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Blockchain technology has managed to influence every walks of our life in a very short period of time. While the benefits of the technology far outnumber the mixed reaction it has received from the crowd, blockchain technology offers a lot of scope for innovative applications. Subscription economy and recurring payment systems are some of them.
The 8x Protocol is a new concept ensuring a leading standard in the management of recurring payments with the help of blockchain technology. The protocol combines the subscription economy with the blockchain technology creating unique opportunities as well as challenges that are utilized by it.
Recurring Payments also called Auto Pay can be defined as mechanisms where a business concern or say a bank is authorized by the customer to automatically collect a certain amount during a particular period. For example, banks are authorized to automatically deduct credit card charges, at the beginning of every month. This helps in avoiding the issues of late fees or fine.
The Main Issues with Recurrent payments
Recurrent payments while a convenient mode of payment in most cases has its limitations as well. Some of the most common issues of recurrent payments are: –
The instability or volatility of payments made
A push-based system which complicates the payment procedure
Lack of scheduling option to smart contracts to schedule payment at a later phase
These issues of recurrent payments can be addressed well with the help of 8x protocol.
What is 8x protocol?
8x protocol is a protocol which enables decentralized recurring payments with a technology built on Ethereum. With this protocol, it is possible to authorize businesses to automatically deduct an approved amount from the account in a prescribed period, eliminating the need for constant manual payment.
Why 8x Protocol?
8x Protocol brings about a remarkable improvement in the way recurrent payments are conducted today. Some of the prime features of the protocol are as follows.
The 8x protocol allows the entity to take the tokens directly from the user’s wallet. With this protocol, the need for an escrow account can be eliminated. It also eliminates the need for advanced upfront payments.
The protocol eliminates volatility with the use of stable coins, Dai, on its collaboration with MakerDAO. This helps in the elimination of volatility for both users as well as businesses. 8x is an ERC20 algorithm.
On time collection of payments are ensured with the help of a network of distributed services nodes that are run by token holders.
The working of 8x protocol
Businesses create a subscription plan specifying the frequency, amount and fee. The subscription with a dynamic fee helps in conveying the importance of payment on time. Customers subscribe to the subscriptions offered by the business. If they do not have the necessary token at hand, they can conduct an atomic swap (to convert Dai to ETH).
The feature of volatility is not available in the presence of stable coin. Once the date is due, the service nodes are notified or kept on wait regarding the subscription to be processed. If the subscription meets with the criteria set by the service nodes, the transaction is executed and the funds are transferred from the user account to that of the business.
The 8x protocol facilitates recurring cryptocurrency payments without exposing businesses or consumers to the volatility of cryptocurrency.
The term cryptoeconomics is one that creates a whole lot of confusion regarding its meaning. People often misunderstand the term for some crypto version of economics, which it definitely is not! Cryptoeconomics is a science that makes use of cryptography and incentives to design various applications, systems and networks. In more basic form, cryptoeconomics is about building things.
Considered to be a subfield of applied cryptography, cryptoeconomics take economic theory and economic incentives into account while building applications or technologies. Cryptocurrencies like bitcoin, zcash and ethereum are all built on this concept. Cryptoeconomics have led to the development of robust applications by combining the soundest technologies of economics, cryptography, networking theory and computer science.
Before we go into a detailed study of cryptoeconomics, let’s have a look at the dynamics of our current financial system and where cryptoeconomics fit into it right now.
Our financial system – the journey so far
The current financial system and economy have passed through quite an evolution to reach the stage it is in today. In the early years, our economy was based on the barter system, where some goods were exchanged for another. This led to a chaos as there were no fixed value or rules for exchange. Hence a unified value system in the form of currency was introduced.
Today our currency value is determined by boundaries. A unified value system does not exist in our global economy. Countries like Greece face huge difficulty due to an unstable currency value. This is where the idea of digital currency arouse from. However, digital currency failed to find a foothold in the economy due to their vulnerability to security attacks, mainly the double spend problem. Double spend problem refers to the safety issue where people are able to hack the digital currency, recreate it and spend it as they please, leading to the devaluation of the currency.
Cryptocurrency is the latest addition to our financial system that is yet to be accepted worldwide. An improved version of digital currency when it comes to security, cryptocurrency is built with what is considered as the best features of networking theory and cryptoeconomics. Cryptocurrencies such as Bitcoins has managed to find success with a lot of application being built in its context.
