A new company, BlockSign, lets customers digitally sign legally binding contracts and preserve them in the public domain.
Running on the block chain, the decentralised public ledger that records transactions on the bitcoin network, the BlockSign platform provides a way to sign, timestamp and later verify documents on the web.
How BlockSign works
From a user perspective, BlockSign works as a web application. A PDF signed with the program will indicate where a signature is to be placed, and the user places a stamp in a stylized font there. Into this signature is encoded an email address and the date.
The BlockSign service then creates a cryptographic hash of the entire document, which it stores in a 40-byte slot included in every bitcoin block, called OP_RETURN. That slot can be used for storing messages and other arbitrary data.
That means that the hash is logged in the block chain. “We verify the document, running it through the hashing function, and we search the block chain for the string to see if it has been logged,” said founder Nicholas Thorne.
A verification record stored by the company on the user’s behalf enables users to check that a particular document is signed and valid.
The system’s security relies on two-factor authentication. It sends a confirmation request to the user via email to confirm their identity. Of course, email is notoriously insecure, so Thorne hopes to use private keys at some point.
Misuse of the block chain?
Not all developers are enthusiastic about the idea of using bitcoin for timestamping documents.
“In my opinion, ideally the bitcoin block chain should be used for bitcoin payments,” says Adam Back. He developed Hashcash, the algorithm bitcoin uses to generate and verify currency, and has also been working on a system for application-specific block chains, linked to bitcoin’s own.
OP_RETURN’s 40 bytes were originally meant to be 80 bytes. Today, the 40-byte limit compares to an average recent transaction size of 570 bytes, which makes its theoretical limit roughly 7% of the average block size.
BlockSign doesn’t use all of that OP_RETURN space. It only uses 32 bytes for its hash – and the slot is not used by many people at all today. Roughly a quarter of blocks used OP_RETURN in a recent 80-block block chain sample.
Bitcoin developer Mike Hearn isn’t worried about more companies using OP_RETURN for their networks.
“Bitcoin’s limiting factor today is actually growing legitimate usage and traffic,” he said. “The more users we have, the more political immunity we have, so if some of those users care more about time-stamping documents than buying things, that’s OK by me. I’m sure bitcoin can scale to accommodate everyone.”
Having said that, if use of OP_RETURN for applications like BlockSign's caught on, it could be more expensive, Hearn said. "Like any bitcoin transaction, you have to pay for it using either fees or coin priority. If some company were to start using lots of these transactions, the fee costs would start to increase."
Both Hearn and Back recommend using a Merkle tree structure, which enables many timestamps to be compressed into a single OP_RETURN output. "This would be a way to save money for only a little bit of extra code," Hearn says.
However, Thorne says that the team hasn't used the Merkle tree system in its first release, arguing that the company wanted to get a product out there that was simple to use. However, the team is considering Merkle tree storage for a future release, he says, arguing that the venture doesn't yet have the volume to make it an issue. BlockSign will have to swallow more transaction fees in the meantime.
Giving back to bitcoin
There is another question, however: should companies piggyback private, for-profit activities on the block chain without investing time in supporting bitcoin development?
Thorne admits that his team of three developers isn’t contributing to bitcoin’s open-source project.
“They would love nothing more than to be able to push up a change that was accepted, and I think they’re working hard to do that, but they probably just haven’t done it yet because they’re still learning a lot and building this one implementation,” said Thorne, adding:
Bitcoin’s lead developer Wladimir van der Laan echoed the need for more support. “There are huge investments in bitcoin companies, but only very little of that ends up helping bitcoin core development,” he said.
Thorne’s team was originally formed a couple of years ago, as part of Basno, a digital badge company that Thorne founded.
That team raised $1.225m in a seed funding round in summer 2013. Basno is now a revenue-generating business, and the company is using the funding at a “pretty slow burn rate,” Thorne said, adding that BlockSign is a subsidiary of Basno.
Not contributing to the bitcoin protocol's core development while aiming to use it for profit isn’t something unique to BlockSign by any means.
Van der Laansaid:
The question for readers is this: is this a situation which needs rectifying?
Disclaimers: This article should not be viewed as an endorsement of any of the companies mentioned. Please do your own extensive research before considering investing any funds in these products. Additionally, CoinDesk founder Shakil Khan is an investor in BitPay.
Signature image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.