As you can tell from the following, it’s an article I’ve written for Safecoin Magazine, which @optictopic is leading the charge on.
I was wondering how it might communicate to people who are not already rather familiar with the SAFE Network, so Rich recommended I put it up here and get feedback.
I’m especially interested in people who are fairly new in the sphere, to see if it’s too much or too wordy too complex or whatever. Probably people who are at least a bit familiar with Bitcoin are the largest part of the target audience.
I’m also very interested in feedback as to any inaccuracies or better ways of putting anything. If I don’t find your input useful, I’ll thank and ignore. So don’t be shy or worry about leading me astray.
(EDIT: Updated with final edit of article. 28 Sept)
Why Call It “Safecoin Magazine”?
(not the short answer)
I have to admit, when our publisher, Rich Beer, first approached me with the idea of participating in the production of Safecoin Magazine, I was a bit conflicted. After all, my last article on the subject was “Safecoin? The Best Thing to Do is Just Forget About It”. My opinion has always been that the value of the SAFE Network is the SAFE Network, and its ability to facilitate Secure Access For Everyone with privacy, security and freedom of the individual’s data, communications and other connections to the world.
Sure, safecoin is a beautiful part of the structure and functioning of the SAFE Network. It might even be considered indispensable. But, come on! Just because it is the first form of currency to be directly backed by what is arguably the most valuable resource of mankind–i.e., the ability of the individual to freely store and share knowledge and ideas–is no reason to focus on the MONEY side of things!
Or is it?
It is fascinating how the thought of money can be so attractive and so repulsive at the same time. Most everyone has a conflicted relationship with it. But as Danny DeVito’s character said so memorably in The Heist, “Everybody needs money. That’s why they call it money.”
Okay, so Safecoin Magazine is really all about the SAFE Network, not just the money. But while we’re on the subject, let’s take a deeper look at money and, of course, safecoin.
Value, Faith and Backing
However else we can define it, money is a unit representation we use to talk about and exchange certain kinds of value. And since value is a very human concept (and completely subjective, when it comes right down to it), we are always on shaky ground when talking about what makes the best money.
So let’s start with a really basic fact: The essence of money is the faith that it will be accepted by others in exchange for things we want or need. Said differently, it’s a matter of shared confidence in value. But because confidence can be gamed, and confidence is a difficult thing to conjure out of thin air, money is pretty much always backed by something which links it to a perceived source of value, whether a solid commodity, like gold, or a more ephemeral quality, like “the good faith and credit of (applicable political entity).”
Gold is limited in quantity, has many useful and desired qualities, and has the weight of history on its side as being the most consistently recognized store of value. People have faith that gold will have a fairly stable value relative to other things. Being heavy, hard to divide, and very hard to move around, gold itself is far from perfect as money, though using it to back the value of a paper and/or digital currency works pretty well. Gold-backed money engenders confidence. But there’s still the matter of trust that the gold backing the currency is really there.
On the other end of the spectrum is “the good faith and credit of (applicable political-military-business-ideological power structure).” In other words, money by decree. Now, actually, if managed properly, this can be rather good money. It can be very mobile, flexible and secure. But, in the long run, how much faith and confidence can we really place in the incorruptibility of the political process or those who actively seek political power? Ouch! Really? Ultimately, this form of money is backed by guns, directly or indirectly. But as I say, this can be a pretty good and useful sort of money, as long as those controlling it stay honest, dedicated to the public good, and relatively uncorrupted. Make your own survey of history on all this, and bestow your trust accordingly.
Something New in the World
For the first time in recorded history, cryptographic currencies have entered a new sort of thing to have faith in: unforgeable transactional mathematics. Cryptography allows us to create unique digital property that can be provably owned and transferred directly by the current owner to a new one, with no third party needed.
Bitcoin is the most notable example of this. Whatever imperfections Bitcoin may have, it is proving unkillable, despite the fact that there are many powers that would have strangled it in the crib, had they been able. It just keeps moving forward, slowly but surely disarming skeptics and cynics alike. The invention and use of other protocols to work on top of Bitcoin, such as Counterparty and Omni, have made it possible to easily create a boundless number of cryptographic properties with the same security of ownership and transfer. Add altcoins of various types, and other projects like Ethereum and Storj, and the options are vast, indeed.
