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Ethereum layer-2 scaling network Starknet has outlined plans to improve the decentralization of three core components of its zero-knowledge(ZK) proof rollup solution.

Speaking exclusively to Cointelegraph, Starknet product manager and blockchain researcher Ilia Volokh outlined the firms intent to address certain centralized elements of its protocol aimed at defending against censorship and making its system more robust.

Starknet operates as a validity rollup using ZK-proof technology to bundle transactions, with cryptographic proofs submitted to Ethereum to achieve security and finality for layer-2 transactions.

According to Volokh, Starknets protocol remains dependent on StarkWare for creating L2 blocks, computing proofs and initiating layer-1 state updates to the Ethereum blockchain.

In this sense, the operation of the network is centralized. This temporary situation, until full decentralisation, is not necessarily a bad thing. Although Starkware operates the network, it cannot steal money and cant do any invalid state transitions because they require executing the verifier on Ethereum, Volokh explained.

While Starkware remains a centralized gateway to enter Starknet,Volokh added that the protocol is 100% honest and cannot falsify transactions or information, as Ethereums layer-1 blockchain acts as a filter.

The only tangible way in which Starknet can misbehave is either by being idle in not relaying proofs to Ethereum or by specifically censoring certain parties from including transactions or proofs.

For Starknet, the latter consideration is part of the main reason to decentralize parts of its protocol in an effort to combat two main causes of censorship in consensus-based systems.

Intentional censorship is one consideration, while non-robust systems that have a single point of failure present another threat to decentralization, given that all network participants would be censored if this central point caused a network or system outage.

Decentralizing these different components of Starknets system entails varying degrees of difficulty. This includes decentralizing block production through its consensus protocol, decentralizing the proving layer, which is in charge of computing proofs for blocks and decentralizing the process of L1 state updates.

I want to emphasize that its crucial to decentralize each of them because as long as even one of them is centralized, you havent achieved much, Volokh added before unpacking the relevant challenges of each component.

Decentralizing block production has been fairly straightforward given that all blockchains rely on a consensus protocol and sybil-resistance mechanism. Meanwhile, decentralizing Starknets prover has required a more novel approach.

As far as I know, were the first rollup that has come out with a fairly complete and concrete solution, Volokh said. He also went on to unpack how competing ZK-rollups all essentially aggregate transactions into proofs and post them on Ethereum, which by extension transfers its own decentralization to rollup solutions.

However, these systems all rely on respective central entities to create and prove blocks, which means these layer 2s are equally centralized. Whether end users are concerned about the philosophical implications of the centralized components of L2s is another conversation altogether for Volokh:

Volokh added that Starknet is still in the process of outlining the process of testing and implementing these decentralized mechanics in its network. This is likely to be carried out through a series of interconnected testnets to test the simultaneous functionality of the different components.

Magazine: Heres how Ethereums ZK-rollups can become interoperable

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Ethereum L2 Starknet aims to decentralize core components of its ... - Cointelegraph

Digital identity is having its moment. Close to 60 percent of consumers in the UK and the U.S. use some form of digital wallet, while more than a third of organizations are planning to include digital IDs in their organization, according to a survey from software maker Curity. This is why digital IDs were once again the hottest topic in London this week during the Future Identity Festival 2023.

The first day of the two-day conference welcomed speakers from organizations ranging from Decathlon, Vodafone and Booking.com to Mitek, IDVerse and Open Identity Exchange (OIX). The panelists discussed business models, risks such as fraud and hacks, as well as solutions such as decentralized identities.

The question of digital identity wallets is a very, very timely one, says Hannah Jeffreys, senior product owner for digital identity at Lloyds Banking Group. The company has recently launched a digital identity app called Lloyds Bank Smart ID in collaboration with Yoti.

The key aspect of digital identity is its reusability, Jeffreys said during a panel covering digital identity strategies for businesses. Users can re-share their identity or attributes across different transactions in multiple industries, from drivers licenses to bank account history and healthcare identifiers. It also allows users to control which data they share through data minimization.

