Defining Property in the Digital Environment. Part Three.

Bitmark, the property system for the digital environment.

In Part One of the series we took a look at the history of property while Part Two made the connection on how the prerequisite for privacy is property rights. This final post introduces a solution for defining digital property, Bitmark.

Bitmarks as property titles

The Bitmark system achieves extremely low transaction costs by supplanting conventional centrally controlled property systems with a shared, distributed ledger for recording digital property titles, or bitmarks, for any digital asset. A bitmark consists of four basic elements:

  • an asset fingerprint
  • asset metadata
  • an owner account
  • a digital signature

A bitmark’s asset fingerprint is created by applying a cryptographic hash function to a digital asset. The resulting fingerprint is an alphanumeric value that uniquely and permanently identifies the digital asset. The asset metadata consists of the property’s name and relevant attributes, as defined by the bitmark’s original issuer. The owner account identifies the current owner’s Bitmark account number, which is a cryptographic public key. The owner may choose to publicly link his or her identity with this account number, depending on the desired level of privacy. A digital signature is a secure mark of authenticity that is appended to the bitmark when first issued or whenever it is transferred to a new owner. One way to think of a bitmark is as an unforgeable chain of digital signatures that form the property’s provenance.

The Bitmark Blockchain

To enable this recording of property titles across the full depth and breadth of the Internet, Bitmark supplements existing methods for tracking provenance with a globally accessible property ledger known as the Bitmark blockchain. Blockchain technology is the key innovation of the Bitcoin currency and refers to a digital ledger that is publicly yet anonymously shared to all members of a peer-to-peer network. The Bitmark blockchain contains every single property title and ownership transfer ever recorded in the Bitmark system. This Internet-native ownership registry allows the Bitmark system to satisfy all the functional requirements of conventional property systems in a single public data resource:

The Bitmark blockchain.

At a more granular level, each bitmark consists of a chain of transfer records that weaves in and out of different blocks of transactions to create its provenance. The authenticity of each property’s provenance is maintained by continuously verifying this chain of owner signatures.

A bitmark’s chain of signatures.

As an example, consider the figure above, in which a Bitmark user named Alice issues a bitmark for a specific digital asset. Her Bitmark app first uses a cryptographic hashing function to generate a unique fingerprint for the digital asset along with an issuance record for the bitmark which lists Alice as the owner. Alice’s app also digitally signs the issuance record with her private key. Once it has been verified by the Bitmark network, this issuance record is aggregated into latest block of the Bitmark blockchain (let’s say block 13). When Alice later wishes to transfer ownership of the property to Bob, Alice directs her Bitmark app to create a transfer record that contains a link back to her previous issuance record, designates Bob as the new owner, and digitally signs the transfer record with her private key. Once this transfer record has been verified by the network to contain an authentic signature from the current owner (Alice), the transfer record is recorded in block 20 of the blockchain, at which point ownership passes to Bob. This method of requiring the current owner to digitally sign ownership transfers creates an unforgeable provenance for a property. The Bitmark system has been architected to support multiple digital signing methods, including digital signatures that guard against the possibility of future attacks from post-quantum computers.

Strength Through Decentralization

Unlike conventional property systems that rely on a handful of trusted government officials to act as centralized gatekeepers, the Bitmark blockchain is an open and transparent property system that is strengthened through the active participation of anyone on the Internet. The integrity of Bitmark’s open-source blockchain is ensured by a peer-to-peer network of voluntary participants running the Bitmark node software called bitmarkd. These software nodes are incentivized to participate in verifying Bitmark property transactions through the possibility of winning monetary and property rewards.

A more diverse and decentralized participant community means a more robust property system for everyone.

Every Bitmark property transfer requires a nominal transaction fee. One reason for this fee is to discourage vandals from spamming the blockchain. A second reason is to motivate the participating nodes to independently compete against one another to be the first node to verify the current block of transactions and “win” that block. A node wins a block by solving a difficult computational problem called a proof-of-work, which functions like a lottery to randomly select a winner.

Whenever a node announces itself to the network as the winner of a block, it presents its result so that the entire peer network can instantly check the proof-of-work and validate the block’s transactions. After confirming the block’s validity, non-winning nodes “vote” for the winner by adding the block as the next block in their local blockchains. The block winner is then awarded all the aggregated transaction fees for that block. As an added incentive, the Bitmark system treats the blocks that comprise its blockchain as digital properties in and of themselves, and the block winner is also issued a bitmark for that block. Block owners are entitled to collect royalties on all future property transfers for properties whose issuance records are recorded in their blocks. The ability for nodes to win ownership of blocks not only creates a further incentive for node participation but also reduces transaction costs for adding digital properties to the Bitmark system to near zero.