But the limitlessness of possibilities forces us back into much the same situation we started with, only on a higher level: Now that we can have innumerable cryptographic properties/currencies available, what characteristics or backing start and keep them on the road of accepted value?
Of course, for Bitcoin there’s the head-start factor. Which it certainly has. This means it has a large amount of resources invested in it, and thus confidence in its security and continued acceptance. This gives it tremendous momentum. But aside from that, I can see at least seven additional factors we can use to analyze the potential value of these various currencies.
Against what valuable asset or characteristic is the currency issued? That is, aside from other characteristics of the currency itself, what value does it represent? (What is its “gold standard”?) Inherent in this, of course, is the question of whether its supply is limited by something other than the calculations of political expediency, because mishandlings in that sphere warp the underlying faith and value.
If a unit of the currency is taken out of circulation, what happens to its value?
Who or what provides the value against which the currency is generated?
How is the currency distributed?
How is identity tied to the use of the currency? (That is, does the user have the option to transact publicly or anonymously by choice?)
How quickly is a transaction completed, so that the recipient can, in turn, use the amount received?
Can transactability of the currency scale with demand?
This list could be greatly expanded, but this is a pretty good set of factors against which to analyse a cryptocurrency (or any other currency, for that matter). I’ll let you analyse any others of your choice.
Now Let’s Talk About Safecoin
Safecoin is unique amongst cryptocurrencies in a number of ways. For instance, there is no separate “Safecoin Protocol.” (That’s why we tend not to use the initial capital when talking about it, except at the beginning of sentences, etc.) The generation, transaction, recycling and security of safecoins are integrated into the operations of the SAFE Network at a fundamental level. Safecoin’s purpose is to balance and lubricate the functioning of the network. The fact that it may be a near-perfect currency is almost incidental, simply allowing it to fulfill that purpose quite well.
At this point it is crucial to grasp that the SAFE Network has a 100% peer-to-peer architecture. In this sense it is like Bitcoin and many other open source projects. There is no central organization that owns it. With the network up and running, MaidSafe, the company that developed the design and implementation, will be working alongside everyone else to utilize and improve the network. The SAFE Network IS the software operating on and through resources that users provide, period. There are no central organization, no servers, no dedicated infrastructure owned by the network. It is owned by everyone who participates.
The details of exactly how safecoin works are too involved and too tied into the entire network function and structure to detail here. Suffice to say that each safecoin exists as an individual cryptographic identity that is owned and transferred via public key cryptography, with all ownership and transactions validated by consensus of a relatively small group of thirty-two network nodes, as determined by the network algorithms, in an extremely secure and ungameable fashion. This simple statement is accurate, though certainly very far from complete. If you don’t have doubts and questions, you’re not being sufficiently cautious, though you’ll have to dig elsewhere for the bigger picture. (reference links at end of article)
So, assuming that safecoin actually works as described, let’s examine it in relation to the list above:
1. Against what valuable asset or characteristic is the currency issued? That is, aside from other characteristics of the currency itself, what value does it represent? (What is its “gold standard”?)
Each safecoin put into circulation betokens resource (drive space, cpu power and bandwidth) which has been actually contributed, and found to already have been useful to the network. In other words, the currency is backed by the full functioning of the network, as enabled by the contribution of all participants. Since the network’s function is to provide Secure Access For Everyone, with default privacy, security and freedom of data and communications for all users, that is the value proposition underlying the currency. (Personally, I think it’s pretty neat when you can back a currency with an unlimited quantity of a priceless resource.)
And if one doubts the objective value of data concerning your personal communications, interactions, location and identity, consider why it is that Google and others can offer so much “free” service in exchange for it. People pay with their privacy, and it’s a bargain for Google, et al–a steal, really.
In Bitcoin, “proof of work” gives validation of transactions and an immutable public ledger. The value proposition is the ledger, which proves who owns what, and the freedom to transact at the owner’s choice with partial privacy, and other capabilities as the technology builds. These things are all incredibly valuable, and the fact that they are proving themselves in operation is beginning to shake the foundations of modern finance.
