Published on Feb 21, 2020
Byteball is a decentralized system that allows tamper proof storage of arbitrary data, including data that represents transferrable value such as currencies, property titles, debt, shares, etc. Storage units are linked to each other such that each storage unit includes one or more hashes of earlier storage units, which serves both to confirm earlier units and establish their partial order. The set of links among units forms a DAG (directed acyclic graph). There is no single central entity that manages or coordinates admission of new units into the database, everyone is allowed to add a new unit provided that he signs it and pays a fee equal to the size of added data in bytes. The fee is collected by other users who later confirm the newly added unit by including its hash within their own units. As new units are added, each earlier unit receives more and more confirmations by later units that include its hash, directly or indirectly.
There is an internal currency called ‘bytes’ that is used to pay for adding data into the decentralized database. Other currencies (assets) can also be freely issued by anyone to represent property rights, debt, shares, etc. Users can send both bytes and other currencies to each other to pay for goods/services or to exchange one currency for another; the transactions that move the value are added to the database as storage units. If two transactions try to spend the same output (double-spend) and there is no partial order between them, both are allowed into the database but only the one that comes earlier in the total order is deemed valid.
Total order is established by selecting a single chain on the DAG (the main chain) that is attracted to units signed by known users called witnesses. A unit whose hash is included earlier on the main chain is deemed earlier on the total order. Users choose the witnesses by naming the user-trusted witnesses in every storage unit. Witnesses are reputable users with real-world identities, and users who name them expect them to never try to double-spend. As long as the majority of witnesses behave as expected, all double-spend attempts are detected in time and marked as such. As witnesses-authored units accumulate after a user’s unit, there are deterministic (not probabilistic) criteria when the total order of the user’s unit is considered final.
Users store their funds on addresses that may require more than one signature to spend (multisig). Spending may also require other conditions to be met, including conditions that are evaluated by looking for specific data posted to the database by other users (oracles). Users can issue new assets and define rules that govern their transferability. The rules can include spending restrictions such as a requirement for each transfer to be cosigned by the issuer of the asset, which is one way for financial institutions to comply with existing regulations. Users can also issue assets whose transfers are not published to the database, and therefore not visible to third parties. Instead, the information about the transfer is exchanged privately between users, and only a hash of the transaction and a spend proof (to prevent double-spends) are published to the database.
The Bitcoin price is known to be quite volatile. The bigger problem is that this price is not only volatile, it is not bound to anything. Share and commodity prices are also very volatile but there are fundamentals behind them. Share price is largely a function of company earnings, revenue, debt-to-capital ratio, etc. Commodity prices depend, among other factors, on costs of production with various suppliers. For example, if the oil price falls below the production costs of some suppliers for a long time, these suppliers will eventually shut down, decreasing production and causing the price to go up. There is a negative feedback loop. In Bitcoin, there are no fundamentals, and no negative feedback. A Bitcoin price of $500 is no more justified than a price of $50,000 or $5.
If the Bitcoin price moves from where it is now, this movement alone will not create any economic forces that would push the price back. It’s just wild. In Byteball, the base currency, bytes, is used to pay for adding data into the Byteball database. You pay 1,000 bytes to add 1Kb of data. It is a measure of the utility of the storage in this database, and actual users will have their opinion on what is a reasonable price for this. If the price of byte rises above what you think is reasonable for your needs, you will find ways to store less bytes, therefore you need to buy less bytes, demand decreases, and the price falls. This is negative feedback, common for all goods/services whose demand is driven by need, not speculation. Besides paying in bytes, one can issue other assets and use them as means of payment. These assets might represent, for example, debt expressed in fiat currencies or in natural units (such as kWh or barrels of oil). The price of such assets is naturally bound to the underlying currencies or commodities.
