Can systems that prevent double-spending (e.g. crypto-currencies) be used to attach other unique data?

Question

The Bitcoin-solution can be described as "[...] a solution to the double-spending problem using a peer-to-peer network. (official Bitcoin paper, PDF, abstract, first page).

Now I wonder if a similar technology can be used to collect, send and receive other data with the goal to create "unique content". That is data that you either have or you don't have (like a physical object).

A follow-up question is if these objects can be only created by a central instance but once distributed there is no control from this central instance anymore. Like real money: It gets minted but once it is public you don't have to register every cash transaction with the your state.

One application could be a digital trading card game where you either have a "card" or not. You can either trade new cards directly with other humans or you get (buy) new ones from the creator who holds the monopoly over creating and releasing cards.

Did I miss anything in the crypto-currency tech that prevents this scenario?

Answer 1

In theory, yes, a peer-to-peer validation network could be used to enforce any unique content (not just money) assuming a sufficiently large validation network.

"Sufficiently large" is the catch. Bitcoin validates transactions by having the network nodes "vote" on the transaction's validity. According to Satoshi's proposal:

The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

Getting enough honest nodes into your validation network that no amount of compromised or attacker nodes can affect validation would be very hard. You would also probably want these nodes to be controlled by a large number of people. With a large number of nodes and a small number of controllers, it would be easier to compromise significant portions of the network and it would also reduce trust in the network since, despite the number of nodes, the control is still only in the hands of a few. Bitcoin (and all of the other cryptocurrencies that I am familiar with, which admittedly, isn't a lot) accomplished this by incentivizing its validators; Bitcoins are periodically awarded to the "miners" who solve the proof of work problems in the transactions. This also happens to be a convenient way to introduce new Bitcoins.

However, this would be particularly difficult for the digital trading card scenario you mentioned, since that kind of service would likely only appeal to a niche audience. Even if you incentivized by awarding cards, there might not be enough individuals interested in operating validation nodes.

A scheme where a central authority issues the money (or other content) might not fare much better, since, in practice, the central authority would probably either end up controlling or having material influence over a large portion of the network. Remember that the Bitcoin network issues coins, not the Bitcoin devs or any other single person or small group of people.

The take-home is that if you can get enough people to participate in the validation network, then you should be able to defend the uniqueness of any information (money isn't special in this regard). However, getting enough people to participate would probably be incredibly difficult.

Answer 2

Yes to both of your questions. Both are those are feasible. At least, the second one is certainly feasible; to the extent that I understand the first scenario, I believe that's possible too.

There are even existing systems that do something like this. For instance, Namecoin is a system for registering domain names that uses a Bitcoin-like blockchain. Only one person can own a domain name at a time, so it has the "uniqueness" aspect you are getting at.

One could easily support a system where a central authority mints digital tokens, e.g., to indicate who has a particular trading card. Then, digital tokens can be traded online, using a Bitcoin-like blockchain to record the transactions.

The general term of art for this broad area is altcoin or cryptocurrency. There are many Bitcoin-inspired cryptocurrencies: see Wikipedia's list or this list.

From a fundamental computer science perspective, Bitcoin solves the distributed consensus problem: it records a sequence of transactions, ensures that these are consistent according to some rules (e.g., no double-spending, can only spend coins that are currently yours), enables anyone to add additional transactions, and ensures that everyone in the world sees the same view of the database of transactions.

However, there are some non-trivial challenges to extending Bitcoin to your particular case. Bitcoin is a sophisticated mechanism that relies upon a clever allocation of incentives. The security of Bitcoin relies upon people to do "mining", as this is what enables appending to the blockchain and prevents forking of the bitcoin. Bitcoin creates an incentive for mining through its proof-of-work-based "lottery": miners who successfully add a new block to the end of the blockchain are given a small reward, a small fraction of a Bitcoin. This works because Bitcoin is used for a currency. If you used Bitcoin for, e.g., centrally-assigned trading cards, it's not clear how you would design the system to provide an incentive for mining. So that aspect of the system design would need careful thought and consideration.