Wednesday , March 27, 2024

Security Notes: Making Uninterrupted Payments a Reality

Payment technology has kept pace with living technology, and thereby has kept payment as the widely accepted means for moving people to do things they otherwise would not do. In other words, humanity runs on payment. Our civil order is maintained through the ability of people to get others to serve them by paying them.

The flipside of this is the risk of disruption. If, for any reason, this bloodflow of society becomes a no-flow, society will collapse as the biological body does when the heart stops. Heart attacks happen to people who, a moment earlier, felt perfectly fine. Similarly, we should not disregard the specter of a sudden payment disruption, regardless of how smoothly payment seems to chug along.

One of the compelling arguments for the new form of money—the crypto abstraction—is that payment is carried out without vulnerability at a central control point. Bitcoin and its crypto cousins run on a non-hierarchical network that would keep operating even if large swaths of the network became incapacitated.

This so-called peer-to-peer payment idea is no doubt a big step forward in planning for payment continuity. It emerged from the Cold War, where it was a solution to a similar vulnerability of a hierarchical network. Peer-to-peer payment will operate even when much of the network is out of order.

Alas, the prevailing P2P solutions require a sufficient number of witnesses. Crypto currencies defer on how exactly the peers intervene to make the payment stick, but intervene they must. Unwitnessed payment is beyond the reach of modern crypto currencies.

For witnesses to play their role, they need a communication platform. So, while crypto payment is quite forgiving of interruption in communication, it does require a minimum baseline of communication, and will wither without it. Crypto currencies also face the risk of having “two network islands” that operate independently, and cannot reconcile when power is back on.

There are two emerging solution categories for this challenge. One is captured in U.S. Patent #9,471,906, based on a chemical-structural hybrid coin, and the other is based on a slow-growing trust index.

Long before a crisis strikes, money traders invite witnesses to observe their trade practices. Crypto tools validate this trading track record, and over a long period of time such good behavior earns a trader a much-coveted trust index. In normal times, a trust index is like a gold or platinum frequent-flier card: it has its benefits. Alas, one misstep, one attempt to cheat, and the index crashes to the ground, even to negative territory. And it will take a very long time to rebuild the index.

The longer the pre-crisis period, the higher the trust indices of the trading public. When the catastrophe happens and the network is down, these indices remain valid and may serve as a basis for unwitnessed peer-to-peer money exchange.

The particular BitMint product allows two unwitnessed traders to use their battery-operated devices to carry out a transaction in which the payer vouches for his money by flashing his or her trust index. If the payer cheats, his trust index will be wiped out when, at some point, the network is back on. A trader who is careful to be honest for a period of, say, three years, and thus achieves a commensurate trust index, is not likely to discard it by making a small false payment.

As the lights go off, people will keep trade going through their battery-operated electronic wallets (their phones), and weather the down period.

The beneficial side effect of this crisis preparation is that this trust index will also serve us during periods of normal network congestion. We are building an automatic decision software program that evaluates a situation where the network seems slow, a payment is small, and the payer projects a high trust index. In this case, the software will not wait for the network, but will accept the payment as claimed by the payer.

As more and more traders run such automatic payment-decision software programs, the load on the network will ease up and overall throughput will increase. All the while, traders are more and more prepared to weather even prolonged periods of network blackouts.

Keeping payments flowing is like keeping clean, unclogged arteries. It’s a life-or-death issue.

—Gideon Samid • Gideon@BitMint.com

Check Also

Visa And Mastercard Agree to Merchant Rate Cuts and Acceptance Changes in a Major Settlement

Merchant lawsuits challenging credit card interchange and payment card network rules that began nearly two …

Digital Transactions