Makoto Yano is chairman of the Research Institute for Economics, Trade and Industry (RIETI); he is also a specially appointed professor at Kyoto University, Jochi University and Chubu University. He was vice-president of the Research Institute for Economics, International Trade and Industry with Professor Yano.
Creation of Blockchain and a New Ecosystem
Data, on the other hand, does not replace any existing resources, but is born as an entirely new type of productive resource. In the midst of the Fourth Industrial Revolution, by contrast, data is not replacing any existing resources.
1 Data: A New Productive Resource
Simply put, industrial revolution in the past meant destroying existing resources and replacing them with new resources. Under these circumstances, blockchain technology opens important avenues to make efficient and fair use of data.
2 Blockchain Technology
- Blockchain and Data Ownership
- Distributed Computing
- Blockchain: Decentralized Ledger
- Mining
- Advancement of Blockchain Technology
In this way, a new ecosystem of human beings and living things can be created, with information technology as infrastructure. A good example is a category of games called "multiplayer online games" in which many different players participate and try to achieve their respective goals, which can vary from car racing to shooting to roles.
3 Building a People-Friendly Ecosystem
- Society 5.0
- Industrial Revolution and Market Quality
- Data Monopoly and Data Abuse
- Small to Medium-Sized Enterprises
The blueprint of Society 5.0 as advocated by the Japanese government is based on the following loop: collection of data from every part of society through IoT, creation of big data, data analysis through AI, and injection of results from data- analysis back to society. Unless these problems are solved, the integration of cyber and physical spaces could end up with a rather dark society that is far from the image presented by the Society 5.0 initiative.
4 Organization of This Book
Data Ownership
Because it is stored in large enterprises, it is becoming increasingly difficult for small and medium-sized enterprises to use data for innovation. The first step is to return ownership of the data to the individual who created it.
Data as Money
On the other hand, for large companies there is no strong incentive to use data; it is sufficient to retain the information to deter challenges from competitors. To assign proper ownership of IoT data and bring it to market, it is necessary to develop a new blockchain technology.
Data Industry
A bottleneck of the current virtual currency system is the time it takes to execute transactions. See chapters 2 and 7 for a discussion of desirable designs of the decentralized financial system from these perspectives.
Appendix
As a result, the work of the network is optimally distributed among the nodes and computational processing is performed. If a distributed open network is chosen to maintain the universal ledger instead of a centralized network, we need to eliminate the cooperation of malicious nodes.
Consensus Among Blockchain Nodes
Such management nodes control workload distribution in the network and authenticate network participants. A computational procedure (algorithm) based on blockchain technology is called a decentralized consensus formation algorithm or simply a "consensus algorithm". Such a network is called a decentralized and distributed network in the sense that it fully addresses malicious attacks based on majority agreements and is distinguished from distributed networks that do not synchronize data across the network.
Sharding
Scalability and Decentralization
To appeal to the general public, Dapps need to centralize password management to some extent to allow for inadvertent user errors.
Token Price: Security or Utility
Traceability and anonymity
Silk Road launched in February 2011 and provided a marketplace for illegal drug trafficking until it was shut down by the FBI in October 2013. By the summer of 2013, the FBI had already launched an investigation into Silk Road and obtained the IP address (the numerical address assigned to every computer server on the Internet) of the Silk Road site.
Regarding the quality of competition, quality of information and quality of products, market quality is defined as an index determined jointly by the efficiency of an allocation and the fairness of the prices achieved in a market. He graduated from The University of Chicago Law School in 1993 and became a member of the New York Bar Association.
Market Quality Approach to IoT Data on Blockchain Big Data
1 Introduction
As shown below, market quality theory implies that it is desirable to assign ownership of IoT big data to the immediate party that generated the data rather than the one that collected the data. In Section 4, we explain that blockchain can alleviate these problems by assigning ownership of IoT big data to individuals who create data through their daily activities.
2 IoT in Society 5.0
A house can be connected to the internet with motion sensors, which can track movements in the different rooms and areas of the house. Perhaps one of the most important industrial applications of IoT in the agricultural sector.
3 IoT Big Data: Underutilization, Unfairness, and Inefficiency
Data Security Issues
The first reason relates to data security and privacy concerns, where people fear being treated unfairly. For example, IBM has introduced an IoT blockchain service that allows “sending data to private blockchain ledgers for inclusion in shared transactions with tamper-resistant records.”5 However, simply ensuring data security cannot solve the problem completely.
Data Monopoly Issues
As news spreads about issues like the Cambridge Analytica scandal, more and more people are turning to blockchain to enable secure data sharing and distribution. This happened before society could even agree on who owned internet data, which may have contributed to the current anti-big data monopolies sentiment.
4 Decentralization: Towards Fair and Efficient Use
- Unfair Data Monopoly
- Inefficient Use of IoT Big Data
- Decentralized Creation
- Need for a New Blockchain Protocol to Handle IoT Data
At the moment, except for a few data monopolies, everyone must participate in the big data market as a buyer, even if he/she is also a data producer. In the future data market, the idea of competitive advantage will become much less important.
5 Market Quality: Fairness and Efficiency
- Market Quality Theory
- Competitive Fairness
- private property right): Goods traded in the market must be subject to transferable private ownership
- voluntary action): Transactions in the market must be voluntary
- nondiscrimination)
It is widely believed that a reduction in the quality of information in the bond market caused the Long Depression and the Great Depression. According to the Unabridged Edition of Merriam-Webster (1961), competition is “the act or action of trying to obtain what another seeks to obtain at the same time and usually under or as if under fair or equitable rules and conditions. ".
6 Creation of a High-Quality Big Data Market
Assignment of Data Ownership
In particular, as Yano (2008) points out, US corporate law on mergers and acquisitions conforms to Rule 3, which is interpreted to prohibit anyone from discriminating one trading partner against another on non-economic terms.
Predatory Pricing and Exploitation: A Price Theory Approach
Further Discussions
To avoid such problems, it is important to maintain competitive fairness in the sense of market quality theory. The images or other third-party materials in this chapter are included under the Creative Commons license of the chapter, unless otherwise noted in a line of credit accompanying the materials.
Industrial Applications of Blockchain to IoT Data
1 IoT and Blockchain
Challenges Facing the IoT Space
- Technical Challenges
- Business Challenges
- Social Challenges
One of the biggest challenges for IoT is the lack of a viable business case that justifies its investments, either by generating revenue or cutting costs. With the rapid proliferation of digitized technologies, the general public has become increasingly aware of the ubiquity of data-gathering sensors and is also concerned about their use.
Blockchain Empowers IoT Devices
- Blockchain Grants Devices Independence
- Blockchain Grants Devices Awareness for Ownership
- Blockchain Enables Devices to Trade
Without the explicit permission of the sender, for example without a decryption key, no one can access the data. Now there is a way to reward and enable better use of the data collected by devices in a decentralized way.
Current Limitations to the IoT + Blockchain Vision
Even with these limitations, blockchain is still well-positioned to address many of the technological, business, and societal challenges facing the Internet of Things, with broad potential for value-added applications. Now let's dive into the current state of blockchain technology to see what can still be done to improve the state of the art.
2 A Blockchain Network Created for IoT Devices
Characteristics IoT Devices and Implications on the Design of Blockchain Networks
Limited bandwidth and connectivity: Many IoT devices operate out in the field without reliable connections and expensive connectivity (e.g. satellite networks in the middle of the forest). The network must support trustless lightweight nodes: IoT devices today cannot support full node operations, but must still maintain their independence on a blockchain network.
An Evolving Landscape
- Bitcoin
- Ethereum
- IOTA
- ByteBall
- Phantom
Limited power consumption: Many IoT devices operate on batteries or via energy harvesting mechanisms that place severe limitations on its energy consumption. The network must support point-to-point transactions: many transactions between IoT devices are highly localized - the devices are right next to each other - and cannot be expected to wait for the latency of network-wide validation each time.
Taraxa’s Innovations
- Concurrent Smart Contracts
- Fuzzy Sharding
Using a series of cryptographic operations (cryptographic partitioning), Taraxa allows each node to independently verify the acceptability of the proposal and the jurisdiction of the transaction - in other words, they are assigned non-overlapping tasks, randomly and fairly, without the need for a leader to coordinate them. Taraxa allows a lightweight node to randomly sample a subset of the full network nodes to compare their responses to become more reliable in its validation process.
3 Potential Applications
Blockchain Application Suitability
- Blockchain Bridges Trust Gaps
- Blockchain Is Digital
- Blockchain’s Guarantees Are on-Chain Only
- Blockchain Is Inefficient
While blockchain provides a lot of on-chain security and trustless guarantees, it is important to note that all such guarantees are only on-chain. If parties make off-chain agreements that undermine the integrity of on-chain transactions (eg collusion between Bitcoin miners), there's not much the blockchain can do about it.
Potential IoT Applications by Archetype
- IoT Data Anchoring
- Machine Monetization and Eventual Tokenization
Available: https://www.wsj.com/articles/google-exposed-user-data-feared-repercussions-of-disclosing-to-public-1539017194. Available: https://www.zdnet.com/article/iot-devices-will-outnumber-the-worlds-population-this-year-for-the-first-time/.
Theory of Money: From Ancient Japanese Copper Coins to Virtual
1 History of Money: From Commodity Money to Virtual Currency
History of Japanese Money
In Japan, in the period between 708 AD. and 963 AD. twelve kinds of copper coins (called the imperial coins) were cast. 1580, Japan unified after a century-long period of war. This is partly because most Japanese copper was not suitable for coinage because it contained too much sulphur.2 Instead, Chinese copper coins were imported from China between the mid-twelfth and fifteenth centuries.
Paper Money
- Gold Standard
- Fiat Money System
In 1932, the Pecora Committee, led by Ferdinand Pecora, was created in the Senate to investigate the causes of the Great Depression. In the first half of the 1930s, several institutional reforms of the financial market took place to cope with the Great Depression.
Ledger Currencies
- Deposit Currency: Centralized Data Currency
- Virtual Currency: Decentralized Ledger Currency
For the banks that were members of the FDIC, a certain amount of a customer's deposit was covered by insurance in the event of a bank failure. Cash is an IOU that determines society owes the holder of cash the purchasing power equal to the value of the IOU.
2 Money and Its Function
But iron rusts too quickly to be a store of value compared to copper, which explains why copper coins have historically been more common than iron coins.
3 Transaction Costs and Money
- Commodity Money
- Currency and Transaction Costs
- Ledger Currencies and Transaction Costs
- Cost Structure of Different Currencies
Therefore, as shown in the middle and right panels, the supply of a ledger currency is determined at the intersection between a currency's price and the marginal cost curve. In contrast, as the leftmost panel of the figure shows, in the case of paper money, the supply of a currency is determined by the government's monetary policy; there is no relationship between the unit price of money and the marginal cost curve.
4 New Monetary Theory for the Digital Era
- An Economy with Commodity Money Only
- Nobunaga Oda’s Currency Policy
- Monetary Policy of Nobunaga Oda and Hideyoshi Toyotomi
- Paper Money System
- Deposit Currency to Virtual Currency
Nobunaga Oda's innovation is that he established an exchange rate between gold (precious metal) and copper coins; see Takizawa (1996, chap. Then the upward shift of the money demand curve will create excessive demand for copper coins.
Ethereum, Smart Contracts, DApps
1 A Brief History of Decentralization
Bitcoin removes the need for a central authority by dividing the responsibility of protecting the network between the participants. Blockchain brings a different kind of efficiency to these promises by obviating the need for Templars (or any other third party) using technology alone.
2 Ethereum
Smart Contracts
The Ethereum smart contract has become so popular that the Ethereum version of the smart contract has eclipsed the original use of the term and added a lot of confusion about what the blockchain can do. For example, if you write a smart contract to securitize real estate and divide ownership of the real estate into virtual tokens, you still need traditional legal contracts (in the appropriate jurisdictions) to link those smart contract tokens to actual property.
3 What Is a DApp?
DApp and Blockchain
Governance can be decentralized so that users of the application directly participate in its management. In this way, actions are transparent and guaranteed, but there is nothing particularly decentralized about the ethics of the application.
Coins, Tokens, and DApps
One of the earliest attempts to do this was with "colored coins" on Bitcoin (Bradbury2013). You may have heard the terms "utility token" or "security token". The reason this distinction is made has to do with how the tokens are used to raise capital for a project or business.
The Case for DApps
These types of instruments are things that could be easily modeled or represented in the blockchain. Each participant would have a unique identity in the program and transactions could be posted and settled directly through the program.
4 Where Is the Smart Contract?
There is an expected average number of guesses it will take to arrive at the solution and so the mining node has effectively proven that it has performed a number of guesses. This is similar to the redundancy of the aforementioned NASA spaceflight computers but on a much larger scale.
5 DApp Development and Challenges
How Are DApps Made?
There are also popular web-based wallets, such as MyEtherWallet,4 that allow you to perform transactions without installing software. However, for reasons explained below, thorough testing is an even more critical part of the development cycle compared to most web applications.
Smart Contract Maintenance
But maybe they underestimated the demand for their tokens and the smart contract is designed to support only up to 30,000 coin buyers. Acme can create a new smart contract that supports up to 60,000 buyers and declare that they are copying your token balances from the old smart contract to the new smart contract.
6 The Boundary Between DApps and the Real World
- Consistency with Laws
- Reliability of Data
- Scalability
- The Future of DApps
Securities and Exchange Commission (2017) Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO.https://www.sec.gov/litigation/investreport/34- 81207.pdf. Vigna P (2019) Raising Money in the Crypto World Has Got Much Harder.https://www.wsj.com/.
DEX: A DApp for the Decentralized Marketplace
1 Why Are We Getting More Centralized as a Whole?
Information technology helps reduce the frictional costs of intra-company trading, but does not significantly help transactions between two unknown parties. Because the friction cost between two unknown parties is a trust issue, we traditionally relied on a third party to witness, record and execute the transaction.
2 Tokenization at Different Layers of Blockchain
- Crypto Asset Token and Its Value
- Economic Benefit of Tokenization
- Enabling Truly Effective and Fair Exchange
- Decentralized Application Tokens and Their Value
- Protocol Layer Coin and Its Value
If the value of a crypto asset token represents the value of the underlying asset premium + liquidity, what is the value of a token issued by a DApp. Basically, the currency is a medium of exchange, but it also represents the trust of the participants in the ecosystem.
3 What Is a DEX?
Key Technical Core of a DEX
Similarly, Bob uses his key and the disclosed private key to open the safe on chain A and the transaction is completed. In this case, once Alice opens the safe on chain B, there is no going back and the transaction will be committed.
Implication of DEX: Revolution Brought by the Ability to Issue, Trade, and Record Crypto Assets
By issuing tickets as tokens on the DEX chain, the cost of issuing tickets is reduced, but it also enables a secondary market where ticket trading is possible and the legitimacy of the ticket is verifiable. The ticket token issued on the blockchain becomes the digital identification that event attendees can show at the event reception desk.
Challenges for DEX
Treasury Department website (2011). https://www.treasury.gov/about/education/Pages/in-god-we-trust.aspx. Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (http://creativecommons.org/licenses/by-nc-nd/4.0/http://creativecommons.org/licenses/ door-nc-nd/4.0/), which permits any non-commercial use, sharing, distribution and reproduction in any medium or format, so long as you properly credit the original author(s) and source, link to the Creative Commons license and indicate whether you have modified the licensed material.
Blockchain Business and Its Regulation
In the following, we discuss the design of rules for blockchain applications for each of these types. In Sect.3, we discuss issues related to the design of fundraising rules for blockchain companies from the point of view of information disclosure.
1 Risky and Risk-Free Decentralized Assets
Roles on Securities Markets
To understand this division, it is desirable to begin with how businesses start and develop into established entities. At an early stage of an enterprise, it is not economical for market participants to collect the necessary information about business prospects.
Securities Regulations: From Caveat Emptor to Caveat Venditor
The Securities Act and the Stock Exchange Act aim to maintain information parity on the securities market. This conventional rule has been displaced by the Securities Act and the Exchange Act, which regulate IPOs and insider trading in the stock market.
Money and Tokens
- Money and Securities Regulations
- Token as a Ticket Under Securities Regulations
If the tickets are bought simply for resale, it is a speculation, in which case the tickets are clearly a risky asset. Currently, a note is thought of as "a commodity purchased for use or consumption" and is placed outside of securities regulations.
2 ICO
Utility Tokens
From ICO to STO
3 ICO and Securities Regulations
- Types of Tokens and Proper Regulations
- Information Disclosure
- Blockchain Characteristics and Security Regulation Conformance
- Desirable ICOs
The issuer is therefore expected to disclose relevant information regarding the business relating to the token. This is also the case even if the token issuer explains that the project is not yet developed.
4 Towards Building a Healthy Blockchain Ecosystem
- Professional Market for Financing
- Reliability of Payment Tokens
- Application Safety and Quality
- Creation of an International Ecosystem Beyond Borders
An ICO is based on a business model that issues tokens to raise funds by leveraging the features of blockchain technology. If the application is open source, it is desirable to have a third party that always checks the security and quality of the application, announces possible risks and confirms that the appropriate patch is made.
Bitcoin and Blockchain Technology
Uniqueness means that each book must be a unique book of record for that particular species. By authenticity, we mean that every piece of information in the book must describe the exact intent of its owner.
1 Chain of Blocks
2 Proof-of-Work
Furthermore, as the required number of zeros increases, it becomes increasingly difficult to find a solution where a series of digits is appended to a given sentence so that zeros at the beginning of the value will line up as the algorithm requires. For example, if every non-spam mail is required to include a solution that sets a certain number of zeros at the beginning of the hash value of email sentences, it takes a certain amount of computation time before ' A sender sends out the email.
3 Decentralized Consensus Algorithm
To create and attach a new block to the existing chain, it is required to find a solution such that a specific number of zeros line up at the beginning of the hash value of the solution that is added to what is written in the existing block, and write the solution to the block new. After a particular node joins a new block and solves the puzzle, it announces the new block to the connected nodes.
4 Open-Key Cryptographic Accounts
To this end, a sender can encrypt a message with a private key and send both the encrypted message with the paired public key and the original message. Essentially, the public key acts as the base of a user's account, while the private key acts as the password for the account.
5 Concluding Remarks
The account owner encrypts transactions with a private key and sends both the encrypted transaction and the original transaction from which miners can verify the authenticity of the transaction. He is a member of the Institute of Electronics, Information and Communication Engineers (IEICE) and the Information Processing Society of Japan (IPSJ).
Index