Companies benefit too, according to Boris Montin, global head of risk and identity strategy and analytics at food delivery platform Glovo. Digital identity informs them about customer preferences and helps them personalize their experience while increasing security. But companies will face challenges in offering digital identity solutions.

You all understand the kind of chicken and egg nature of the reusable digital identity market, says Jeffreys. Users dont want a reusable app until there are lots of places that accept it and places dont want to accept it until lots of users are using it.

Companies have been facing different challenges across geographies: While using biometrics may be a good way to achieve inclusivity in a country like the UK, it may not be an option in countries where many people own cheaper phones such as Nigeria.

Another issue in some countries is a lack of access to government data, says Duncan McIntosh, lead product owner for strategic identity services at NatWest Group.

The interoperability of digital wallets across different geographies was also one of the most commonly mentioned concepts during the day. The team behind the UK Digital Identity and Attributes Trust Framework, for instance, has been closely watching what is happening across the channel with the European eIDAS, panelists said.

A more pressing concern, however, may be cybersecurity, fraud and the looming dangers of artificial intelligence.

In the old days, criminals used to send letters to banks in attempts to defraud them, says Sally Felton, director for Fraud Risk Management at auditing and assurance company BDO. Thanks to digitalization, they can now spam thousands of people from the comfort of their homes.

These criminals have no governance committees, they have no sign-off processes. They can react much quicker to weaknesses in systems, Felton said during a panel on the shifting landscape of fraud and risk regulation.

Organizations have been shy about sharing data because of privacy rules such as the GDPR, even though more data sharing would help prevent fraud, the panelists agreed.

At the same time, organizations need to pay attention to how they are handling customer data. Organizations should be thinking about deleting data, sharding it into segments, or decentralizing it in a way that it cannot be replicated.

Are we as a society moving away from the honeypot to the world towards something that is more focused on decentralized and/or data minimization? asked Christopher Briggs, SVP of Identity at Mitek during a panel on privacy.

The Future Identity Festival did not just lay out challenges to digital identity, it also offered solutions.

Identity management has seen different approaches, says Jason Boud, co-founder and CEO at RegTech Associates. Some identities are verified and issued by a single authority like the government. Other identities are federated and issued by third parties such as those from private actors like Lloyds or the UK Post Office. The third way is decentralized identities.

The basic building blocks of decentralized identity have been standardized for a couple of years now, says Damian Glover, senior director of communications at the Decentralized Identity Foundation.

What were now working on is going up the stack, he adds. Theres only so far you can go into those basic building blocks you need. You need functionalities that can then sort of exploit those basic capabilities.

The benefits of decentralization are better resistance to hacks that have been plaguing centralized identity repositories. So-called self-sovereign identities should also give more user control over data. But the concept is still fresh and is currently fighting with skepticism and a bad reputation generated by headlines about blockchain and web3 failures.

I think that our current legal system and the regulation dont fit at the moment at all with the idea of decentralization. I think its one of those things where youre always going to be probably behind the technology for quite some time, says Jacqueline Watts, head of commercial law at the A City Law Firm.

Decentralized identities have yet to find a way towards commercialization. But as privacy becomes more important to consumers and even larger parts of our society move towards the digital realm, decentralized identities will also find their place in the world, panelists concluded.

Shaping digital identities for the finance sector: Future Identity Festival day 2

biometrics | decentralized ID | digital identity | digital wallets | Future Identity | interoperability | reusable identity

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Business models, fraud and decentralized digital IDs: Future Identity ... - Biometric Update

After 2021, we entered an era in cryptocurrency where people stopped talking only about financial decentralization and started to broadly discuss the tokenization of everything, thanks in part to nonfungible tokens (NFTs).

This shift represents a critical perspective that is set to guide three theses for the upcoming bull market. To fully grasp these theses, it is crucial to understand that everything is data. Money is data. Your engagement with a brand is data. Your credentials are data. The ticket for your favorite show is data.

Since 2021, the ecosystem has increasingly started to store a large part of this data in the form of fungible tokens, NFTs, and timestamps on the blockchain, which acts as a data repository in this context.

