Secure communication and how Bitcoin does it better

What if you wanted to use a Bitcoin transaction as a “trigger” for an event, to communicate information rather than send money? How would you identify that the transaction has taken place, and confirm it came from the right party? That’s the start of this week’s “Bitcoin Class with Satoshi” episode with sCrypt’s Xiaohui Liu and Bitcoin creator Dr. Craig S. Wright, the latest in a series of educational video tutorials for developers.

This week’s episode also involves a Bitcoin concept that has been around since the white paper, but its capabilities are rarely understood. That concept is simplified payment verification (SPV)—a way to verify that events have happened without using what Dr. Wright calls the “silly concepts” of on-chain computation, or of every single user running their own node.

New class is out. Special thanks goes to @SatoshiDoodles for the cool new logo https://t.co/d3Aj9y5vHQ https://t.co/xi95egs5Dd

— sCrypt Official | BIP-347 🐱 (@scryptplatform) May 11, 2021

“I send you a transaction, and you send it out to the blockchain,” Dr. Wright says. But on top of that, you can monitor and filter transactions to make use of only the ones you need. This may require a system of personalized alerts, triggered by hierarchies of Bitcoin addresses known (or verifiable) only to the parties involved.

“How is this better than existing services, like AWS?” Xiaohui asks. Dr. Wright explains it’s useful for security—it’s harder to attack someone if you don’t know where they are, how they’re connected… or necessarily even who they are.

Middlemen yes, but trusted third parties no. Keep that in mind. Bitcoin isn’t about trying to eliminate middleman parties who “efficiently aggregate services” (like real estate agents), that’s not the point of Bitcoin.

Secure, private and pseudonymous communications could be important between corporations who need to keep their details private, especially when sending potentially confidential information across the open Internet. One party could guarantee a transmission was from that source, or even form a point-to-point VPN—something that’s possible now, but with Bitcoin it can be temporary, include shifting addresses, between parties who don’t know each other, or be used only for particular information. Participants in the transactions don’t even need to be human; they might be IoT devices and/or automated systems.

Dr. Wright points out that these transactions are still not completely anonymous, rather more “hidden,” or with “firewalled identity.” An analyst could at some point in the future (with considerable effort) use Bitcoin’s audit trail to examine some of what the transacting parties were doing, at least.

Imagine a software update—rather than relying on a certification company that could be compromised (like the infamous DigiNotar), a company could push verified software updates based on a root key set formed from information shared between that company and the customer. Addresses can be a lot more dynamic than that single digital certificate, changing often or single use for specific purposes.

Information transferred between parties, or used to verify it, could be Bitcoin tokens. The initial handshake could be performed with the information specifying how to perform the verification using information available only to each party (so even if this process was intercepted, the attacker couldn’t know it).

Instructions like “this is how I’m going to hop around the network, follow me” would become possible. These processes are cheap enough on BSV that they could be used for any sort of communication, from confidential corporate and government operations, to chat apps and social networks. All sorts of networks could benefit from dynamic, yet secure, connections.

There’s a lot of value in being able to easily verify a party’s identity without necessarily knowing it, or having to verify it all the time.

“Is this my key on the blockchain? Yes or no. Is it valid? Yes or no.” It’s as simple as this, Dr. Wright says. This is what’s possible using Bitcoin and SPV monitoring, and in a more secure and cost-effective way than any existing systems—but the exact uses and processes to perform these actions are up to developers to build.

“Bitcoin Class” looks far beyond the basics we’ve come to understand about BSV and its uses, discussing ways to form complex automations by extending it far beyond what occurs on the blockchain itself. There are no easy solutions, but Bitcoin makes more options available in a world where electronic networks are becoming ever-more-difficult to trust.

To watch previous episodes of the Theory of Bitcoin and Bitcoin Class with Satoshi, check out the Theory of Bitcoin YouTube channel here and the Bitcoin Class with Satoshi YouTube channel here.

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.