The value of bitcoins is maintained by regulating its supply in the digital economy. By regulating the production of bitcoin, its value stays high.
What is cryptoeconomics?
Cryptoeconomics refers to the technology that employs both cryptography and economic incentives for the creation of robust decentralized applications or protocols. The reason for the success of bitcoin among various other decentralized protocols is widely acknowledged as the efficiency of cryptoeconomics that worked at the core of its protocol.
Cryptoeconomics aims to replicate this success in every field including transaction, storage, computation, power and prediction. With blockchain playing an important role in various applications today, the scope of employing cryptoeconomics and its various incentives are on the rise.
The design of Bitcoin is mainly based on the penalties and economic incentives in it. The economic incentives in a Bitcoin are gained through mining or creation of a block. If the user is able to create a block, he/she will be able to produce Bitcoins.
A Penalty is a part of the Bitcoin security model. The only way that the security of a bitcoin blockchain can be compromised is when an attacker is able to access the majority of the application’s hashing power. However, the cost required for this is quite high and the process is very difficult to get through. The hash function not only offers security but integrity as well by linking the previous blocks to one another. The public-private key cryptography ensures additional security and offers the users the access and control over their bitcoins. On a deeper note, cryptoeconomics is not limited to just computer science or network theory, it is interdisciplinary.
Want to know more about cryptoeconomics based applications?
Cryptoeconomics – the link with economics
The term cryptoeconomics is one that can misguide people to think of it as an application of some level of economics, which it is not. It is not either a microeconomic or macroeconomic application. The only link it has to mechanism design would be a type of game theory, where the best strategies are designed to obtain the best outcome. In cryptoeconomics, we employ the best economic theories to design a mechanism that would help produce an equilibrium outcome.
The theories used to design a mechanism in cryptoeconomics mainly involve software and cryptography in a decentralized and distributed system. Incentives could prove to be a good security model for some time but nothing can be said about the future. The success of a security model mainly depends on the ability to gauge how people would react to certain things.
Some applications of cryptoeconomics
Different systems in operation today employs cryptoeconomics at the heart of it. One such system is the consensus protocol. The consensus protocol in blockchain sets the platform for a reliable agreement without having to depend on a centralised trust party. In the case of bitcoin, this is known as proof of work consensus, as the miners are required to commit the work initially in terms of electricity and hardware before being allowed to participate in the mining process and seeking rewards.
Cryptoeconomic research is still on for designing a better alternative for the proof of work consensus. Proof of stake is an alternative that is being developed as an alternative to the current system with a number of improvements and variations.
State channels is another application of cryptoeconomics where small set interactions are designed between users. This helps in overcoming one of the biggest disadvantages of blockchain, the cost. Designing smaller interaction sets ensures that the blockchain is made more efficient by moving some of the process, off-chain while maintaining the trust factor with the help of cryptoeconomic design.
State channels can be used not just for payment transaction but for any update process. However, it can be easily explained in the context of a payment transaction. Consider that A and B want to conduct a number of transactions involving small payments. If A and B perform this via a blockchain, the cost involved increases with each transaction and also, the time taken to build the blocks increases.
With the help of state channels, these small transactions can be conducted off-chain. A and B signs off the transactions in a way that it can be conducted on the blockchain but is not done so. When that is done, only the last transaction is updated on the blockchain. The safety of transaction is not compromised as both it is performed in the same format as can be done on a blockchain.
The cryptoeconomic technology has been viewed in the context of bitcoins or blockchain technology till now. It’s time to widen up the scope of this promising branch of technology and use its benefits outside the scope of the finance system. The world has a lot to benefit from if cryptoeconomics stays to bring about what it promises to do!
Further reading list
Want to learn more about cryptoeconomics? Here are some links for a deeper understanding on it.
With the GDPR (General Data Protection Regulation) to be enforced from 25 May 2018, organisations are in a haste to satisfy all the rules mentioned in the regulation. However, doubts regarding some of the guidelines persist.
In this blog, we aim to address one of these main concerns, ‘when do you need to appoint a Data Protection Officer’?
What entails to personal data in GDPR?
GDPR is all set to be enforced in a few days and organisations are busy with tasks to ensure GDPR compliance. Personal data forms the foundation of GDPR, given the main aim of its implementation resting with the need for data protection and privacy. Although it’s not possible to find a definitive classification for personal data, it is possible to identify the data based on the definitions of GDPR.