For safecoin, “proof of resource” gives security for safecoin transactions (anonymous or not), choice of privacy or publicity of one’s data, perpetual data storage, choice of anonymous or fully identified communication, the ability to post uncensorable websites, all other basic internet functions but done with privacy, security and freedom as defaults, and many other capabilities on top of that.
There is a hard coded limit of 2^32 (about 4.3 billion) whole safecoins possible. As the value of safecoins and the size of the network grow, subdivisions of safecoin will be enabled as needed, with an extremely small subdivision possible.
2. If a unit of the currency is taken out of circulation, what happens to its value?
Safecoins are both put into and taken out of circulation in exchange for valued, measurable resources. An individual provides cpu power, hard disk space and bandwidth to the network by installing software that allows a Vault to run and carry out the network’s business. A “farming” opportunity (wherein the Vault’s owner can be awarded safecoin) is triggered when the Vault successfully delivers up requested data.
Conversely, when an individual wishes to buy resources from the network (i.e., the ability to store data on the network permanently, distributed computation services, etc.) the individual purchases that capacity in exchange for safecoins, which are then recycled. In essence, the safecoin is removed from circulation until it is again rewarded in exchange for further resources provided to the network by another. Effectively, safecoins are created and destroyed in exchange for resources, back and forth between the network and its users.
3. Who or what provides the value against which the currency is generated?
Every individual who provides the resources that are the flesh and bone of the network is rewarded with safecoin. Security of the currency is achieved by the very mechanisms that are used to access, participate in and secure the network, down to the interface level. This makes for extraordinary granularity of contribution. Every device connected to the network contributes to its function and security, and is rewarded for that contribution.
4. How is the currency distributed?
As noted above, because contribution of resources is granular, right down to the individual user, distribution of safecoin is equally granular, because most anyone who can access the network can contribute real value to it. As a result, an unprecedented percentage of people all over the world will be acquiring safecoins. Value given, value received. This is fantastically important in its effect of bootstrapping safecoin as a currency. Almost everyone will be able to farm safecoin. From a planter on the window sill (smartphone/tablet), to the squarefoot garden on the porch (laptop), to a backyard garden plot (desktop), to the larger farming operations (dedicated larger rigs running multiple instances of the software). Everyone who wants to, can have some safecoin, anywhere in the world that they can connect to the network and run the software. This allows one to very directly and easily purchase additional resources from the network, but also to start to exchange safecoin for other things via the network, whether the parties are standing face to face trading safecoins for eggs, or are across the world from each other, trading safecoins for bitcoins through a decentralized exchange. It is possible that safecoin can go directly into use as a means of exchange and acquire an independent value, bypassing the need to interact much with the various fiat currencies.
5. How is identity tied to the use of the currency? (That is, does the user have the option to transact publicly or anonymously by choice?)
Safecoin is inherently a digital cash. The only record of ownership maintained on the network for any safecoin is its current owner and the previous owner, but these are recorded only by a private ID that is not easily tied to any network identity, much less a personal identity. These features make it easy to transact in complete anonymity, should one wish to do so. It is also possible to transact with complete verification of identity. The choice belongs to the user.
6. How quickly is a transaction completed, so that the recipient can, in turn, use the amount received?
Safecoins transact “at network speed,” which should be quite fast, and when the transaction is done, it’s done. No waiting for further confirmations before being able to spend your safecoin.
7. Can transactability of the currency scale with demand?
Because of the way safecoin is secured and transacted, the number of transactions per second has no foreseeable limit. As the network expands and demand for transactions grows, so will the capacity to accommodate them.
There is much more that could be said, but hopefully that’s enough for here and now.
So, Is Rich Right?
This publication is about so much more than the title suggests but, after reading a bit about safecoin, you may be ready to ask this question: “If safecoin is the lubricant, what is the whole SAFE Network capable of accomplishing?”
If that question resonates with you now, then I guess Rich was right. Safecoin Magazine is exactly the right title.
Welcome. What say we make a planetary adventure of it, eh?