is where things get squirrelly. Then there are those referring to the idea that “the blockchain” means a new public network for storing data using the blockchain method in a distributed ledger. This public storage network “the blockchain”, of which there are many networks, which has crypto as the exhaust, is loosely all “the blockchain”.

If we are to come to any kind of practical understanding of what we are talking about then we need to first come to some foundational definitions.

  1. A ledger is a series of records of transactions measured in terms of units
  2. A ledger is stored in a database, where database is a collection of data stored in a structured computer file
  3. Blockchain refers to a method of making entries in a database where a chain of entries or blocks in a database, include a record of the state of the last entry.
  4. There are many methods of maintaining a database. One method of maintaining a database is to store it in a distributed method maintained by a consensus over a network of computer systems connected by communication network.
  5. Another part of the method of maintaining the ledger/database is to use cryptography to determine who can read the ledger and/or write to the ledger. One popular way to do this is to use asymmetric cryptography.
    1. from the wikipedia: Public-key cryptography, or asymmetric cryptography, is a cryptographic system that uses pairs of keys: public keys which may be disseminated widely, and private keys which are known only to the owner.
  6. A blockchain ledger is where entries in the ledger are controlled by public-private key pairs. This determines who can request to make changes, write, and even read entries in the database.
  7. A distributed ledger network is a network of connected computing devices that consensually share a database and synchronize its state across multiple devices.
  8. In this system, the private key of an entry in a blockchain ledger is an alphanumeric string. This alphanumeric string therefore represents the value of the number of units recorded at the corresponding ledger entry.
  9. A wallet is a list of private keys.
  10. The private key, the alphanumeric string, is the asset. The thing used as a store of value that can be used as a medium of exchange, which a user of a blockchain ledger stores on a distributed ledger network.
  11. The owner of this string is whomsoever posses the string and presents it to the ledger writing mechanism.

If we are to come to any kind of practical understanding of what we are talking about then we need to first come to some foundational definitions.

  1. A ledger is a series of records of transactions measured in terms of units
  2. A ledger is stored in a database, where database is a collection of data stored in a structured computer file
  3. Blockchain refers to a method of making entries in a database where a chain of entries or blocks in a database, include a record of the state of the last entry.
  4. There are many methods of maintaining a database. One method of maintaining a database is to store it in a distributed method maintained by a consensus over a network of computer systems connected by communication network.
  5. Another part of the method of maintaining the ledger/database is to use cryptography to determine who can read the ledger and/or write to the ledger. One popular way to do this is to use asymmetric cryptography.
    1. from the wikipedia: Public-key cryptography, or asymmetric cryptography, is a cryptographic system that uses pairs of keys: public keys which may be disseminated widely, and private keys which are known only to the owner.
  6. A blockchain ledger is where entries in the ledger are controlled by public-private key pairs. This determines who can request to make changes, write, and even read entries in the database.
  7. A distributed ledger network is a network of connected computing devices that consensually share a database and synchronize its state across multiple devices.
  8. In this system, the private key of an entry in a blockchain ledger is an alphanumeric string. This alphanumeric string therefore represents the value of the number of units recorded at the corresponding ledger entry.
  9. A wallet is a list of private keys.
  10. The private key, the alphanumeric string, is the asset. The thing used as a store of value that can be used as a medium of exchange, which a user of a blockchain ledger stores on a distributed ledger network.
  11. The owner of this string is whomsoever posses the string and presents it to the ledger writing mechanism.

 


Opinion/ Rant

What is referred to as a “crypto-coin” is really just a private key to an entry in a ledger that uses a blockchain method to store records in a database that may or may not be maintained using a distributed mechanism. Ironically, when you put it like that, this is not in any way a new idea. There is innovation here it is just not where the blockchain hysteria is pointing to. The napster for transactions economic model, “mining”,  is a novel approach to aggregating computing resources. Part of a modern take on the sharing economy application approach. So before we start changing laws and changing lives let us get a sober understanding of what we are talking about. Blockchain, the sharing economy concept of aggregating the resources of multiple people to provide a service, in this case a database,  to a user base, does have practical applicationsBlockchain however is not the second coming of the internet or anything like that. In fact, I would argue that 80% of what is being done with it would be better served just getting AWS and some real programmers. It would also cost 100 times less and be more stable. Crypto, the exhaust of the sharing economy, the economic incentive driven by the next greater fool economics, is not truly an “asset” class, as there is no asset.  The inconvenient truth is that sharing technology resources is almost always less efficient, often way more expensive, and is rarely sustainable. This is just the science. If you are going to invest your hard earned money in building something you want to focus on substance not hysteria. 

Here endeth the rant. back to the article


Now that we have a clear definition that forms the foundation of the landscape now let us look at some higher level concepts.

At a very fundamental level, the foundation of any economic system is proof of ownership. All economic systems require a method for establishing proof of ownership preferably one that is irrefutable. Value, it turns out, is a benefit assigned to ownership. In order to transfer value you must first establish proof of ownership and only then can a change in ownership can occur, which is a transaction. If a change in ownership cannot be reasonably established or reliably depended on, then transferring value is at risk.

Humanity wants to make trade more efficient. What came out of this need was a concept called a medium of exchange; money. The underlying economic principle behind the first economic systems was actual possession. You spend what you are in possession of. However storing a medium of exchange, moving it around in large volumes and keeping it safe was expensive.

To solve this problem, another economic principle evolved: Custodial Possession. Custodial Possession is where you use a neutral third party and give them custody of the medium of exchange. The third party uses entries in a ledger that represent ownership of what they had in custody. and transactions are a double entry in the ledger, a debit and credit.

With the advent of computers, Custodial Possession could now be implemented in a digital environment. While computers make it easy to store records, it turns out that they aren’t easy to secure. Also when you move records they are subject to hacking. The result is double spending, lost records, and other errors in the record. With the advent of computers storing records became inexpensive but keeping them safe was still difficult and moving them is risky, thus expensive.

In 2009 Satoshi Nakamoto, came up with an idea to use hashing in a chain of blocks to create entries in a ledger that made it difficult to change. Ownership would then be a cryptographic key to an entry in the ledger, which determines who can write to and read from the ledger. The ledger would also be used to keep a record of transactions using the same method. This is blockchain or a chain of blocks. It is literally a way to make entries in a ledger.

Now that you could make immutable entries in a ledger you need to keep the ledger safe. To facilitate this the paper called for a distributed consensus mechanism. The system would then distribute copies of the ledger so lots of independent parties have a copy therefore keeping it accurate through a consensus.

This distributed ledger required lots of computing power. Satoshi needed a way to incentivize independent parties to lend their infrastructure to process and keep the ledger. The real invention of bitcoin was the novel idea of using an entry in the ledger as a “unit of account”. The people who contributed the infrastructure needed to maintain the system would be involved in a mathematical contest and the winner of a contest would get the key to that entry. This new “unit of account” entry was fungible, divisible, and so it could be used as a value that could be treated like a medium of exchange. This is bit coin.

This solved the custodial possession problem of storing the ledger in a way that it can’t be changed. What is moved around is cryptographic keys to read from the ledger and write to the ledger. This solved the custodial possession problem of keeping the ledger safe.

ONLI

Onli is different, literally, from the ground up. In 2010, ONLI was invented, it was based on an economic principle called Actual Possession. This was a departure from everything else which was a digital instantiation of custodial possession. Onli has no ledgers.

An Onli is a dataset generated by a uniqueness quantification algorithm, where operations (copy, read, write or update) evolve the dataset by hashing the previous state and storing it in the structure, as a chain of blocks (blockchain), thus advancing the state. This enables the dataset to maintain a real time single global state across a network of connected devices. Each dataset is stored as a single capsule. This capsule can be used as a medium of exchange as it maintains a real time globally unique state across a network of connected devices. The owner is the one in “actual” possession of the currently unique state. This technology allows you to digitally implement an “actual” possession economic principle. You get all the benefits, scalability, integrity, speed, lack of central control and none of the problems.

OnliOne

Of course being able to create a digital asset that can be used as a medium of exchange, while difficult, it is not really the hard problem. The hard problem is moving it around and keeping it safe.

Distributed Ledger Technology is about making copies of the ledger and keeping the consensus. The bottom line is lots of copies means lots of copies. There is no changing that fact. Transaction integrity, where “a” is “a”, and consistency gets exponentially more expensive as you make more and more copies of something. Eventual consistency is the best you can hope for with such a premise and that means changes in ownership are not tenable from a legal perspective. Remember property is the foundation of law and claims against ownership where the proof is not tenable means lots of conflict. These kinds of risks, scalability, speed, integrity, are all acceptable in an Open Data Economy, where data is free. Those kind of risks are unacceptable in fin-tech where a dispute may mean the loss of a person’s entire life savings.

OnliOne is a different approach. There is no ledger to make copies of and update. The technology is focused on moving the Onli capsule around, maintaining changes in the ownership, and having strong authentication. Infrastructure has become increasingly inexpensive. Independent validation can provide for checks and balances on a dedicated infrastructure approach.

Onli and OnliOne is not right for everyone. For projects that can’t afford infrastructure or for whom shared or public infrastructure is a compelling benefit, DLTs as a concept makes sense. However, for financial and economic projects for whom the cost of infrastructure is minor, this absolutely makes no business sense and it is in fact an unnecessary risk.

We began nine years ago to build a different system from the metal up. We made a core departure from the general direction the technology was heading at the time. All data is not created equal. Bottom line it is forty million times more expensive to run something on Ether than AWS, that’s not a typo. https://hackernoon.com/ether-purchase-power-df40a38c5a2f. The current state of the web ( the web is a network of documents where the internet is a network of computers)  is public-by-default. Economic systems require a communication system that is private-by-default. Privacy and security has to be job one.The bottom line is you can’t break the laws of physics. It could look like that for a while and that’s a good trick but in the end physics wins.

Onli is a new approach to solving the problem. It is different from the ground up. This is not the blockchain you have been reading about. No matter how complex a technology or a concept is, it doesn’t take a PHD to understand it. If you want to evaluate it in a way that is practical follow the three golden rules. Rule number one: always go back to first principles. If all else fails go back to rule number one. If you get any ideas or start feeling you should follow the crowd then see rule number one.

among

Leave a Reply