This strategy of rewarding an open network of peers for competitively verifying the results of one another’s work creates an impregnable security model that is an emergent property of the individual peer interactions themselves. Unlike centralized property systems, which suffer from increased negative externalities as larger populations exploit the shared resource, Bitmark’s decentralized blockchain grows more resilient and valuable as the network grows. As a method for encouraging the widest possible participant base, the Bitmark blockchain has been designed to resist centralized monopolization of network node resources. Unlike preceding blockchains, many of which have become vulnerable to the outsized influence of a few well-financed mining pools, the Bitmark blockchain has implemented a proof-of-work algorithm that has proven itself largely impervious to the high-end custom mining hardware that has led to the inequitable concentration of Bitcoin mining power, thereby diversifying node participation and fostering cost-competitiveness among independent participant nodes. Wherever possible, Bitmark has endeavored to build upon the lessons of pioneering blockchain systems to broaden network participation because a more diverse and decentralized participant community means a more robust property system for everyone.

Data Privacy Through Digital Property

Bitmark affirms individual privacy rights within the digital environment by, first, allowing anyone to create private property from any type of digital asset and, second, by implementing strong encryption measures for the digital assets themselves. The ability to convert any type of digital assets — whether content or metadata — into private property makes any unauthorized data access a violation of one’s property rights, thereby providing an added measure of legal defense against unwarranted search and seizure of digital properties. Asserting explicit private property claims are particularly advantageous in incipient domains where digital property rights remain murky, such as device location data, Internet-of-Things traffic, or collaboratively authored social media content. As more of our daily activities are inconspicuously scattered across different third-party cloud servers, Bitmark offers a mechanism for asserting clear ownership claims to personal data, even in cases where individuals have voluntarily consented to provide their data to third-party services.

There will undoubtedly be cases where governments or other entities succeed in circumventing Bitmark’s legal and technical privacy protections and obtain access to owners’ properties, whether through legitimate due process, abuses of power, or radical political upheaval. History is replete with examples of asset forfeiture, eminent domain, expropriation, and nationalization, in which the powers that be have forcefully seized selected populations’ properties and subsequently reallocated their property rights. One of the glaring liabilities of government-administered property systems is their inherent susceptibility to the vagaries of political climates. By providing a shared global property ledger independent from any single institution, regime, or hegemony, the Bitmark blockchain serves as a permanent and politically agnostic record of ownership claims. While the blockchain can never prevent the possibility of government confiscation of one’s assets, it does provide an enduring record of ownership claims that can serve as grounds for future contestation of property rights should political conditions change.

In addition to providing increased legal defensibility of digital properties, Bitmark employs strong technical measures for protecting digital assets during transfer and storage. By default, Bitmark encrypts all digital assets so that only verified property owners can access their properties. Whenever a property’s bitmark is transferred to a new owner, the corresponding asset is encrypted then transferred so that only the new owner can access it. This method of end-to-end encryption affords asset protection for local or remote storage in addition to safe asset transfer over the Internet or across peer-to-peer file-sharing networks.

Additionally, the Bitmark system protects owners’ identities by default. Even though every bitmark issuance and transfer record is freely accessible in the public Bitmark blockchain, these records only contain references to owners’ cryptographic public keys, which function as pseudonymous identifiers devoid of any personal information. In cases where owners wish to have their accounts tied to their personal identities, they can opt to publicly link their Bitmark public key to other verifiable means of identification, including web domains, Twitter accounts, and GitHub accounts. This combination of asserting private property rights over digital assets as a legal safeguard for data privacy in conjunction with leveraging strong encryption protocols for protecting the privacy and integrity of the digital assets achieves a level of privacy protection commensurate with long-standing protections for physical properties.

Bitmark allows creators to exert clear ownership claims to digital properties so that they can be fairly recognized and compensated for their efforts… Similarly, Bitmark extends real property rights to consumers by granting them full control over the disposition of their properties.

Towards a Healthy Digital Environment

The Internet’s earliest pioneers and homesteaders demonstrated little regard for something as prosaic and establishmentarian as property rights. To them, the early Internet held the promise of a vast, utopian frontier where humans could transcend the age-old restrictions of physical existence and come together in an unfettered society of the mind. For these early explorers, the Internet’s lack of property rights was not a bug, but a feature. Yet for all the romantic allure of frontiers, the Internet has turned out to be a pretty rough place, precisely because it lacks the rule of law that has developed to protect individual rights within modern societies. In frontiers, more often than not, might makes right, and one person’s new-found liberation is another’s negative externality.

