Outlook for 2024 in the World of Distributed Ledger Technology (DLT)Outlook for 2024 in the World of Distributed Ledger Technology (DLT)

A glimpse into the year 2024 in the fascinating world of blockchain technology. In the ever-evolving landscape of digital innovations, it’s often the seemingly modest beginnings that bring about the most significant changes. Think back to the introduction of the iPhone in 2007, which led to a revolution in the smartphone industry despite initially less than ideal technological conditions.

Similarly, today in the world of DLT, we are experiencing exciting developments that surpass our expectations and open new horizons. This outlook for the year 2024 will provide insight into the fascinating progress and trends that could shape the coming years.

We will delve into the key concepts of cryptography, including Zero Knowledge, Multi-Party Computation, and Post-Quantum Crypto, which form the foundation for a more secure and efficient blockchain technology.

Another thrilling aspect is the vision of a decentralized energy future where blockchain technologies play a pivotal role. We will explore how blockchain can fundamentally change the way energy is generated, distributed, and utilized.

User experience in the crypto world is also a focal point of our outlook. New approaches to simplicity and security will significantly enhance interactions with crypto assets and decentralized applications.

In the gaming world, we will examine the evolution from “Play to Earn” to “Play and Earn,” with blockchain technologies putting players at the forefront like never before.

The exciting fusion of artificial intelligence and DLT will usher in a new era of decentralized innovation, where intelligent agents and algorithms play a crucial role in blockchain networks.

Another highlight is the streamlining of formal verification for smart contracts, leading to more robust and secure applications.

Lastly, we will shed light on the revolution in computation verification through ZK-SNARKs, making the verification of computations more efficient and secure.

This outlook for 2024 in the DLT world promises exciting developments and innovations that could fundamentally transform the way we conduct business, communicate, and interact.

Zero Knowledge, Multi-Party Computation, and Post-Quantum Crypto

The world of cryptography is constantly evolving, with some key concepts currently in the spotlight: Zero-Knowledge Proofs, Multi-Party Computation, and Post-Quantum Cryptography. These technologies are fundamental and have far-reaching implications for blockchain scalability, application security, and more. However, there are still challenges and trade-offs to address.

One central topic is Zero-Knowledge Proofs (zk-proofs). Here, the focus is on the efficiency of the prover, the shortness of the proof, and the need for a trusted setup. It would be highly interesting to see if there will be constructions for zk-proofs that better balance these trade-offs in a multi-dimensional space. Particularly intriguing is the question of whether trusted setups for constant-size proofs (with constant-time verification) are required, further emphasizing the need for more transparent trusted setups.

Another important area concerns constructions for Threshold ECDSA Signatures (Elliptic Curve Digital Signature Algorithm). Achieving thresholds eliminates the need to trust a single signer, which is crucial for multi-party computations with private data and applications in Web3. Of particular interest are threshold ECDSA signatures that minimize the total number of rounds, including the pre-signing rounds where the message is not yet known.

In the digital world, proving identity is more complex than in face-to-face conversations where we often confirm a person’s identity through their face, voice, or introduction by someone we trust. On the internet, when a user connects to their bank provider, for example, they need not only security for transmitted information but also certainty that they are sending it to their bank and not a malicious website impersonating their provider. This certainty is provided by the Transport Layer Security (TLS) protocol, which uses digitally signed identity credentials (certificates). Digital signature schemes also play a central role in DNSSEC, an extension of the Domain Name System (DNS) that protects applications from forged or manipulated DNS data, such as DNS cache poisoning.

A digital signature is proof of authorship of a document, conversation, or message transmitted digitally. Similar to traditional signatures, it can be publicly verified by anyone who knows it was created by someone.

A digital signature scheme consists of three main components: a key generation algorithm that creates a key pair consisting of a public verification key and a private signing key; a signing algorithm that uses the private signing key to create a signature for a message; and a verification algorithm that uses the public verification key, the signature, and the message to determine if the signature is valid.

In the Transport Layer Security (TLS) protocol, authentication must be performed when establishing a connection or conversation because data sent after this point is automatically authenticated unless explicitly disabled. Therefore, the transition to post-quantum secure signatures is not as urgent as with post-quantum key exchange methods, given that sufficiently powerful quantum computers for eavesdropping on connections and forging signatures are not currently available. However, this will change in the future, and the transition will become necessary.

There are various candidates for authentication schemes (including digital signatures) that are secure against quantum attacks. Some use cryptographic hash functions, some are based on lattice problems, while others employ techniques from the field of multi-party computation. It’s also possible to use Key Encapsulation Mechanisms (KEMs) in cryptographic protocols to achieve authentication.

