With the emergence of BitStream, the use of Bitcoin in data markets is gaining momentum

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Robert Linus, ZeroSync developer and creator of the BitVM protocol, has created a new protocol for incorporating data sales and downloads into the trustless security of Bitcoin’s blockchain, and it may open a new realm of uses for Bitcoin.

Maximizing Bitcoin’s Potential
Linus has had a busy career as of late revolutionizing Bitcoin’s potential. Although much of the buzz about Bitcoin in the mainstream is related to its monetization and use as a financial instrument as it increasingly becomes entangled with the existing world of finance, Linus has undertaken several important projects to maximally harness the blockchain in surprising new areas. In addition to his work at ZeroSync to create zero-knowledge proofs, in October, Linus made headlines with his new BitVM protocol: A method to create logic gates and complex computations entirely within Bitcoin’s blockchain. Such functionality, at scale, would enable Bitcoin to carry out smart contracts to the same degree as other tokens like Ethereum, only without sacrificing any of Bitcoin’s decentralized characteristics.

BitStream Protocol
On November 11, Linus announced the proof-of-concept for a new protocol: BitStream. Essentially, the plan is to utilize Bitcoin’s blockchain to make atomic purchases of various data packages; in other words, purchases that require no intermediary and can be accepted or disputed by the buyer and seller purely using the functions of their contract.

Linus’ whitepaper goes into greater detail: He specifically draws attention to Nostr, a decentralized protocol designed to create censorship-resistant communications. Although its trustless nature and general aims are very adjacent to Bitcoin’s ethos, Nostr does not directly use Bitcoin, and Linus claims that “paid servers for platforms like Nostr often underestimate their operating costs when charging a monthly payment for storing a user’s data. Users can split their payment into daily or weekly increments if they don’t trust the servers, but this strategy doesn’t resolve the economic challenges servers face. Users are paying to upload their data, so servers are not paid per download.”

Enhanced Security
Although Linus was quick to state some of the very easy ways that BitStream’s encryption protocol would be further complicated, to make the service overall more secure, he made an explanation of the basic fundamentals using a much more simplified model. Essentially, as is extremely common in file encryption, the initial file is broken into chunks to form a Merkle tree, and it then hashes each chunk of data.

Automated Process
With the Encrypted ID available, an automated process can exist where payment by the seller is automatically met with the other pieces of data needed to decrypt the actual file: All encrypted chunks, the hashes of all unencrypted chunks and the original file ID. If there is any discrepancy between the encrypted chunks and the unencrypted chunks, it will be immediately evident, and the buyer can use it as a proof to the blockchain that the transaction is somehow bogus and should be refunded. In this way, a secure method for transferring files is transformed into a trustless contract that financially incentivizes the data server, all using the power of Bitcoin’s blockchain.

Redefining Data Markets
This protocol is enabled with a wide variety of Bitcoin’s payment channels, obviously including the Lightning Network but also sidechains like Liquid and several more obscure solutions. It is also constructed in a similar way to BitVM, not necessarily clogging up Bitcoin’s blockchain by making every step require on-chain transactions, but verification and disputes can easily do this to carry out disputes.

Durabit Protocol
It’s in this spirit, then, that we should consider Durabit: a similar protocol for using Bitcoin to incentivize and guarantee the security of data transfers, albeit with an anonymous creator.

Bitcoin’s Potential
Bitcoin has a powerful ability to transform the entire world of data markets, and it’s all contained within the most fundamental laws of Bitcoin’s ethos. If BitStream sees widespread use, if further anonymous Bitcoiners create protocols like Durabit, who knows what the possibilities are? After the community begins to innovate on a new concept for Bitcoin, the sky’s the limit.


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J-S Tremblay
About the author - J-S Tremblay

I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...

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