The Internet has democratized communication to such a degree that today anyone with a networked device can instantly connect to hundreds of millions of people. A teenager with a smartphone and a Facebook account can become an Internet sensation overnight. But for most of its existence, the Internet has not possessed a similarly democratized means for valuing what happens in its spaces. E-commerce exists, of course, but primarily only as high-friction articulation points between the Internet and conventional financial systems. It is ironic that credit cards, whose security model hinges on absolute privacy of account numbers, have become the default payment method for the Internet. When limited to the physical point-of-sale payments for which credit cards were originally designed, their fraud risk was manageable. Credit card designers never anticipated that people would voluntarily give their credit card numbers to anonymous entities on the Internet. Retrofitting the ill-suited credit card system to underpin e-commerce has required a monumental centralization of technical and commercial infrastructure, which has largely come at the expense of increased fees for merchants and greater incursions on individual customer privacy than are necessary for the lion’s share of online transactions.

If one considers the level of decentralization and privacy afforded by simple physical cash, e-commerce gateways represent a large leap away from the decentralized spirit of the Internet rather than a step toward it. Only with the advent of Bitcoin in 2008 did the Internet have its own truly endogenous currency — a unit of exchange as decentralized as the Internet itself. Suddenly, anyone with a networked device could freely engage in the kinds of financial transactions that had previously been the exclusive domain of sovereign states and their monetary trustees. Suddenly, the frontier had a native means for anyone in the world to exchange money as safely and privately as one might exchange a text message or selfie.

Just as e-commerce sites offered an intermediate remedy to the problem of payments on the Internet, “digital rights management” (DRM) has served as a stopgap for the lack of an Internet-native property system. However, DRM concentrates too much power in the hands of a few centralized gatekeepers at the expense of individual property rights for everyone else. Although DRM platforms position themselves as altruistically doing the heavy lifting required to make the digital economy work, the reality is that DRM platforms only serve their own interests by further locking both creators and consumers into their platforms. While DRM offers the semblance of digital property rights, in actuality DRM functions more as an extralegal police force that — as cases like Amazon’s 1984 incident have made clear — is solely concerned with hamfisted enforcement of its own platform policies, even at the expense of trampling over long-established individual property rights.

Conversely, property rights offer an elegant solution that has already evolved to be decentralized in the same way that physical currency is already decentralized. Centuries of legal precedents have already balanced property rights to protect both creators and owners. What is needed, therefore, is not the engineering of a new kind of police force for the digital environment but rather an Internet-native property system that brings already established property rights to digital assets. What is needed is a system that allows anyone to safely and easily claim and transfer property rights in the digital environment as safely and easily as they can transfer physical properties.

Bitmark has built this property system for the digital environment. Particularly with the emergence of the Internet-of-Things, we are realizing that the Internet is not some idealized, disembodied, virtual realm that is discontinuous with our physical realities. Rather, the Internet is deeply embedded in our physical world and increasingly orders and controls its relations. This convergence between physical and digital environments makes establishing clarity around digital property rights all the more urgent.

The Internet can no longer be governed by a frontier code. The resultant negative externalities — from widespread privacy intrusions to rampant online piracy to entire asset classes mired in dead capital — are just too numerous and too acute to remain unaddressed. We have reached a tipping point at which we must pose the same question of the digital environment that we have previously asked of our physical environment: Are we creating the kind of world that we want future generations to inherit?

Bitmark both strengthens and expands the Internet’s essentially decentralized, open, and transparent ethos. The Bitmark blockchain supplants the byzantine jumble of archaic, expensive, and incompatible state-controlled property systems with a single cryptographically secure, extremely low-cost, and globally accessible system for tracking properties and provenance. By bringing both market forces and the rule of law to the digital environment, Bitmark allows creators to exert clear ownership claims to digital properties so that they can be fairly recognized and compensated for their efforts. Similarly, Bitmark extends real property rights to consumers by granting them full control over the disposition of their properties. As an all-inclusive property system that respects and accommodates jurisdictional differences, Bitmark broadens the types of commerce that can occur, thereby reducing the expediency of solutions that result in negative externalities. This ability to extend economic participation to every corner of the Internet creates value for the larger global economy by transforming the digital environment’s deepening morass of negative externalities into a new property boom capable of powering the next major economic revolution.

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By Bitmark Inc. on March 9, 2017.