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The proposal of the operation of socially integrated money as cryptocurrency

  In a previous thought , it was considered how a universal value-exchange instrument can work, an instrument capable of solving the biggest...

 In a previous thought, it was considered how a universal value-exchange instrument can work, an instrument capable of solving the biggest problem of the money in use today, which is the capability of representing value without any external guaranteeing agent, while not being value by itself. The proposed solution was to create a universal value-exchange instrument, Humanity Associated tender (HAtcoin), a representation of society-integrated money in the form of cryptocurrency.

The following is the logical concept of a value exchange instrument that functions as a cryptocurrency that has the required characteristics. The proposed system uses blockchain technology, meets the criteria of socially integrated money, eliminates the social problems of using blockchain technology, and is suitable for an ideal universal medium of exchange that generically represents value.

The fundamentals of the computerized operation of cryptocurrencies and their digital functioning have been developed in a satisfactory manner and have been adequately tested in practice. The proper functioning of HAtcoin as a cryptocurrency requires the following modifications to the general blockchain technology, which are necessary for the operation of socially integrated money in order to eliminate the problems associated with the functioning of currently used cryptocurrencies, and to take the specific operation of HAtcoin into account:

A/ The creation of HAtcoin is assigned to a process tied to an existing person.
B/ The accounting of HAtcoin transactions on the blockchain is not a competitive process.
C/ The guarantee of credibility of the nodes that create HAtcoin blocks is based on social reputation.
D/ The validity of the record of HAtcoin transactions on the blockchain is limited in time.

A/ The creation of HAtcoin is based on a process assigned to an existing person

In the proposed application of socially integrated money, a newly created HAtcoin token is given to an adult person, a person can receive a new unit of HAtcoin, which functions as a cryptocurrency, once and only once, so the creation of HAtcoin, a unit of money in digital form must be explicitly linked to an existing adult person.

The task is achievable, the token can be created by unambiguous association with an existing individual if the individual's unique set of personal identification data (e.g., name, date of birth, place of birth, mother's name) encrypted by a cryptographic hash function is associated with the individual's unique biometric identifier (e.g., fingerprint or other biometric markers) which is also encrypted by a cryptographic hash function, and the authenticity, existence, and association of the data with the given individual are certified by a cryptographic signature of a socially trusted organization.

Suggested steps for the creation of a new unit of HAtcoin:

1. Generate the hash code of the personal data. It is preferable that the associated person performs this function using the mobile application of the HAtcoin wallet, for example, by scanning official personal ID cards with a mobile device equipped with the necessary hardware and software components.

2. Assigning the hash code of the unique biometric identifier of the associated person to the hash code of the personal data. It is preferable that this function is also performed by the person using the HAtcoin wallet mobile application, for example, using the device's fingerprint reader.

3. The characteristic dataset created in this way must be registered as a crypto-token by an organization considered reliable by society, where the adult person appears in person.
The personal data must be verified by comparing the hash code of the personal data created by the person with the data that can be generated from officially existing databases containing the data as a member of the society related to this actual person, and by regenerating the hash code of the biometric identifier previously created by the person on the device of the social organization. In addition, the organization registering the crypto-token verifies that the data related to the person is unique, that no crypto-token with the hash code of the personal data and the biometric identifier already exists in the blockchain or in the transactions mempool.
If the information is valid and unique, the socially trusted organization will add the date of creation to the unique dataset and then use a cryptographic signature of the social organization to sign the data to certify the real existence of the person's information and the actually existing relationship between the personal information and the biometric identifier. The dataset created with this information is a piece of unique digital information that unalterably and unambiguously represents an existing adult person, and thus can function as a representation of a unit of socially bonded crypto-token. The created dataset can then be considered a valid currency and can be issued into circulation.

4. The resulting crypto-token’s transaction from the address of the validating organization to the HAtcoin address provided by the corresponding associated individual. A nominal flat fee, a transaction commission built into the system may be charged for the transaction to support the maintenance of the organization providing the service. A HAtcoin address can be created by anyone at any time, without restriction, similarly as other cryptocurrencies work.

Features of this procedure:
- The HAtcoin creation process does not require the involvement of an external administrative person, the registration of a new crypto-token can be fully automated.
- During the HAtcoin registration process, the person associated with the generated HAtcoin can remain incognito, as no identifiable personal data is published on the network.
- This method makes it unreasonable to register HAtcoins on behalf of another person before the real person registers HAtcoins for himself/herself because the uniqueness of the biometric identifier and the hash code of the personal identification data in the network allows a person to register HAtcoin only once.
- The proposed method, which does not require external human involvement, eliminates the possibility that the social organization registering the HAtcoin could act as a malicious actor, i.e., create HAtcoins representing a non-existent person or with random data, since the system is able to verify that the record needed to create HAtcoins was registered using the valid software version accepted by consensus of the network.
- Including the identification information of the country that issued the HAtcoin-registering individual's official document in the HAtcoin identifier dataset allows the proposed financial system to distinguish between different societies in the use of the universal medium of exchange, as it is an expected feature of the proposed system. The included country information also allows the HAtcoin to be registered in a non-local manner, i.e. independent of local political systems, but still allowing it to be associated with a specific society.
- This method also contributes to achieving compatibility between social systems through the personal motivation of a more general acceptance of the socially integrated HAtcoin, independently and protected from external political influence.

