Introducing Totemic — the new digital trading card exchange built to give artists and creators a new model to fund their work.

By Sean Moss-Pultz

Jamie King & I met about three years ago, introduced through a mutual friend, one of the founders of BitTorrent Inc. Jamie had distributed his documentary STEAL THIS FILM via the Bittorrent protocol, and gone on to found VODO, one of the first distribution companies based on P2P tech. I just started Bitmark, and was looking for new distribution channels for artists.

Right from the start, it was clear something interesting could happen.

Over the next year or two, Jamie and I discussed different ways that Bitmark could support people creating all kinds of digital work — music, photography, video and writing. The “ah-hah” moment came after we found out, separately, about Rare Pepes — a platform using blockchain to create scarce assets from memes. Having both decided that blockchain-based, digital trading cards would be the wave of the future, we decided to work together and build a new platform: Totemic.

Totemic is a digital trading card exchange in which artists can issue limited edition digital card sets for their fans to purchase, sell, and trade. One of the things I like about trading cards, is that they can allow artists to re-use bits and pieces of their original works. They’re not having to create whole new assets to get access to this valuable new revenue stream. And for fans/collectors collectibles trigger this kind of immediate nostalgia. To this day, I can remember opening up baseball cards with the stick of gum. You never knew what you were going to get. Even the duplicates created more fun — you could easily trade those with friends for cards you did not have.

Where Totemic stands apart for buyers and collectors is that card ownership is completely decentralized. On any other digital collectibles platform, a company owns your collection. By using the public Bitmark blockchain, however, Totemic makes sure your cards are truly yours, forever. Ownership of a card and its ownership history are always maintained independently from any third-parties — even including Totmetc and Bitmark Inc.!

An important part of Totemic’s raison d’etre springs from Jamie’s insight, from both his own experiences as a filmmaker, and distributing other people’s work at VODO, that artists increasingly don’t make money from their artwork directly. Popular new platforms like Patreon, for example, are based around indirect ways of monetizing the creative practice. This can lead to skewed incentives and peculiar projects endorsements that don’t really create value for their fans.

In contrast to other platforms, which pay creators through one-time licensing fees, artists who publish trading cards via Totemic profit from their cards’ appreciation. When fans sell and continue to trade cards they are extending the value, funding and visibility for the artist who created that card. This in turn motivates creators to offer unique and compelling experiences within each card to their fans, like adding giveaways, concert tickets, videos, etc. And fans can feel like they are participating in their favorite artists success, plus they gain value from the cards themselves. Totemic becomes a jumping-off point for a deepened relationship between the artist and supporter — a dynamic missing from crowdfunding and digitized campaigns like Pateon, Kickstarter, Behance, etc. We think Totemic is one of the first platform to align creator and fan incentives, creating a valuable new channel in digital arts.

Totemic has been through a number of different prototypes and iterations already, and it’s now in testing with the very first, live sets of cards from a few invited creators. Soon we’ll be opening up the platform to more artists — we hope you can enjoy creating and collecting cards! Join the site here.

By Bitmark Inc. on May 5, 2018.

What is property?

Property is a titled asset.

The other day one of our engineers asked “Can I think of a property as a ballon?” Smiling, I asked what she meant. She drew me that picture. If I want to give you my ballon, she said, I would hand you the string, not the ballon itself. The string is like the property title, transferring the rights to use the asset.

Most of us have some idea what an asset is or could be. We are comfortable with abstract assets like money. Or scarce assets like water. Even ephemeral assets like time itself, can easily be accepted as valuable.

Property rights are one level deeper in abstraction. You need a string to get there. And then you are talking about how you and your ballon can interact with society at large. Property rights deal with interactions between entities.

Personal rights are property rights are therefore connected — two sides of the same coin.

By Sean Moss-Pultz on Nov 26, 2017.

All Future Supply Chains Will Contain Digital Assets; How the Bitmark team won the International Blockchain Hackathon

By Maureen Walsh & Sean Moss-Pultz

Huge congrats to the Bitmark engineering team, who took first place in the first annual International Blockchain Hackathon!

On March 29–30, 2017, Intel, The Floor, and The Tel Aviv Stock Exchange (TASE) hosted the hackathon with intent to create blockchain solutions for leading financial institutions. Among an atmosphere of intense innovation, many worthy startups attempted to create real solutions for leading world banks, using blockchain technology.

Based on the business challenges to be introduced by The Floor’s financial partners, the International Blockchain Hackathon gave entrepreneurs and start-ups the opportunity to drive new applications, showcase technological capabilities, and create some business opportunities for new blockchain-based ventures.

During the two-day hackathon, the participating teams implemented use cases presented by the financial partners. There were 2 competing tracks: corporations & independent developers (first prize was 5 bitcoins) and startups (first prize was 3 months at The Floor).