Related: Expect new IRS crypto surveillance to come with a surge in confiscation

While not all data needs to be on the blockchain, the ability to place data on the blockchain radically transforms how we store, share, and utilize data for automated and secure instructions and transactions.

And it seems that this prospect of tokenizing everything is coming to Bitcoin. This gives rise to the first thesis.

In January 2023, Casey Rodamor publicly released the Ordinals protocol, which, in short, allows for the permanent insertion of any file type into the Bitcoin blockchain.

In less than a year, the community has already conducted experiments in which music, artwork, journalistic articles, and even video games are being inscribed on the world's leading blockchain.

The Ordinals protocol was not the first to allow this, but it has gained the most traction. And everything indicates that this is a flame that will not go out.

More than just a technical protocol, a culture and a mindset have been created where more and more builders see Bitcoin as a canvas for the creation of other projects and applications, and nothing can stop well-established cultural movements.

But remember: not everything needs to be stored 100% on-chain, as this is expensive and, for some applications, inefficient.

Therefore, protocols such as Taproot Assets which enable the creation of other assets on the Bitcoin network but in a way that keeps most of the information off-chain, will be essential.

Speaking of storage costs on layer-1 blockchains, it looks likelayer-2 blockchainsare set to shine.

Those who were active during the 2021 bull market recall that $50 for a transaction fee on Ethereum was almost the norm, not to mention the spikes, like during the minting of the Otherside NFTs by Yuga Labs, where users paid up to six Ether (ETH) per transaction.

It's simple: if the blockchain isn't invisible, it won't reach the mainstream. And expensive and slow transactions make the blockchain highly noticeable.

That's why layer-2 blockchains designed to scale layer-1 blockchains will be so crucial for the next bull market.

Although they've been around for years, neither they nor the market was mature enough to build on them in the last cycle. On one hand, many companies and developers weren't convinced that layer-2s were stable enough to handle a significant influx from the mainstream. On the other hand, there was also the issue that, in the excitement of the moment, people acted without studying and understanding much.

The number of projects unnecessarily on Ethereum was significant, and the reasons varied: it was cultural, because some companies didn't even know what secondary layers were, or simply because everyone was building on Ethereum.

Now, with all the lessons learned and the calm that has settled in with the bear market, it's clear that the mentality for building is much more mature, and the 'jobs to be done' by blockchains have become much clearer to those who are building.

And the cherry on top will be the implementation of EIP-4844, which is expected to happen in a few months on the Ethereum network, and will further reduce the transaction costs of layer-2 networks, making them even more invisible and robust to attract and retain the mainstream audience.

But it's useless for the infrastructure to be invisible if people can't connect to it and companies can't build on it. However, the solution is already here!

The big issue is that with the tokenization of everything, in some cases decentralization is more of a hindrance than a help.

If the topic is Bitcoin (BTC) custody, the topic of decentralization is pertinent. However, when the subject shifts to tokenized tickets or a company's loyalty credentials, the value does not lie in the system's decentralization. Therefore, simplifying the user's experience by abstracting complex processes such as creating a semi-custodial wallet with social login or eliminating concerns about gas fees makes total sense and it's necessary.

Related: Bitcoin beyond 35K for Christmas? Thank Jerome Powell if it happens

Abstraction solutions were the missing bridge so that the crypto universe does not continue to be a technical environment exclusive to technically skilled people willing to face various challenges and complex journeys. But now, they are ready to shine!

And It's not about ending decentralization, it's about having an option. Those who want to remain 100% decentralized can do so, but those who don't now have an option. This way, it avoids the crypto ecosystem dying in the famous chasm of innovation. Because magnificent infrastructures are pointless if people cannot connect to and navigate them easily in everyday life.

Something that's not often discussed is how important these abstraction solutions are for traditional companies to effectively join Web3 too. How many companies currently have a team of developers who can program in blockchain languages, like Solidity? Making it easier for builders to get started is also crucial.

Breaking down the blockchain journey to mainstream into four phases, we could say that the account abstraction solutions, along with the advancements mentioned in thesis two, will propel Web3 into its penultimate phase with improved infrastructure, fewer technical builders and brands join the game, and the number of applications, projects, and use cases multiply, attracting mainstream attention.

