EMERGING TECHNOLOGIES - Blockchain Enables Unique Digital Proofs

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We’ve all seen the movie about the kidnap victim whose family asks for a “proof of life.” The proof is typically a photograph of the victim posed with a current newspaper. The photograph proves that the victim was alive on the date of the newspaper printing.

Blockchain technology is now allowing us to provide similar proofs for the existence of digital assets. The immutable nature of the blockchain—the fact that it is impossible to overwrite time-stamped blockchain ledger entries—allows us to create “proof of existence” entries for digital assets.

Simplistically, such a system works by inserting a cryptographic hash into the blockchain ledger. A cryptographic hash can be thought of as a digital fingerprint for a document. The chance of documents having the same hash is infinitesimally small—there are more possible hash values in a 256-bit hash than there are nanoseconds since the Big Bang! So by placing a cryptographic hash of a document on the blockchain, we have definitive proof that the document existed at the time of the blockchain entry.

Cryptographic proofs are all very well for mathematicians and computer scientists, but would they hold up in a court of law? At the moment, the situation resembles the early days of DNA profiling. Very few people understand the molecular structure of DNA, and similarly, a deep understanding of cryptographic hashing is restricted to relatively few experts. However, just as the solid scientific basis for DNA profiling eventually led to acceptance of its legal validity, there are early signs that blockchain proofs will be accepted as legal proofs. For instance a Chinese court recently ruled that blockchain proofs could be used in intellectual property disputes, and legislation in Arizona and Vermont provides recognition for blockchain signatures and records.

There are a few startups and established companies offering blockchain time-stamping and document proofs. The original proof of existence service will store a document hash on the blockchain for a small Bitcoin fee, while Originstamp is an example of a startup offering a commercial implementation of blockchain time-stamping. In addition, many established commercial services are now incorporating blockchain proofing. For instance, DocuSign offers the ability to write a proof of the DocuSign document to the Ethereum blockchain.

The original proof of existence project placed a hash for a single document within a single Bitcoin transaction. This implementation is neither cost-effective or scalable. The cost of Bitcoin transactions becomes unattractive when proving large numbers of documents and the total number of Bitcoin transactions that can be supported is limited by the blockchain block size. A mainstream implementation requires a different approach.

It would be possible to use an alternative blockchain with lower fees and latency—such the recently launched EOS blockchain. However, although alternative blockchains may offer better scalability and economics, they cannot offer the strongest levels of proof. The robustness of the Bitcoin blockchain is without peer, and it is likely that Bitcoin blockchain proofs will gain wider legal acceptance than those stored on secondary blockchains.

Luckily, there is a technological solution to this dilemma. The Chainpoint protocol allows document proofs to be aggregated using a hash structure known as a Merkle tree. A Merkle tree consists of a hierarchical tree of hashes. The top of the tree—the “Merkle root hash”—can be placed on the blockchain and effectively used to prove the existence of all the hashes within the tree. In this way, a Merkle tree root hash can effectively prove the existence of tens or hundreds of thousands of documents.

I believe that blockchain proofs will eventually become as widely accepted in law as DNA profiles or fingerprints. The ability to prove the provenance of digital assets has wide-ranging implications for systems that maintain legal, intellectual property, financial, or regulatory information. Database systems and applications will increasingly integrate blockchain proofs. It’s even possible that blockchain proofs will become the killer app for the public blockchains.