The Bitmark engineers, joined by Tel Aviv University student Ayush Chandrato, won the corporate & independent category. They developed a supply chain system for digital production, helping rectify the challenge of 3d printing industrial products.

Challenge: 3D Printing Supply Chain Issues

There are three main issues within a 3D printing supply chain:

1) files contain sensitive IP, 
2) copies of digital assets create issues with supplier trust, and 
3) current systems have a weak payment infrastructure.

Bitmark’s Solution: Authenticated Digital Production

Bitmark created software to digitally produce and distribute products with secure provenance. With Bimark technology a manufacturer can create a new digital product with name, description, and citation of ownership. The manufacturer can procure and track digital components directly from suppliers via the blockchain. Manufacturers can then purchase digital assets via the peer-to-peer network that is the Bitmark blockchain. If needed, manufacturer can adjust to market demands in near real-time.

Big thanks to the Bitmark team for their win, and congrats to the many other teams who developed compelling solutions!

By Bitmark Inc. on May 15, 2017.

Part 3: Understanding the Blockchain

Why did the creator of Bitcoin want decentralized, digital cash?

My previous two articles came at making digital cash from an objective perspective. I explained the need for decentralization and also the need for “proof-of-work” to safely record who has what. This article is going to take a step back and look at the Big Picture picture — Why decentralize cash in the first place? Money is an abstraction, so any redesign will unavoidably include a philosophical angle. I believe Bitmark’s new model of trust and privacy are the two important characteristics that make it unique in our world of government issued currencies. This article is about trust and how it connects (in my opinion of course) to why Satoshi Nakamoto, the creator of Bitcoin, wanted digital cash to exist.

To get started, I want to show you the very first block in the Bitcoin blockchain. What does a block actually look like? It’s raw data. Here is it:

This first block — known as the genesis block — technically could have been empty of transactions. But it was not. Along with the normal data necessary for the block structure, Satoshi manually inserted a single transaction. Here is that message:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

This was probably intended as proof that the block was created on or after January 3, 2009. The message is a headline from this newspaper:

It’s obvious, but worth saying: Bitcoin emerged from a catastrophic financial crisis. The crisis was fundamentally a failure of trust. Satoshi programmed Bitcoin to have a radically different monetary policy, based on artificial scarcity and predictable issuance. In other words, it was based in mathematical trust.

The supply of Bitcoin is capped at 21 million. The protocol itself specifies that the reward for adding a block starts at 50 bitcoin and will be halved every 210,000 blocks. Each block is tuned to be found in roughly ten minutes. Thus, approximately every four years the block reward will drop in half. When the reward decrease to zero the process of record keeping will be rewarded by transaction fees alone.

What exactly motivated Satoshi to replace middlemen with math? I’ve read just about all of Satoshi’s public writings (thanks to Phil Champagne’s fantastic “The Book of Satoshi.”). I found this passage the most raw and revealing:

“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.”

Satoshi wanted digital cash, based on cryptographic proof, because without the need to trust a third party middleman, “money can be secure and transactions effortless.”

Trust and control of money are absolutely intertwinedIt’s important to always keep this in mind when thinking about digital cash. The blockchain wasn’t created as a way to make things faster. The real purpose was to remove censorship and central-control from money itself. Blockchain technology, properly understood, is a method to increase trust by removing central intermediaries and letting everyone, anywhere exchange value. And that is a radical idea whose time has come to reshape our world.

Continue with part 4: How Blockchain privacy protects consumers while thwarting mass surveillance.

By Sean Moss-Pultz on April 27, 2017.

Part 2: Understanding the Blockchain

How to make decentralized, digital cash.

(Part 1 was A brief history of decentralization: about E-gold, Napster, and BitTorrent. What follows is part 2 of a 5 article series for the curious, non-technical reader.)

As a technology, cash is pretty impressive. It’s easy to verify and difficult to forge. When you pay for a coffee with cash, a third party is not required to verify and process that transaction — it’s peer-to-peer and decentralized. Most likely, the only personal information revealed was your physical appearance. If digital cash is to be adopted, then it should, at a minimum, behave similar to physical cash from the perspective of the individuals involved. This article will explain how to create digital cash that is 1) hard to forge and 2) transferrable without requiring a third-party (aka: decentralized).

Long before the days of e-gold (link back to previous post), people knew how to make something digital that was hard to forge. It’s called the digital signature.

A digital signature is a mathematical scheme to authenticate digital messages. The content of the message doesn’t matter — anything digital can be signed. Digital signatures employ cryptography. Most schemes have three parts:

  1. The generation of a private key and a corresponding public key.
  2. A signing algorithm that, given a message and a private key, produces a signature.
  3. A signature verifying algorithm that, given the message, public key and signature, either accepts or rejects the message’s claim to authenticity.

