This post shows how the technology and process behind bitcoin is going to change business in ways far more profound than the public realizes. Randall Moeller Heres a list of possible ways to profit from building an infrastructure around Bitcoin that leads to Contract Law 2.0 (most of the ideas and text below arent mine -- many come from this Mike Hearn presentation -- m.youtube/watch?v=mD4L7xDNCmA): 10 legal business ideas relating to Bitcoin * dispute mediation - 2-of-3 transaction: the coins specify 3 parties, of which any 2 can sign to move the money. No dispute: buyer/seller sign. Dispute: buyer/mediator signs and the seller loses. Or seller/mediator signs and the seller wins. The mediator cant steal or move the money by themselves. * estate planning - An oracle is a program that runs other programs, and then signs or doesnt sign, a Bitcoin transaction based on the results. If you have a dispute in which the outcome can be decided by a program, you can use this to reduce costs by taking people out of the equation. For example, imagine a man who wants to release some coins on his grandsons 18th birthday, or when the man dies, whichever comes first. The 18th birthday condition is easy because Bitcoin lets you create transactions that are only valid after a certain time. If the local government provides information about deaths online (like Missouri does), he can write a program to check if the man has died and only then release the money. * assurance contracts - In the field of economics, an assurance contract is a method of funding public goods. In English its a fancy term for something you may already have heard about - Kickstarter style funding of projects. An entrepreneur announces they will make something that benefits everyone freely, but only if Ⓑ1000 are raised. Supporters pledge money, but the money only leaves their account if the target is reached. The traditional example is a lighthouse but more modern examples would be a music album, or film or program or any other creative work that can be pirated. Bitcoin lets us do this without fee-charging middlemen. All you need is some software that runs on your server or always-on home computer. Pledgers submit invalid transactions that arent acceptable to the network. They can be combined such that they become valid once the target amount is raised. You can combine this with multi-sig transactions so to release the funds some mediator has to agree that the public good has been created. * purchase and sale of smart property - You could pay somebody and then they refuse to give you the goods and disappear. What we want is to combine the act of selling with the act of transferring control over the property into one atomic operation, we programmers call something atomic when something happens such that it cant be interrupted or split up. It eliminates the need to trust the seller. Your car is already kinda smart, it has an engine control computer that wont start the engine unless it handshakes with your keyfob, its called an immobilizer and has dramatically reduced car theft. Its possible to write engine control software that stores a very small amount of data about the Bitcoin block chain. The same message that is broadcast on the Bitcoin network to transfer funds from buyer to seller can also instruct the car to hand over ownership. Once the payment is confirmed you present the car with a proof of payment (like, with a smartphone you touch against the dashboard). The car sees that it has a new owner and now requires your phone to start it instead of the previous owners phone. The same concept can apply to rooms/houses, safes, shell accounts on remote servers, and so on. * collateralized lending - If your car is smart, you can use it as collateral for a loan. Its similar to selling it, in that the car gets a new ownership key, but the new owner (the lender) also grants a time limited access key that can be used to start the car. The lender doesnt have to trust the borrower - if the loan enters default the temporary access key will expire and the car wont start any more. The lender can then use the same smart property protocol described on the previous slide to sell it over the internet to somebody they never even met. The new owner will come and pick it up after presenting the car with a proof of the transactions that change ownership. The borrower doesnt have to trust the lender much either. The lender also creates a transaction that gives ownership back to the borrower, but that transaction isnt valid until enough repayments are made to clear the loan. If they successfully make all the payments that were agreed to, that transaction becomes valid and they can prove to the car the loan was repaid. No permission from the lender is needed to take back control of the property. * P2P investment funds - So now theres a market with lots of bonds flying around. Thats great, but it doesnt help the man on the street. Many of us invest in bonds, but indirectly, via constructs like pension funds. Those funds often in turn invest in other funds. An investment fund is a fundamental abstraction - it reduces complexity by letting you invest in particular strategies or asset classes rather than specific assets. For instance a low risk fund may invest only in local municipal bonds, and a high risk fund might invest in energy stocks. We can implement decentralized investment funds in Bitcoin too. It relies on something called Sahai-Waters ciphertext-policy attribute based encryption. The mathematics are very complicated and I wont get into them here. Bitcoin has a thing called script but it cant do what we need in this case. But essentially it lets you pay money to a policy instead of a single target. You can take unclaimed money back at any time. Various organizations issue attributes that can be combined to decrypt data if your attributes match the ciphertext policy. Instead of giving money to a fund that simply implements an investment policy and then creams fees off the top you can do it yourself. Of course this doesnt obsolete funds that have very complex or secret policies, like hedge funds. * P2P currency exchange - Use the Ripple concept, from Ryan Fugger ● Alt chain tracks credit relationships in a social network. ● People who know you provide credit lines ● Buying coins results in immediate transfer. ● You are then marked as in debt and your credit lines are used up. ● People settle up later via whatever means is convenient (paypal, cash, bank wires, etc) * contract interpretation - anonymized, crowdsourced - parties agree to this in the event of dispute, dispute arises, one party calls in resolution - dont know who it is, so cant bribe them, but they must meet minimum standards - penalties like liquidated damages can be seized through Bitcoin system * trust accounts for client funds - watch for a liberal jurisdiction that allows client funds to be held in Bitcoins instead of regular IOLTA accounts - can use above methods to ensure fair treatment of both sides * simple trademark and copyright licenses - receive payment for validation, monitor websites for appropriate use
Posted on: Sat, 18 Jan 2014 22:48:50 +0000
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