B/ Reliable blockchain-based accounting with the non-competitive process - the creation of blockchain blocks in the public ledger with the proof of the random method

The collaborative accounting of HAtcoin as a cryptocurrency should avoid computational competition while maintaining authenticity. In conventional blockchain technology, block creation based on computational competition has been used to ensure the authenticity of the blockchain, protect its immutability, and schedule the issuance of crypto-tokens.

The computationally competitive crypto-token bookkeeping process, in addition to the goals it achieves, has well-known drawbacks in the form of the energy required to perform the computation, the risk of 51% vulnerability, and the security risk associated with the centralization of computing power in the actual cryptocurrency operation. Using the proof of stake method as a replacement of the proof of work method, while not requiring a computational contest to create blockchain blocks, also results in centralization of the nodes that create the blocks, not in terms of computational power, but in terms of the cryptocurrency held.

Any form of centralization in the operation of cryptocurrencies violates the original concept of independence from manipulative authority, poses a security risk, and artificially contributes to the must-be-avoided inequalities that can arise in the system.

Since the issuance of HAtcoin does not require scheduling, there is no need to control the network's accounting speed associated with the issuance of crypto-tokens by a computational process. If it is achievable that the computing power does not play role in ensuring the immutability of the ledger, then the 51% vulnerability does not pose a threat to maintaining the authenticity of the blockchain. The use of the proof of stake method to elicit computational competition, but still carries the risk to centralize blockchain maintenance is also unnecessary if the immutability of the blockchain is not ensured by the amount of computing power invested.

For socially-integrated cryptocurrency, the proposed method for creating transaction blocks on the blockchain is a random-based process that can maintain the security, immutability, and authenticity of the blockchain.

Role of the nodes

As in general blockchain technology, in the case of HAtcoin also, the recording of transactions in the blockchain ledger is managed by the nodes. The nodes are connected to each other in a computer network that allows continuous communication and uses synchronized time. 

As in general blockchain technology, in the case of HAtcoin also, a node can be anyone who has the necessary computing power to run the open-source, consensus-accepted operating application, has sufficient storage space to store the blockchain, and has a continuous network connection for communication.

Steps to joining the network as a node:
1. Install the open-source blockchain ledger management application.
2. Retrieve the current blockchain and node table from the network
3. Ping nodes registered in the node table
4. The entity requesting to act as a node sends the request to be registered in the node table to the nearest neighboring node in the network structure with the data required to authenticate the request for inclusion in the table.
5. The invoked node interactively verifies and validates that the conditions for adding the new node are met, and if the verification is successful, adds the new node as a new record to the node table with the network's acceptance time. The primary key in the node table is the acceptance time.
6. The first authenticating node propagates the new node record to the other operating nodes in the node table.
7. Each node re-authenticates the new node's admission requirements when its node table is updated.

HAtcoin-based financial transaction: publishing the record of a HAtcoin-based transaction (payment with HAtcoin)

Payment with HAtcoin works on similar principles to the general payment process of cryptocurrencies. The transaction record is created by the HAtcoin client sending the token. The receiving partner provides the public address of a HAtcoin wallet. The sending client compiles the transaction based on its own available HAtcoins from the information contained in the blockchain, together with a flat transaction fee set by the system for the node accounting the transaction, and publishes all the information to the network with authentication by the sender's cryptographic signature.

Steps to publish a HAtcoin-based transaction:
1. The client sending the token retrieves the current node table from the network.
2. The client pings the nodes based on the node table and sends the record to the node with the fastest response.
3. The node receives the transaction and verifies the information against the blockchain that it exists, is real, and is authentic.
4. After authenticating the record, the node appends the network time to the record.
5. The node propagates the transaction to the mempool table (mempool is a table of transactions that are not yet recorded in the ledger). The primary key of the mempool table is the network time of the transactions.

Each node checks the validity of each new mempool record. An invalid transaction record can be deleted by any node. HAtcoin clients can check the existence of a transaction in the mempool table at any time.