For some time, I struggled with how to explain digital signatures to people unfamiliar with cryptography. Then I realized the Chinese seal might be an interesting analog:

Chinese seals are typically made of natural materials (stone, wood, ivory, … ). Official documents are stamped with an individual or company’s seal instead of a handwritten signature. This has some advantages. Each seal is unique and difficult to duplicate because the surface details of the organic material cause detectable variations when the stamp is used. By fanning the pages, a stamp can be applied over multi-page documents such that it is easy to detect if a page is missing or changed. Some Asian governments and financial institutions keep stamps on record for fast, precise verification of documents.

Here’s how you would authenticate a digital document:

For example: An individual has a private key (seal) that represents ownership of their account and is used to produce a digital signature (stamp a document) that authorizes transactions in their name. Another party could view the public key (read the characters on the seal) and quickly verify their digital signature (against public government records) to accept or reject the claim to authenticity of the transaction.

We can create digital “coins” as signed digital messages. These will be very difficult to forge, which satisfies the first part of the solution. But if it’s possible to send the same digital coin to two or more people, AKA “double-spending”, then we have an incomplete solution. This “double-spending” problem, by the way, is far trickier than it might first appear. It stumped all previous attempts to decentralize digital money.

To understand how Satoshi Nakamoto, the creator of Bitcoin, resolved doubling spending, it helps to consider a smaller, simplified example first. Three people — Alice, Bob, and Carol — want to transact using digital coins. Everyone starts with one digital coin, and they agree upon some rules:

  1. New transactions are digitally signed and shared with everyone.
  2. Each person records new balances in their own sheet (spreadsheet).
  3. If a transaction spends the same coin twice, the first transfer is recorded in the sheet and the second is ignored.
  4. Once per day, everyone compares sheets. If the majority (two of three in our example) of the sheets are the same, the corresponding balances are accepted as “correct.”

Initially, things would look like this:

Sheet 1 (Account Balances)

 Account Balance  
--------- ---------
Alice 1
Bob 1
Carol 1

Then Bob sends his coin to Alice and Carol transfers her coin to Bob. They each record the new balances in their sheets, and at the end of the day, the majority agree on the following sheet:

Sheet 2 (Account Balances)

 Account Balance 
--------- ---------
Alice 2
Bob 1
Carol 0

You could see how this process would continue. Each day settlement happens, and a new sheet is added. Consensus is reached among Alice, Bob, and Carol through a simple majority. The process is nicely decentralized and peer-to-peer.

Yet there’s an obvious problem: Bob and Carol could collude against Alice. They could get together and agree to reverse each other’s transactions — effectively changing their account balances. Again, “correct” is whatever the majority agrees upon.

One way to reduce the effectiveness of colluding is to randomly pick one participant’s sheet and accept that sheet as “correct”. This works when people are known, yet, when we switch to computers talking to one another, we still have a problem. Someone with more computers would have a disproportionate chance of his or her sheet being selected. This is where a “proof-of-work” system is needed. A proof-of-work is a computational puzzle that is costly or time-consuming to produce but easy for others to verify. One way to think of a proof-of-work problem is like solving a Sudoku puzzle. The goal of Sudoku is to complete a partially filled in 9×9 grid with digits such that each column, row, and 3×3 section contains the all the numbers between 1 to 9 once and only once. Although solving a Sudoku puzzles requires a lot of time and effort, anyone with a knowledge of the rules can immediately verify a correct solution without having to solve the puzzle themselves.

We can use a proof-of-work puzzle, related to the account balances in a given day, to make it expensive to connect many computers and keep them computing the puzzles. Let’s modify our sheets to also include the solution to the new and previous puzzle. (You will see why we need the previous puzzle shortly.)

Here are the updated rules:

  1. New transactions are digitally signed and shared with everyone.
  2. Each person records new balances in their own sheet (spreadsheet).
  3. If a transaction spends the same coin twice, the first transfer is recorded in the sheet and the second is ignored.
  4. Once per day, everyone works to solve the proof-of-work puzzle for their sheet.
  5. When a person solves the puzzle, they record it in their sheet and share it with everyone.
  6. People express their acceptance of the sheet by working on creating the next sheet in the chain, using the puzzle from the accepted sheet.

In effect, we have “chained” our sheets together such that making a change to any single sheet requires redoing the puzzle — not just for that specific sheet — but for all the sheets thereafter. Why? Because once a proof-of-work is created for a given set of balances, it cannot be reused for different balances without redoing the work. As later sheets are chained after it, the work to change the sheet would include redoing all the sheets after it.

