Over the past ten years, the development of a digital network architecture, with design principles such as trust, security, consensus, and economics based on personalized, agile and transparent exchange agreements has been maturing. The year has come to embrace its broad possibilities in the debate about value, its exchange and money.
The mastery of this ceremonial is an important weapon for social progress. In the 19th century it was a complicated system of codified behaviors, which in the 20th century evolves within each culture in the field of business. With the internet, email, the web and the cell phone it is adapted for communication between distant points and across cultures.
If in 19th century retailing ‘the customer is always right’ summed up the profit orientation of good manners between buyer and seller, in the 21st century aspects of instant social interaction are assumed, with an underlying code of ethics, reflecting fashion and social status anywhere on the planet. As of May 2021, global commerce is digital and is reflected in the results (in dollars) of the six largest companies in the world by capitalization: Apple (2.19 trillion), Microsoft (1.88 trillion), Amazon (1.63 trillion), Alphabet (1.57 trillion), Facebook (914 billion) and Tencent (735 billion).
The personalization of good manners between buyer and seller is established multiculturally through the Internet, thanks to its communication protocol, to billions of lines of code of millions of applications providing services and products of the industrial-business sectors. A very high resilience is required for all the information exchanged. The millions of millions of pieces of data on habits, interests, habits or preferences of both companies and customers can be used for multiple purposes.
Cryptography becomes relevant
Digitally it guarantees confidentiality, information integrity, user authentication, sender authentication, recipient authentication, non-repudiation at source, non-repudiation at destination, and topical authentication (non-replay).
To speak of cryptocurrency is to speak of ‘crypto’, since Bitcoin was born with a message signed with the pseudonym Satoshi Nakamoto and titled ‘Bitcoin P2P e-cash paper’, materializing in 2009, as the use of a cryptographic system for the transmission of a digital value that will depend on all the people who have access to the computer network.
Bitcoin shows its robustness with the asymmetric cryptographic algorithm Elliptic Curve Digital Signature Algorithm (ECDSA), whose essence lies in the fact that a number on the curve multiplied by a huge secret number of results in another number on the curve, and with the parameters secp256k1. The Bitcoin code is open: programmers can see it, analyze it and improve it if necessary. It creates a digital connection between peers (people who own/use) the hardware-software (the nodes), which communicate from multiple locations on the planet.
The algorithm is designed to exchange one digital value, the bitcoin, and prevent double spending and counterfeiting.
The same bitcoin cannot be used multiple times or generated arbitrarily. The high mathematical load of the code is endowed with the so-called Byzantine general’s problem to reach consensus among the nodes that make up the network. Mining is the technique to solve the problems of cryptographic basis for information exchange and verification.
Cryptocurrencies, Blockchain and its operation
The mechanism consists of executing in each node the blockchain algorithm (Blockchain), with a single record, consensual and distributed in several nodes and a ledger located throughout the network that records each of the exchanges. In each digital block we have the information of a number of valid records or transactions, the information referring to that block, and its linkage with the previous block and with the next block, which is done through the hash of each block, which is its unique fingerprint, and has a specific and immovable place in the chain.
When new records are created, they are first verified and validated by the nodes in the network and then added to a new block that is linked in the chain. Miners run this process in exchange for a share of the digital value (the crypto), and the faster their hardware the more likely they are to verify transactions and receive their reward. The hardware is matched to the cryptographic algorithm according to the Blockchain typology.
High-powered hardware is what is required in the case of Bitcoin’s initial algorithm, the Proof-of-Work (Proof-of-Work). Proof of Stake is based on the miner’s acquisition power, the more ‘cryptos’ he has, the more he can mine. The constant evolution of cryptographic algorithms allows new Blockchain approaches. Its energy usage is always relative to the type of hardware, the type of software and the power source used by the node that mines.
Since 2015 with Ethereum and its crypto, Ether (the ‘gas’ that drives the chain), a transcendental element is added: smart contracts, conditional clauses that govern the value-per-share agreement between multiple suppliers and customers participating in the network. A good functional design of the conditions and actions allows for valuable automation between and for several actors. With collaborative etiquette, an abundance of success stories can be covered, including the necessary recording and traceability of values relevant to a company’s environmental, community (social) or corporate governance commitments.
Decentralized networks, digitizing value with “crypto”, such as Bitcoin, or establishing value with the innovation of ecosystem agreements (smart contracts), plus the development of Digital Identity (ID) that contemplates the method of identification, authentication, and authorization in the use of digital services by individuals, legal entities, and things. The design of the ID consolidates the definition of information attributes, as traces of evidence of existence of the person or thing. The person with individual authority can decide on the guaranteed provenance of the attributes and the exchange of those required for a given service.
To this paradigm shift in access to services, we add technological convergence with objects that capture information on conditions and trigger programmed actions, and with AI software that performs the necessary calculations with guaranteed quality of information input and output. Thus, for example, for an autonomous vehicle, there are advantages from the security of route recording, automatic pay-per-use, accurate recording of energy consumed with a guarantee of sustainability, etc.
Central banks, legislation, and cryptocurrencies
Accepting that the exchange of value is protected in this new architecture by mathematical and cryptographic properties, in 2021 the change and musculation of the new political, socio-economic and financial etiquette in the relationship between the public and private sector is rabidly topical.
In Europe, on the one hand, the work (in ecosystem) of the draft Law on the Regulation of Crypto-assets Markets (MiCA), which could be approved at the beginning of 2022, and which gives the CNMV and the Bank of Spain the power to control and safeguard the legality of ‘crypto-assets’, stands out. And, on the other hand, communicated on July 14, 2021 by the Governing Council of the European Central Bank, the work done and the agreement on the next steps in the exploration of the benefits and risks of introducing a digital version of the euro for the 19 countries of the Eurozone, in parallel to the euro, allowing faster digital transactions, independent of external factors to the community block, and supporting European sovereignty and stability, in the monetary and financial aspects.
The outcome of the group formed by Eesti Pank, Banco de España, Banca d’Italia, Deutsche Bundesbank, Latvijas Banka, De Nederlandsche Bank, Central Bank of Ireland, Bank of Greece and the European Central Bank, of the study on Blockchain technology or DLT as the basis of the digital euro indicates that it enables eligible disruptive innovation in micropayments, and machine-to-machine payments, including security, privacy, and scalability requirements for the expected performance of the monetary system of the coming decades.
In addition, the scope covered Digital Identity solutions demonstrating the operational, cost and compliance benefits and the alleviation of some practical limitations thanks to an updated eIDAS regulation and the increased use of verifiable credentials or sovereign identity. Thus, based on a set of common standards defined by the European Commission, member states could offer identity wallets (which could be provided by companies) to their fellow citizens for them to request, store and share identification data and electronic certifications (attributes). A possible industrial policy in this regard is necessary and exciting. Digital wallets will go beyond the digital wallet.
Anthropologists Boyd, Richerson and Henrich (2016) in their model of cultural evolution posit that manners are a means to mitigate social differences, curb undesirable personal behaviors and foster cooperation within the social group; the development of decentralized technology, in 2021, globally enables the etiquette of trust and sustainability and reinforces an exciting renaissance spirit.