In Search of Digital Value

The pursuit of value in digital systems

Attempts at giving value form within a digital environment began around the start of the 1990s with Digicash (Chaum, 1989), pricing via processing (Dwork & Naor, 1993), Bitgold (Szabo, 1998), Hashcash (Back, 2002), eventually giving rise to Bitcoin (Nakamoto, 2008). Each of these technologies (of which Bitcoin has naturally been the most successful) represents a step (sometimes a leap) toward understanding value in digital systems. But a general solution, and one that mirrors the structure of value found in the physical world, is still elusive.

The source of digital value

In order to frame this discussion properly we need to establish a very basic ontology for describing value. On a basic level, value can be described as either intrinsic, which is a form of value inherent to the asset and its existence or instrumental, which is the utility value of an asset; its purpose, its functionality, or its usefulness as a means to an end. Both of these value types can divide into any number of sub-types, depending on the individual.

Stone money

The reason why blockchains actually work — the reason why Bitcoin was the first of the digital currencies to develop into a global phenomenon — is that everything in a blockchain is just an entry on a ledger (a distributed ledger). There are no actual bitcoins — no piece of code that someone can point to and say “that’s my bitcoin” that exists — but instead an accounting system that is (i) purely digital (ii) requires no central controller (iii) is secured by cryptography and an ongoing commitment of a scarce computational resource and (iv) creates ownership through a digital, cryptographic identity that is uniquely associated with each ledger entry. It is this ledger-based approach that allows a blockchain to solve the long-standing double spend problem, and the even longer-standing Byzantine Generals’ Problem, and to enable digital money.

‘Stone money’ on the island of Yap. Figure credit: tropical.pete/Flickr

Files under blockchain governance

The newest form of money — blockchain-based distributed ledger entries — imparts the ownership to this digital money via asymmetric cryptography. This public/private cryptographic key pair creates a digital identity that mirrors an identity in the real world. Extending this paradigm to the ‘thing of value’ in the digital space means applying the same framework to files.

  1. Being able to demonstrate uniqueness
  2. Access & control
  3. Protection of content (this is a bonus)
  • Encoding — this provides the uniqueness & originality
  • Keys — providing access & control (the ability to get the file and the ability to alter the file)
  • Encryption — providing the protection of content
Providing ownership of digital files through blockchain governance
  1. The hash of the file
  2. The hash of the encryption key
  3. The hash of the encrypted and encoded file
  4. The hash of the perceptual hash of the file (double hash; but different hash functions)
  5. The encoding scheme (encrypted)



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