The bitcoin block chain is well known for its use as a ledger for digital currency transactions, but it has the potential for other, more radical uses too – uses that are only now beginning to be explored.
The online service Proof of Existence is an example of how the power of this new technology can have applications far beyond the world of finance, in this case, giving a glimpse of how bitcoin could one day have a substantial impact in the fields of intellectual property and law.
Although in its initial stages, Proof of Existence can be used to demonstrate document ownership without revealing the information it contains, and to provide proof that a document was authored at a particular time.
Manuel Aráoz, a Buenos Aires, Argentina-based developer, who built Proof of Existence as a decentralized method of verification, a kind of cryptographic notary service explained:
"As the block chain is a public database, it is a distributed sort of consensus, your document becomes certified in a distributed sort of way."
While the prospect of the block chain providing key evidence in legal disputes may seem far-fetched today, such a leap in thinking is akin to the work being done by developers of digital currency projects around the globe.
As projects like OneName and BitID are proving, decentralized, digital verification is a concept that many proponents of distributed systems see as a natural, if as-yet-untapped, application of the technology.
How it works
Proof of Existence allows users to upload a file and pay a transaction fee to have a cryptographic proof of it included on the bitcoin block chain. The actual file is not stored online and therefore does not risk unwanted publication of the user's material.
After anonymously uploading the document and paying the network fee, a hash of the document (or any other type of digital file) is generated as part of the transaction.
This, in effect, uses the public and ledger-like nature of the block chain to store the proof of your file, which can later be verified should an issue of authorship or dating arise.
"Basically, by inserting the cryptographic hash of the document in a transaction, when that transaction is mined into a block, the block timestamp becomes the document’s timestamp," said Aráoz.
As well as time-stamping, Proof of Existence is also a way to make sure that files are what they are supposed to be.
As Proof of Existence says: "All we store is a cryptographic digest of the file, linked to the time in which you submitted the document. In this way, you can later certify that the data existed at that time."
Developers, for example, can use the service to later verify versions of their code, inventors can prove they had an idea at a certain time and authors can protect their works.
And this is can be verified via the hash generated during a block chain transaction, said Aráoz:
"You put the hash next to the download link and check the hash yourself. If someone compromises your server, a hacker cannot modify that."
Aráoz indicated that there are a number of potential applications for the service given its ability to prove that a document or piece of code was verified at a point in time and that the bitcoin ledger is perfectly designed for the task.
Effectively, the scripting capabilities that exist within bitcoin's block chain allow for transactions to have no output. This means that, while a small amount of bitcoin goes into the system (currently a 0.0001 BTC fee for miners to confirm the transaction within a block), no BTC needs to be sent to a recipient.
Hence, the block chain has the built-in functionality to incentivize miners to carry out the necessary hashing to verify a document.
This functionality is key to utilizing the block chain for reasons other than just moving BTC, and it is clear that this no-output design has potential to power innovative ideas beyond just virtual money.
Protecting digital property
Given this potential, it's possible that the implications of solutions like Proof of Existence might be even more valuable than the per-bitcoin price many investors are fixated upon today.
Digital property can sometimes also be considered intellectual property, and block chain technologies could essentially prove ownership of such digital property, according to Aráoz, who explained:
"For example, if you are writing a paper or you have an idea for a patent, in some cases you need to prove that you owned the idea or the paper before someone else."
Verification is example of the block chain's potential outside of just monetary innovation.
That's something venture capitalist Fred Wilson is interested in, and recently said:
“Right now you need someone to be the arbiter of identity – either Facebook, Twitter or Google [...] I think you could do the same thing with a block chain architecture."
The block chain could help to better prove digital identity and property, giving people more ownership of personal data.
Companies like Google, for example, promote the ability for users to control data from its services. Facebook recently added the option to login to services anonymously to reduce the possibility of user data being spread out among third-party applications.
However, the fact of the matter remains, those services are centralized and always will be, while block chain technologies are better suited for distributed cryptographic trust systems.
Legal backing needed
The question raised by the service, however, is how quickly institutions such as the US legal system will adopt this new type of public validation and identity.
Given that the implications of bitcoin in the world of finance are difficult for many to comprehend, realizing the power that the block chain holds as a record of fact might be even harder. Aráoz understands this is currently an issue and said:
"So you can either pay for a notary, or you can use Proof of Existence. In practice, [the block chain] proves it. The thing is, it is not yet widespread enough so that it can hold [up] in court."
However, all it would take for acceptance is a favourable ruling in one case where the block chain certifies that something happened at a particular time.
When (or if) that happens, it might allow bitcoin's general ledger to be used as a mainstream method of verifying document authorship and contents or software versioning.
Court rulings in the US have made headway in making bitcoin as a currency more tangible, at least from a legal standpoint.
Last year, a Texas Court ruled that bitcoin is a form of money, which then gave the Securities and Exchange Commission (SEC) the means to justifiably prosecute a man in a purported bitcoin-based Ponzi scheme.
There will be more court rulings like this, and if courts around the world start to look favourably on distributed systems like bitcoin that can offer undeniable verification of existence, that will ultimately validate this concept as something that has real-world and mainstream applications.
Digital information image via Shutterstock