Personal data refers to information relating to an identifiable or identified natural person, termed as data subject in GDPR regulations. An identifiable person is one who can be identified by a reference such as a name, location data, and identification number or by referring to physical, mental, economic, physiological, social or cultural identity, or through an online reference. Even information such as IP address, political affiliation or hair colour can be considered as personal data, based on the context in which it is used.
The scope of personal data
Ascertaining the scope of personal data, as in specifying what is considered as the ‘risk-prone’ data, is a difficult process. For example, collecting the occupation of users for the purpose of the survey cannot be considered harmful. However, when this is combined with more information, such as location, the name of the company or name of the person, it can be identity revealing.
While it is difficult to classify personal data, here is a broad list of things that could come under its classification.
Information on the current living situation or biographical information
This constitutes details such as address, email addresses, phone numbers, social security number, date of births and so on.
Description of looks, appearance or behaviour
Information such as eye colour, hair colour, height, weight, skin tone or character traits.
Information about education or workplace data
Details of education such as student number, place or subject of study, tax details, salary or workplace name and addresses.
Private, subjective data
Details such as political opinions, religion or geo-tracking of data.
Information regarding health and genetics
Data regarding medical history, sick leaves or genetics
Who is a Data Protection Officer?
A Data Protection Officer in an organisation acts as an independent advocate for the enforcement of customer’s data security. The officer keeps track of the various laws and regulations of data protection while conducting internal privacy assessments. This helps them to ascertain if all the data protection policies followed by the organisation are up to date.
A DPO’s scope of work includes the following
Setting up of defendable personal data retention periods
Authorizing specific workflows to ensure proper data access
Outlining the procedure for keeping retained data anonymous
Constant monitoring of the systems to ensure data security of the customers
Inform and advise employees and the organisation management regarding their obligations of data protection.
Serve as the point of contact between the organisation and data protection authorities
Serve as the point of contact for users on privacy matters
Which organisations are required to appoint a Data Protection Officer under GDPR?
This question has been doing the rounds ever since the decision to adopt GDPR was made by the European Union. Article 37 of GDPR rightly addresses this query.
According to Article 37, a Data Protection Officer needs to be appointed if,
The organisation is a public authority, other than courts
The core activities of the organisation are centred on regular, systematic and large-scale monitoring of individuals within the EU region, like tracking of online behaviour.
The core activities of the organisation involve large-scale processing of special or sensitive data such as data of criminal activities, offences or convictions.
The definition of public authority is clearly provided in the Freedom of Information Act 2000(FOIA). This applies to GDPR as well until any act or amendment points to otherwise.
The core activities of an organisation imply to the primary business activities conducted in the organisation. Hence if the processing of personal data is a prerequisite to achieving the primary objective of the business, then it is considered as the core activity and the organisation needs to appoint a DPO for GDPR compliance. On the other hand, using personal data for activities such as HR and payroll processing are all considered secondary activity.
Regular and systematic monitoring
Regular and systematic monitoring refers to all forms of profiling and tracking, through offline and online methods. The extent of monitoring is identified by taking into account the count of data subjects concerned, the personal data volume that is processed, the range of data items processed, the duration of the activity and its geographical extent.
Appointing the DPO
The DPO need not necessarily be a new employee. It is possible to select an existing employee if they are compatible with the scope of work. It is also possible to externally contract a DPO based on a well-prepared service contract. The contact details of the DPO needs to be published and submitted to the ICO.
What are consumer rights?
How to handle personal data in GDPR compliance?
The first task of ensuring that you maintain GDPR compliance is to identify if the collected data can be classified as personal data. If you are not sure regarding its nature, it is better to classify it as personal data rather than taking a risk.
Once collected personal data should be encrypted and pseudonymised. The process of pseudonymisation involves replacing the identifiers with artificial identifiers. This process is an important part of GDPR and is mentioned about 15 times in its document. Although it helps in ensuring data protection and privacy, data pseudonymisation has its limitations. Hence GDPR suggests encryption alongside this process.
Encryption is similar to pseudonymisation in that it replaces the identifiers with a false set. But then again, when in pseudonymisation the dataset is visible to everyone, encryption allows access to only authenticated users. Both these processes can be used separately or simultaneously. Simultaneous use of these would ensure better data security.
With only a few days to go till the deadline for GDPR compliance, it’s high time, these specifications are met with, to avoid the brunt of GDPR penalty!