The construction of a specific post-quantum secure signature scheme, namely CRYSTALS-Dilithium for example, is a finalist in the NIST process for standardizing post-quantum cryptography and illustrates a common approach to developing digital signature schemes.

Dilithium is based on polynomials and rings as basic building blocks. A polynomial ring, R, contains polynomials and allows addition and multiplication of integers. The generation algorithm of Dilithium creates a matrix A containing polynomials in the ring R and random private vectors s1 and s2. The public key consists of the matrix A and t = As1 + s2. Quantum computers struggle to derive the secret values from t and A, which is referred to as Module Learning With Errors (MLWE).

The Dilithium scheme enables identification and signing. The prover generates a secret value y and creates a commitment w1. The verifier issues a challenge c. The prover creates a potential signature z = y + cs1 and verifies the security. The verifier checks the signature using Az−ct and w1. Transformation into a non-interactive signature scheme is achieved through the Fiat-Shamir transformation, ensuring security against quantum computers.

In conclusion, as new post-quantum signatures are nearing standardization, it would be worthwhile to investigate which of these signatures could be suitable for aggregation or thresholding. This could further enhance security and efficiency in the post-quantum era.

Decentralized Energy Systems and Blockchains — A Realistic Vision for the Future?

In this chapter, we explore the application of the decentralization philosophy to the energy sector. Currently, most power grids are outdated and centralized, facing challenges such as high costs and uneven incentives. However, exciting opportunities are emerging to address these issues. We discuss the development of microgrids, storage and transmission networks, where tokens play a crucial role.

Another focus is on emerging markets for renewable energy certificates and carbon credits based on blockchain technology. These developments are groundbreaking for a decentralized energy supply, where blockchains take over coordination. We are eager to see how developers in this field continue to push the boundaries of what is possible, thereby redefining the future of energy provision.

The power grid is a complex and extensive network, with parts that are over a century old. Energy is a crucial lever for reducing environmental impact. Today’s world is characterized by natural disasters and environmental effects of climate change. These problems are closely related to the global energy system. The decentralization of the energy system not only aligns with the ethics of Web3 but is also crucial for environmental preservation.

A look at the fundamental principles makes the possibility of decentralizing the energy system clear. Earth’s resources for renewable energy are enormous compared to our needs. The use of solar energy holds great potential since sunlight is available everywhere in the world. Electrifying energy-dependent applications allows us to reduce environmentally damaging centralized supply chains for fossil fuels. Similar to the vision of IPFS and Filecoin, where large centralized data centers are replaced by a distributed network of miners and nodes, we can significantly increase the sustainability of our society by producing energy closer to the point of consumption.

Today’s power grid is designed for the transportation of electricity from a small number of large generation facilities to a large number of consumers. Historically, this was cost-effective and easier to control. However, decentralization requires a redesign of control systems to enable coordination without centralization. This is a complex challenge that can only be implemented gradually. Development is needed to manage the complexity of the power system by breaking down fundamental tasks into deep modules with simple interfaces that allow for upgrades and minimize overall complexity.

Decentralized energy generation offers numerous advantages, including environmental friendliness through renewable energy sources such as PV, wind power, and more, low environmental impact compared to fossil fuels, and short transport distances for electricity and heat. It also enables energy independence from central providers, reducing price fluctuations. Decentralized energy systems increase the resilience of communities to natural disasters and create jobs. Although initial investments are required, they lead to significant long-term cost savings through self-produced energy.

Decentralized energy generation, along with its advantages, also comes with some drawbacks. A significant hurdle can be the initial investment in the required equipment, as operators need to provide financial resources initially. Additionally, decentralized energy systems such as photovoltaics and wind power are weather-dependent, which can cause fluctuations in energy generation compared to biomass and biogas. One solution for this could be the use of various decentralized systems.

In Austria, decentralized electricity generation, especially from renewable energy sources such as solar, wind, and biomass, has gained importance in recent years. Decentralized energy generation, primarily carried out by smaller providers such as energy cooperatives and households, has been comparatively limited so far. However, there is potential for it to become significantly more important and widespread in the coming years (decades).

However, Austria faces challenges in decentralized energy generation, including ensuring network stability and regulating decentralized power producers. The increasing number of power generators can strain the power grid and lead to power outages, requiring technological innovations and regulatory measures. Therefore, it is crucial not only to focus on transaction-based secure logging and value transfer using DLT technology but also to use it as a catalyst for progress.

Decentralized energy generation will gain importance in the future as a crucial factor in the global energy transition and the fight against climate change. This trend is driven by technological advancements in renewable energy and energy storage, the digitization of energy infrastructure, the use of distributed ledger technologies, the formation of energy communities, and political measures. Decentralized energy systems are expected to play an increasingly important role in energy supply.

The Revolution of User Experience in the Crypto World is Crucial: New Paths to Simplicity and Security

In the world of crypto assets, we are currently witnessing a significant evolution in user experience (UX) that is groundbreaking for the future. Traditionally, UX in the Web3 space has been a challenge, especially for new users. With the need to self-manage private keys, connect wallets to decentralized applications (dApps), and manage signed transactions across various network endpoints, the entry barrier has often been high. However, a transformation is underway that could fundamentally enhance the user experience.

A key innovation in this area is Passkeys. They have the potential to revolutionize how we log in to apps and websites. Unlike traditional passwords, which are often susceptible to security risks, Passkeys are cryptographically generated and work seamlessly across a user’s devices. This approach not only simplifies the login process but also enhances security.

Another advancement is the concept of Smart Accounts. Due to their programmability, they are easier to manage. These accounts automate certain functions and provide more intuitive control options, significantly simplifying interactions with crypto services.

The integration of wallets directly into applications, known as embedded wallets, is also a significant innovation. They make it easier for users to get started with crypto services as the necessary tools are already integrated into the application environment.

Multi-Party Computation (MPC) technology offers another improvement. It allows third parties to assist with transaction signing without the need to hold the user’s keys. This provides a safer and more user-friendly way to manage crypto transactions.

Finally, advanced RPC (Remote Procedure Call) endpoints contribute to simplifying the user experience. These endpoints are designed to understand user intentions and automatically fill in any gaps in the transaction process. They make the user experience more intuitive and reduce the likelihood of errors.

All of these developments not only contribute to making Web3 more accessible to a broader audience but also offer a better and more secure UX than what is currently available in Web2. The focus is on reducing complexity, enhancing security, and creating a more user-friendly interaction with Web3 applications. This transformation could be a significant step toward the widespread adoption and use of crypto assets and blockchain technologies.

From ‘Play to Earn’ to ‘Play and Earn’: The Evolution of Gaming?

The gaming industry is one of the world’s most popular sectors, with a massive player base across various platforms. In recent years, game developers have shown increased interest in integrating blockchain technology to create innovative games.

“Play to Earn” (P2E) became popular in the 2020s, allowing players to earn in-game tokens as rewards by completing quests, winning battles, or creating assets and experiences in games. These tokens could then be traded for fiat currency on special markets.

While P2E was initially seen as a groundbreaking model for monetizing blockchain and metaverse games, popular P2E games like Axie Infinity have recently seen a decline in user engagement, and the prices of native tokens have fallen. This has brought solutions like “Play and Earn” (P&E) into focus.

“Play and Earn” (P&E) emphasizes improving the player experience while still offering rewards. Unlike P2E, the focus in P&E is not solely on financial incentives but also on the enjoyment of gameplay itself. P&E games are designed to be entertaining in the long term and motivate players to actively participate.

There are various differences between P2E and P&E. P&E games prioritize the player experience, while P2E games often target financial rewards. In terms of market dominance, P2E games are currently more prevalent, but P&E is also gaining importance and offers a better player experience.

Another important aspect is the distribution of value between players and developers. P&E enables a more balanced distribution of value, where players are involved in the long term and can support developers.

Regarding features, both P2E and P&E offer unique advantages. P2E features smart contracts and decentralized control over assets, while P&E offers digital assets as rewards and grants full ownership rights.

Despite the initial popularity of P2E (Play to Earn), it ultimately faced its downfall as the bear market set in and pushed token prices down. The main issue users had with this genre was the unsustainability of its economy.

In any economy, a healthy balance of supply and demand is crucial to keep it functional. P2E games were designed to rely on supply and demand, but their economy was entirely dependent on it.

Most P2E games heavily relied on continuously attracting new users to support the economy. While P2E games could thrive in this environment, they could only survive for a limited time within it. Ultimately, if a game couldn’t attract enough new players or if the sale of in-game items significantly declined, these games collapsed under the cost of their own operations, becoming victims of their own success. Many popular P2E games had already failed before the onset of the bear market.

When the primary incentive for players is to earn money, users often lose interest once the opportunity to make profits is removed. This results in a game primarily consisting of investors and speculators, with genuine players being rare.

