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The blockchain as a digital notary
Can the blockchain replace the notary? The technology is ready, but far from accessible yet. However, these possibilities are very interesting for governments and companies.
Parties that cannot or do not trust each other, but still want to carry out a transaction, can use the services of a trusted third party. This is a third party, independent and trusted by both parties, who oversees the correct execution of the transaction.
In many transactions, a notary acts as a trusted third party. Think of the transfer of a house, the establishment of a foundation, or the recording of a will. The notary ensures that the transaction is well-drafted and clear to both parties, understood by both parties, and in some cases ensures its execution. The notary also stores the transaction in their archive, so that there is no dispute over which transaction has taken place: the notary's copy is considered 'the truth'.
The core of the blockchain is that it enables transactions between parties that cannot or do not trust each other. The blockchain could potentially replace the role of the notary. In theory, the blockchain could even have a significant advantage over traditional notaries: as the system is based on formal rules and mathematically proven principles, the correct operation of the blockchain can be verified by anyone.
As we saw in the previous article, the blockchain is very difficult to corrupt. In theory, a blockchain can only be influenced by a party that has more than half of the total computing power of all parties connected to the blockchain. An important advantage, but also a disadvantage of transactions carried out via the blockchain is that they cannot be altered. A small mistake in the digital 'contract' could have catastrophic consequences. When it comes to the blockchain, lawyers need to think like programmers, and programmers need to think like lawyers.
Time stamping
One of the notarial tasks that would be easiest to implement with a blockchain is time stamping. Time stamping involves obtaining proof that a party had certain information at a specific moment in time. For example, you can prove that you made a certain invention at a specific time, or that a copyrighted work was created by you before anyone else.
A previously popular method of time stamping was to send a sealed envelope containing the information to the Tax Office. They would not open the envelope, but they would stamp it with a date and time (verifiable). Other forms of time stamping include depositing trademarks and rights with specially designed registries, such as the Trademark Office. In some cases (like with patents), once approved registrations are made public.
Another method would be to include a description of the invention in the description of a bank transfer. Once the transfer is successful, the databases of at least two accounts indicate that you made the invention on a specific date. This is exactly the principle on which it can work with the blockchain.
In practice
Imagine you have made an invention. How can you time stamp it using the blockchain? You describe the invention in a digital text document and sign it with your name. Then, you add a blockchain transaction to the blockchain with the contents of this document.
Once the transaction is included in the blockchain, it is linked to a block, to which a date and time are attached. All parties on the blockchain network agree (and can mathematically verify) that the block was created at that time and that your document is part of it.
When you later want to prove that you made the invention at a certain moment, you just need to refer to that block in the blockchain. Everyone participating in the blockchain network can retrieve this block from history and verify that it contains a document with your name and the invention.
You can already use the above method, for example, by adding extra text to a Bitcoin transaction.
One step further: anonymous time stamping
The drawback of the above method is that your invention is readable to everyone: it is in the blockchain. You can solve this by not uploading the description of the invention itself, but a so-called hash of the description. A hash is a type of checksum. Imagine if in a document you count the number of letter 'e's, and only tell this number to someone, along with the number of words in the document. Afterwards, someone can check that a document meets this checksum, but based on the checksum alone, the document cannot be reproduced.
It is relatively easy to create a different document with the same number of 'e's and words but different content. Cryptographic hashes are immune to this and have the property that it is practically impossible to create another document that produces the same checksum (a 'collision').
Therefore, if you have inserted a hash into the blockchain at a certain moment and can later show a document with that hash value, you have proven that you had the document at that time without others needing to know the content of the document.
Finally
As you can see, using the blockchain involves some new mathematical principles. Understanding these principles is crucial for building new applications based on the blockchain. These applications, as described here, can be very powerful and provide a good alternative to traditional methods.