Blockchain technology is a novel innovation that has brought about the much-needed stability and security in the cyber world. The competency of this decentralized and distributed ledger system has made it one of fastest growing technologies today, leading to its implementation in various fields. In fact, it has played a significant role in the growth of safe and secure cryptocurrency transaction.
Given the popularity of the technology, it’s imperative that we know more about how data is organized and stored in Blockchains. Blockchain data structure is mainly hash pointer based and involves block as the main data structure. Data structures help in the organisation and storage of data in a way that they can be easily accessed and modified.
Broadly speaking, blockchain data structure can be described as a back linked list of transaction, arranged in blocks. They can be stored in simple databases or in the form of flat files. Each block is identified with the help of hash in the block header.
What is a Block?
A block is considered to be the prime blockchain data structure. The different blocks in a blockchain are identified with the help of a hash in the block header, which is generated cryptographically with the help of SHA256 algorithm. This cryptographic hash function is developed from a mathematical algorithm that maps data of arbitrary size into a 32 byte string.
The use of hash functions helps in the identification of data from a data set. The most basic of hash functions can map any data from arbitrary to fixed size and store them as hash values or hash codes in a hash table. This provides for an effective indexing mechanism ensuring instant availability of the required data.
The fact that hash is collision-free adds to the efficiency of the mechanism. Hence it is impossible to find multiple data corresponding to a single hash value. This quality of blockchain data structure provides for easy identification and verification of integrity.
Blocks are container data structures that help in bringing together of transactions to be included in the public ledgers. Their structure includes a header and a long list of transactions. The header stores metadata, which includes the data about the different data stored in the header. The header of each block consists of the following fields:-
Index – which indicates the position of the block inside the block chain. The first block is indexed ‘0’, the next ‘1’, and so on.
Hash – hash function enables the speedy identification of data in the dataset
Previous hash – every block in blockchain data structure, is linked with its predecessors. This feature contributes to its immutability as a change in the arrangement of blocks warrants a change in the whole blockchain leading to a whole lot of computation, which is not a feasible option.
numTx – this stores a count of the number of transaction added in the block.
Timestamp – stores the time details of when the block was created.
Nonce – stores the integer (32 or 64bits) that are used in the mining process
Transaction – This is another field stored as arrays in the body of the block. They store the complete summary of transaction performed so far in the block. Here, data storage is done with the help of another data structure called Merkle trees.
So what are Merkle trees?
A Merkle tree is a type of data structure used for the efficient verification and summarization of large chunks of data. Merkle tree are basically binary trees that contain cryptographic hashes. Hence they are also known as Binary Hash Tree. They help vastly in producing an overall fingerprint of the transaction conducted so far in the block.
Merkle tree follows a bottom up structure. The data regarding the transactions are not directly stored on the Merkle tree nodes. They are initially hashed with the help of Secure Hashing Algorithm and the hash is stored at each leaf node. Every transaction is hashed cryptographically with the help of hashing algorithm and the hashes are added as a node of the tree.
Consecutive nodes are clubbed together by concatenation of the hashes. The concatenation and hashing together of nodes continue until a single node is formed at the top. This node is known as Merkle root and it contains the summary of all transactions in the block header. As Merkle tree comes under binary tree data structure, in the event of an odd number of transaction summary, the last node gets duplicated.
The transaction section of the block contains a hash and a field specifying the type of transaction. Some of the different types of transactions include fee transaction, coin base transaction and regular transaction.
Accessing transaction data from Merkle Tree
The speed and ease of data identification and access play an important role in the efficiency of any transaction. The data regarding a particular transaction is accessed by the identification of path that connects the node to the root. This path is known as Merkle path or authentication path.
Transaction Input is basically an array data structure, which manages the details of tokens that we are planning to spend. To be more precise, this array points to the details of the token that is to be spent, like the id of the transaction where the token came from, its index on the array of transaction output, the value or amount of token to be spent and the unlocking script which is a cryptographically protected digital signature.
Transaction output is another array included in blockchain data structure. It stores the details of where the tokens are going to be spent. It includes the details of the amount of tokens to be transferred or spent, along with the locking script. The locking script consists of a combination script operation codes and address of the destination where the tokens are to be transferred. These scripts help in setting rules at the destination address to where the transaction has to be performed.
Want to know more about Blockchain data structures? Check out the following resources: