Published on: 2014-02-15T14:43:08+00:00
The author proposes writing contracts like IOUs and vouchers on the blockchain, with the legal contract outside of the chain for them to be enforceable. They argue that data on the blockchain cannot represent a physical or legal entity without consensus and/or authorities in the "real world". The author also warns potential investors that investing in digital asset transfer systems is risky and losing some or all of their investment is possible. They suggest building, testing, using, and trying embedded consensus systems in court to ensure they can be explained in simple language to the decentralized local court systems.The context discusses the limitations of digital asset transfer systems, specifically tracking ownership of contested assets. The author highlights the challenge of documenting rulings from small claims court in an embedded consensus system. They stress the importance of good accounting systems that allow for reversing fraudulent transactions while maintaining a full audit trail. The author acknowledges that courts cannot legislate code and proposes model municipal and county ordinances as a solution. Additionally, the author emphasizes the need to build and test these systems to determine if they meet real-world business needs.In an email exchange between Luke-Jr and Peter Todd, they discuss the idea of upgrading the embedded consensus system with new rules. Luke-Jr argues that this would give developers too much power and establish a central authority. However, Peter Todd counters that users are not forced to upgrade unless they choose to run an operating system with automatic updates. They also discuss the challenge of including consensus from relevant legal jurisdictions when transferring assets that do not solely exist in the blockchain. Luke-Jr clarifies that the only assertion of central authority is from those who download and run the code. He believes that being able to read the code before submitting to it is an improvement over ambiguous legislation or proprietary trading algorithms.On February 9, 2014, Peter Todd expresses concerns about an embedded consensus system that could be upgraded with new rules. He believes that such a system would grant developers too much power and establish a central authority. Todd emphasizes the importance of maintaining a decentralized structure in blockchain technology to ensure security and integrity. He suggests that any changes made to the consensus system should be agreed upon by a majority of participants, rather than dictated by a central authority or a small group of developers.The problem addressed in this context is the potential for double-spending assets during a transition period where some users interpret new consensus rules while others only interpret old ones. The proposed solution is to split actions into separate "decrement" and "increment" operations to prevent double-spending and protect v1 users from being ripped off. The analogy drawn is to proof-of-work cases, and the solution is referred to as an embedded consensus system soft-fork. Colored coins technology implements this principle implicitly with miner validation. It ensures that moving transaction outputs from one owner to another results in the destruction of the colored coin from older software versions' perspective. Implementations should record in their databases the blockhash associated with transactions that affected the state of the consensus but were not yet recognized. After upgrading, these markers can be used to replay blockchain data and arrive at the new consensus. A master digest representing the state of the consensus in the database is also useful for different implementations and instances to ensure they have reached a consensus.
Updated on: 2023-08-01T07:34:45.365939+00:00