As of today, it seems that major blockchains will be increasingly viewed as platforms for multi-asset consensus in the next market cycle and less as currencies. The crowning gem will be the quest for scalability, which will make the layers more invisible and less complex for users to navigate and for businesses to integrate. Welcome to t of Ethereum and phase 2 of Bitcoin.

Lugui Tillier is the chief commercial officer of Lumx Studios, a Web3 studio that counts BTG Pactual Bank, the largest investment bank in Latin America, among its investors. Lumx Studios has previous Web3 cases with Coca-Cola, AB InBev, Nestl and Meta. The author holds investments related to the Ordinals Protocol, though none named in this article.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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3 theses that will drive Ethereum and Bitcoin in the next bull market - Cointelegraph

Generative art is proving Web3s creative anchor in the traditional art world. Last month, New Yorks Museum of Modern Art (MoMA) made headlines by acquiring Refik Anadols Unsupervised Machine Hallucinations (2022) alongside an edition from last years 3FACE project by Ian Cheng. These two mark the first-ever artificial intelligence (AI) and nonfungible token (NFT) additions to MoMAs collection, already home to relics such as Andy Warhols soup cans and Vincent Van Goghs Starry Night.

The landmark acquisitions also supplement MoMAs longtime legacy of pioneering exhibitions at the intersection of technology and art, from its 1968 show The Machine as Seen at the End of the Mechanical Age through this years Signals: How Video Transformed the World.

MoMAs announcement arrived in tandem with an outline of the institutions digital art programming for the fall and winter seasons ahead, including the debut of video artist Leslie Thorntons latest work, HANDMADE (2023), and an online exhibition with Feral File opening early next year. Weeks before, MoMA had announced its on-chain Postcard project, too.

These new initiatives underscore MoMAs longstanding commitment to support artists whoexperiment with emerging technologies to expand their visual vocabularies and creative exploration, increase the impact of their work and help us understand and navigate transformative change in the world, the Museums release around their acquisitions states.

Im very proud to be included, Cheng told Cointelegraph. MoMA had previously acquired my Emissaries trilogy of simulations in 2017. Their openness and enthusiasm for acquiring dynamic digital art is rare for an institution.

Its the screensaver heard around the world. Whether youre enamored or suspicious of this one-time Google artist-in-residences prolific and mesmerizing machine-learning abstractions, the odds are youve seen them. Anadol designed this one in particular with help from Nvidia. It feeds 138,151 pieces of visual metadata from MoMAs collection to an algorithm that produces an AI imagination of art history through Anadols signature undulations.

Since its release in November 2022, Unsupervised has been reviewed by critics at Vulture, Artforum and more. The time it took to write those reviews says more than anything about the works import. Jerry Saltzs half-baked hot takes dont detract from the mental energy his writing requires. Haters alone havent made Anadol famous he has scores of devoted fans if not collectors. MoMA opted to extend the works 24-foot tall display several times. It just came down on Oct. 29, but visitors who minted their proof-of-attendance protocol, or POAP, from the posted QR code still have a piece of the spectacle.

Noted NFT collector and founder of the club 1 OF 1 Ryan Zurrer made the works acquisition possible, along with the RFC Collection, led by Pablo Rodriguez-Fraile and Desiree Casoni.

I tip my hat to the folks at MoMA for understanding the cultural zeitgeist of the moment, Zurrer told ARTnews. Unsupervised went up two weeks before ChatGPT went public. AI is the defining topic of the moment, and MoMA captured that. Im excited to donate this work to MoMA. But I need to acknowledge that this isnt just a donation from me and [collector] Pablo Rodriguez-Fraile, but from Refik. He is bringing the servers and screens and the other components. The NFT is one part of this conceptual artwork that belongs to MoMA now.

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While the Museum couldnt clarify whether Anadol outright donated the hardware that enabled Unsupervised to go on view, we can assume thats the case. Their release said Thorntons HANDMADE will go on view in the same Gund Lobby where they displayed Unsupervised on a screen the very same size, designed by and realized with thanks to Refik Anadol Studio.

Meanwhile, Cheng evades branding. A lifelong exploration of psychology through cutting-edge technologies defines his practice more than any single aesthetic. In fact, there are 4,096 unique editions of 3FACE in existence, and not one of them was designed explicitly by Chengs hand. Works in the generative project depict adaptive, ongoing visual portraits of their owners, crafted using data gleaned from their wallets at any given moment. MoMA calls it his most ambitious experimental artwork to date to explore blockchain technologies and the decentralization of data, which expands upon the artists interest in the capacity of humans to relate to change.

In his efforts to represent and shape the ephemeral mind, Cheng told Right Click Save last year he believes art can play a role in upgrading the unconscious response we have to complexity. 3FACE honors the depths of every person and, because its dynamic, their ability to change.

The NFT platform Outland Art donated its 3FACE to MoMAs collection. Jason Li and Chris Lew advised a lot and helped flesh out the team to turn the idea into a reality, Cheng told Cointelegraph. I would not have made 3FACE without Outland.

The works public entry on MoMAs website doesnt list what number out of the whole series it is or what wallet it belongs to. MoMA didnt respond to Cointelegraphs request for comment, but based on the way 3FACE works and the fact that MoMA just started collecting on-chain artworks, this might be the 3FACE interpretation of a wide open wallet populated only by Anadols Unsupervised.

Carrying the torch from former contentious and pioneering art forms like photography, generative art has forced this generation of artists to reassess what exactly makes art valuable.

The endgame of generative AI tooling is a new immediacy between thought and visual articulation, Cheng mused about whats next for AI art. Were used to the immediacy between thought and written or verbal expression. A writer, with no intermediary help, can construct a novel. Imagine if you, with no intermediary help, could construct a movie. As with writing fiction, the filmmaker is capped only by their own imagination, their taste, the quality of their questions, their courage to pursue gray truths, and their understanding of human behavior.

Technology will continually evolve, but its the evolution of artists abilities in using it that divides whats merely eye-catching from whats impactful. Not that those two are mutually exclusive even though MoMAs Anadol acquisition is akin to the institution buying itself a Louis Vuitton bag, what society calls luxury is history on its own.

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Anadol and Cheng both work predominantly with data while making AI art. The emergent properties of their processes have implications. Unsupervised begs the question: What is art history? a fraught topic traditional art historians argue over without even breaching painting alone. By virtue of its premise, 3FACE asks those who engage with it how theyd quantify a gnarled human psyche. Its one of the few projects that uses the ledger as anything more than a manner of transacting.

Museums such as the Los Angeles County Museum of Art and the Centre Pompidou started collecting NFTs back in the boom days. MoMAs decision to lend credence to such works now marks a new watershed moment.

We pinch our nose at AI art right now because the first experiments look like experiments, but zoom out 10 years from now, Cheng said. The ease of producing visually refined expression will unlock a lot of artistic agency from a greater plurality of people, and this is a good thing.

More here:

New York MoMA now has tokenized artworks in its permanent ... - Cointelegraph

By Ari Juels and Eswar Prasad

Blockchain technology and proof of reserves will help to create transparency and build trust

The vertiginous fall of Sam Bankman-Fried, the disgraced founder of the cryptocurrency exchange FTX who was recently convicted of fraud and money laundering in New York, has cast a harsh light on a largely unregulated market. For all the supposed wonders of the blockchain technology underpinning cryptocurrencies, the headline-grabbing events of the past few years indicate an industry in turmoil.

In addition to the criminal activity that led to the spectacular collapse of FTX in 2022 and Bankman-Fried's guilty verdict in early November, U.S. regulators have sued Binance, the world's largest crypto exchange, for allegedly operating a "web of deception." An industry-wide reckoning looms. Will crypto always be a magnet for fraud and malfeasance, or can it eventually transform and democratize finance?