Creation of a new blockchain block from transaction records in the mempool table using the proof of random method

In the application that operates the HAtcoin system, a limit on the number of records for the mempool table is specified. When the mempool table exceeds the specified limit of records, the application operates the system triggers the proof of random process on the nodes for a new ledger block creation process, and each node executes the following algorithm:

The proof of random algorithm:
1. It halves the time between the oldest record and the record that triggers the limit in the mempool table.
2. Selects the first transaction record that is newer than the calculated half-time from the mempool
3. Takes the cryptographic signature of the selected transaction record as a numeric value and divides it by the number of records in the node table that have an acceptance time earlier than the time of the selected transaction record.
4. The remainder of the division indicates which row-numbered node of the node table is authorized to create the new ledger block.
5. The node that selects itself through the procedure creates the new ledger block from the records of the mempool table containing the transaction records up to the record selected through the half-time procedure, adding the cryptographic signature of the last block already created in the blockchain, includes the actually valid node table, and signs the data with the node's cryptographic signature authenticating the information of the new block for the blockchain.
6. The node that creates the block propagates the new block of the blockchain to the nodes in the node table.
7. Each node that receives a new blockchain ledger block verifies the data and, if valid, deletes the transaction records from the mempool that are still there but have already been copied to the new blockchain block.
8. If the number of transaction records in the mempool is reduced below the specified limit by deleting transaction records from the mempool table because they are recorded in the ledger, the trigger to create a new ledger block is disabled until the number of transaction records in the mempool reaches the limit again.

The proof of random method can be used as a general blockchain ledger technology, which eliminates the disadvantages of competition and the risk of centralization and is a suitable procedure for creating new ledger blocks.

The typical benefits of the proof of random method:
- The proof of random method is flexible to adapt to the volume of transactions, with more transactions automatically resulting in the creation of ledger blocks at a faster rate.
- The time required to record a transaction on the blockchain does not increase as the number of transactions increases.
- There can be no forks in the blockchain because the random method uniquely and unambiguously selects the node that will create the new block each time. The longest blockchain continues rule loses its meaning.
- The process is democratic, with no risk of centralization, each node is equally likely to create new blocks.
- The process does not involve competition of computing power.
- The computational requirements of the nodes are not significant, hence the operation as nodes can be democratized, which increases the security of the network.
- Since the creation of a new block on the blockchain does not require computational competition, the 51% vulnerability is no longer a risk.
- No need for confirmation depth, transactions on the blockchain are immediately immutable.

C/ Ensuring the integrity of the nodes that create HAtcoin blocks based on social reputation

A typical problem with open peer-to-peer computer networks is the threat of Sybil attacks. A Sybil attack is a type of attack on a computer network service in which an attacker subverts the service's reputation system by creating a large number of pseudonymous identities and using them to gain a disproportionately large influence.

The proof of random process that generates blockchain blocks from HAtcoin transactions is not protected by the proof of stake or proof of work Sybil deterrence mechanism typical of traditional cryptocurrencies, which originated from the resources invested.

The administration of a socially integrated cryptocurrency can be credibly regulated by the trust created by social recognition. An obvious solution to protect the HAtcoin administration computer network from Sybil attacks is to allow only the node that creates HAtcoin tokens to create blockchain blocks.

This condition properly satisfies Sybil's deterrence mechanism because it provides both authentication of the physical existence of the node and social control and monitoring since a real person has the incentive to use an organization that is considered trustworthy by society to create his or her own HAtcoin token.

The rule, in addition to Sybil's deterrence mechanism, makes nodes interested in maintaining a social reputation in order to earn transaction commissions. The rule also makes the operation of nodes that administer HAtcoin transactions economically sustainable with a low and flat HAtcoin transaction fee.

The proposed Sybil deterrence policy can be easily implemented if the node table records when a node has created a HAtcoin token, and the rules governing the system include a time limit for nodes during which they are allowed to participate in the proof of random process after creating a HAtcoin.

D/ The age of the validity of the record of the HATcoin transactions on the blockchain is limited

A specific rule corresponding to the proposed socially integrated universal value exchange instrument is the dynamic, socially dependent limitation of the amount of money in circulation, achieved by the time-dependent validity of the transaction records recorded in the blockchain. The application of this rule allows the automatic withdrawal of unused money from circulation in a way that typically does not violate the fundamental right to personal property, since the creation of a transaction to extend the personally owned HAtcoin validity without actual value exchange can be done by anyone creating a transaction to the person’s own HAtcoin address.

The rule can be easily implemented by utilizing the creation time of blockchain blocks. A possible solution is for the HAtcoin client not to read blocks in the blockchain that are older than the validity period calculated from the current time, or for the nodes managing the blockchain actually delete blocks that are older than the validity period calculated from the current time. Both methods have their advantages and disadvantages, and consensus must be used to determine which method to use, and consensus must also be used to determine the validity period of the blocks in the blockchain.

The outlined logical concept, a computational system implementing HAtcoin as a cryptocurrency can be a suitable method to realize the practical operation of a socially integrated universal medium of exchange. 

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