I hope it’s obvious to the reader that my sheets are blocks and the chaining forms the “blockchain”. (Even though it’s more of a mouthful — I prefer calling it “proof-of-work” chain). The very astute reader might realize it’s possible that two people could share a block at the same time. (These blocks would differ because their puzzles are digitally signed and are thus different.) In this case, the tie would be broken when the next proof-of-work is found and one of the branches in the chain becomes longer. A rule is that participants must work on the longest chain.

This concept of a blockchain becoming a “trusted” record secured through proof-of-work really is fantastic and original. It makes it possible to transfer digital money directly from one party to another without an intermediary. But there is something even more subtle and deeper that involves the incentives that emerge while the system is running. And this, in my opinion, is where Satoshi’s genius shines through the most. It’s how the system combines a proof-of-work chain with incentives to help participants stay honest.

By convention, the first transaction in a Bitcoin block is special. It creates new bitcoins owned by the participant that solved the proof-of-work for the block. This is a clever way to initially distribute coins into circulation without requiring a central authority to issue them. Yet it’s far more than that. The reward of new bitcoin adds an incentive to support and secure the network. If a greedy participant could assemble a lot of puzzle-solving power, he would have to choose between using that power to defraud people through reversing their own payments or using it to generate new coins. Clearly, it should be more profitable to play by the rules and win more coins than anyone else combined, rather than working to undermine the very system that is required to transact in the first place!

And there you have it.

Continue with part 3: Why did the creator of Bitcoin want decentralized, digital cash?

By Sean Moss-Pultz on January 21, 2017.

Part 1: Understanding the Blockchain

E-gold, Napster, and BitTorrent: A brief history of decentralization.

Before you can understand blockchain, I think you have to understand Bitcoin. And before that, it is worth looking at some of the past digital currencies — specifically e-gold.

E-gold, launched in 1996, was the first digital currency to reach scale. The service worked by allowing users to deposit US dollars into an online account that was then denominated by grams of gold. Such an account holder could instantly send their e-gold to other account holders. By 2004, there was over a million accounts.

All was going well with e-gold’s business until the U.S. Treasury Department and the United States Department of Justice stretched the definition of money, specifically the transmission of money, to include the transfer of any kind of value from one person to another, not merely a national currency. Before that change, a money transmitter business was defined as a business that cashed checks or accepted cash remittances to send from one individual to another across international borders, such as Western Union. This change was made in the USA Patriot Act and it crushed e-gold. (You’ll need to understand “Know Your Customer” and “Anti Money Laundering” compliance requirements to grasp why services like e-gold are so difficult to run, legally that is, after this legislation.)

Clearly people liked the idea of digital currencies, safely transferable over the internet, without using banks. But it was equally clear that governments would not want to give up their monopoly over the creation and control of money. We have seen this story play out many times since e-gold’s death. Any central authority that intermediates the transfer of anything resembling money is easy for a government to regulate and/or shutdown.

You can think of Bitcoin sort of like e-gold, minus the company or central authority that issues money and verifies transactions. That crucial difference — exchanging value without a central authority — changes everything. I will come back to why, later. First let’s talk about digital music. For those of us old enough to remember the early days, there is a parallel concept that I think helps to understand Bitcoin (and then we will get to the blockchain). It also hints at what we can expect in the future.

Napster launched in 1999. At its peak it had 80 million active users, exchanging mostly digital music (mp3 files) through personal computers. Napster was called a “peer-to-peer” file sharing service. Yet it wasn’t really P2P, in the networking sense. When someone wanted to download or transfer music they would need to know which computers had what files. And that information was only stored on Napster servers.

Just like e-gold, legal realities forced Napster, the intermediary, out of business. Around that time Bram Cohen, an American computer programmer, released the “BitTorrent” software to share files. His method was superbly clever: instead of centralizing the information and sharing of a file, he developed a method to distribute that data across all the people that have downloaded or are in the process of downloading that file. This has two benefits: 1) You don’t even have to download the entire file before sharing. And 2) as long as one person, anywhere in the world, has that file on their computer, others will be able to download it. Computers connecting in this manner form a decentralized, “peer-to-peer” network and are both technically and legally difficult to shut down because no central computer is required to operate the network.

I encourage you to suspend moral judgement of such a file sharing system and look at what occurred from a technology perspective. It is incredible. Even after 15 years of legal whack-a-mole, BitTorrent is still the most dominant way to exchange digital music. And beyond that, BitTorrent now moves as much as 40% of the world’s internet traffic on a daily basis. Why? Because its decentralized peer-to-peer architecture is economically and technically advantageous for moving any type of data over the internet.

I hope it’s clear now that an alternative digital currency must be decentralized for it to survive outside of and independent of the banking system.

Continue with part 2: How to make decentralized, digital cash.

By Sean Moss-Pultz on January 21, 2017.