An increasingly obvious paradox has emerged. Satoshi Nakamoto, the pseudonymous creator of bitcoin (BTCUSD), proposed the idea of a purely peer-to-peer version of electronic cash in the wake of the 2008 global financial crisis, when confidence in governments and central banks was at its nadir. Soon after the launch of bitcoin in 2009, Nakamoto wrote that "the root problem with conventional currency is all the trust that's required to make it work." Today, the system that was supposed to eliminate the need for trust between people and in traditional financial institutions is experiencing a crisis of trust.

Cryptocurrencies such as bitcoin and ethereum (ETHUSD) rely on computer code and networks that are not controlled or managed by a central party. Remarkably, such decentralization works. Transactions can be completed in a secure manner, without relying on a bank, credit-card company, or other institution. In principle, this should make financial systems less vulnerable to fraud and manipulation.

Any innovation inevitably attracts speculative mania and chicanery, especially in the early stages.

Unfortunately, grifters and unscrupulous companies have exploited customers and investors enamored with the new technology and, in the process, obscured crypto's most compelling innovation: blockchain-enabled tools that can improve transparency and strengthen the trustworthiness of the financial sector.

Maintained on computers around the world and publicly accessible by anyone with an internet connection, blockchains are digital ledgers that carry an immutable record of all transactions in a system. Their reliance on algorithms, rather than human interaction, creates a robust money trail that traditional financial infrastructure lacks.

So, how did we end up with a crypto industry that often contradicts its founding ethos? One answer is that any innovation inevitably attracts speculative mania and chicanery, especially in the early stages of its development. In the 19th century, banks deceived examiners by padding gold reserves with nails. More recently, the dot-com era gave us the likes of Enron, while a biotech boom brought us Elizabeth Holmes and Theranos.

Another problem is that the industry's consumer-facing platforms have simply grafted old ways of doing business onto a technology designed specifically to do away with them. For example, while FTX was an "exchange" -- a gateway to blockchain-powered cryptocurrencies -- it did not make fundamental use of decentralized technologies. Ironically, most crypto holders today store their assets in exchanges that require high levels of trust and carry many of the risks of traditional financial institutions.

Behind the scenes, the crypto industry has started using technology to shift the balance back toward innovation. One example is the development of proof of reserves, a mathematically-based method that enables institutions to verify their crypto assets. Such tools could help prevent debacles like FTX, where the lack of transparency allowed Bankman-Fried to conceal financial fraud.

Importantly, proof of reserves and similar tools work best for cryptocurrencies, not for ordinary financial assets -- including the U.S. dollar (DX00). These technical advances have therefore prompted traditional financial institutions -- the very ones bitcoin sought to replace -- to embrace crypto. JPMorgan Chase (JPM), for example, has plans to move trillions of dollars of value on to the blockchain, while monetary authorities are exploring central bank digital currencies, which would involve using blockchain technology to issue digital versions of their fiat currencies.

To be sure, the crypto industry faces several daunting challenges: the large environmental footprint of bitcoin mining; its use for illicit transactions; privacy shortcomings, and more. But, as proof of reserves suggests, the crypto community is innovating powerful new ways to harness the inherent transparency and trustworthiness of blockchain technology to create a more secure and flexible financial ecosystem.

As these innovations proceed, governments around the world are exploring ways to safeguard consumers from the crypto industry's excesses. They would do well to look past the headlines and seek a balanced approach that enables this remarkable technology to thrive.

Ari Juels, a professor at Cornell Tech, is co-director of the Initiative for CryptoCurrencies and Contracts (IC3), chief scientist at Chainlink Labs, and the author of the forthcoming The Oracle (Talos Press, 2024).

Eswar Prasad, professor of economics at Cornell University, is a senior fellow at the Brookings Institution and the author of The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance (Harvard University Press, 2021).

This commentary was published with the permission of Project Syndicate -- Whither Crypto?

Also read: 'Fraudsters, hucksters and scam artists': Gensler defends SEC track record on crypto in wake of FTX scandal.

More: All memes aside, crypto buyers aren't any different from stock investors

-Ari Juels -Eswar Prasad

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Crypto will overcome the stain of FTX and Sam Bankman-Fried - Morningstar