The evolution from “Play to Earn” to “Play and Earn” reflects a shift in the gaming industry. Initially, players could earn real money in “Play to Earn” games. This approach is now expanded to prioritize the fun of gameplay while still allowing players to share in the generated value. This shift underscores the need to make games both entertaining and economically rewarding, striking a balance between gaming enjoyment and monetary reward.

AI and Blockchain: A New Era of Decentralized Innovation?

The fusion of Artificial Intelligence (AI) and Blockchain represents a balance between centralized AI systems and decentralized approaches. Until now, large technology companies have dominated AI development, but Distributed Ledger Technology (DLT) opens up new avenues for broader participation and compensation in global markets. This could reduce the costs of AI and improve its accessibility. At the same time, DLT technology enables the tracking of the origin of digital content and contributes to the decentralization and democratic control of AI, enhancing consumer safety.

In the world of Web3 games and future video game development, it becomes clear that AI agents in games must provide certain guarantees. These guarantees include the use of specific models and ensuring their unaltered execution. When AI systems play a central role in game development, it is crucial to ensure that they act credibly and neutrally. Players want assurance that the game world is built on solid foundations. Here, blockchain technology can contribute by offering such guarantees, including the ability to detect, diagnose, and address AI issues appropriately.

In this context, it becomes evident that “AI Alignment” is essentially an incentive design problem, similar to dealing with human actors. This reflects the core of what the world of Crypto Assets is about.

However, software security vulnerabilities can have serious consequences, including crashes, data loss, and security breaches that affect the quality of software applications. Conventional approaches to bug fixing, such as automated testing and static analysis tools, face challenges, particularly with false positives. An innovative approach based on Large Language Models (LLMs) and specifically tailored for cybersecurity could revolutionize the detection of software security vulnerabilities. LLMs could achieve an impressive accuracy rate of over 90% in identifying security vulnerabilities and significantly impact the field of cybersecurity.

Another focus is on an innovative solution that combines LLMs with Formal Verification strategies to verify and automatically fix software security vulnerabilities. This approach uses bounded model checking to identify vulnerabilities and derive counterexamples. These counterexamples are then passed to the LLM system, which uses a specialized prompt language to debug and repair the code. The results of this method could be promising, as it could successfully fix vulnerable code, including buffer overflows and pointer dereference errors.

Overall, the combination of AI and Blockchain could help enhance the security, transparency, and efficiency of AI systems. This could lead to broader adoption of AI in various industries while preserving user privacy and control over their data.

Simplified Formal Verification for Smart Contracts — Highest Security Standards in the World of Blockchain?

In the world of software development and system design, formal methods play a crucial role. These mathematical techniques and tools are designed to improve the quality, security, and reliability of software and systems, relying on formal logic and mathematics to bring precision and clarity to the development process.

A critical aspect of formal methods is the ability to create precise and unambiguous specifications. This prevents misunderstandings and misinterpretations during the development process.

The verification of software or systems is a critical step to ensure their correctness. Formal methods enable mathematical verification, allowing developers to prove the correctness of a system. This is especially important in safety-critical applications where errors can have devastating consequences.

The ability to abstractly model systems is another feature of formal methods. This simplifies the analysis of complex problems by removing irrelevant details.

Formal methods use mathematical proofs to demonstrate the correctness of systems, leading to higher trust and quality.

Formal methods find applications in various fields, especially in safety-critical industries such as aerospace, medicine, automotive, and finance. However, they are also widely used in general software development.

Despite their advantages, formal methods are not without challenges. They often require deep mathematical knowledge and can slow down the development process. Nevertheless, they are an essential part of modern technology development.

In a world where software and systems play an increasingly significant role, formal methods will continue to contribute to the development of safer, more reliable, and higher-quality solutions. They are the mathematical foundation for the software quality of tomorrow.

While formal verification methods are widespread in the world of software development, they often appear too complex and cumbersome for most developers outside of specialized fields such as safety-critical hardware. However, this is changing in the context of Smart Contracts, where the requirements for security and reliability are particularly high.

Smart contract developers face the challenge of creating systems that handle billions of dollars, and errors in these systems can have devastating financial consequences. Unlike traditional software, Smart Contracts typically cannot be updated through patches, as they run on blockchain platforms.

In recent years, a new wave of tools specifically designed for the formal verification of Smart Contracts has emerged. These tools offer a better developer experience compared to traditional formal verification systems. The reason for this lies in the architectural simplicity of Smart Contracts: they are characterized by atomic and deterministic execution, the absence of concurrency or exceptions, low memory usage, and minimal loops.

Another significant advancement is the performance of these tools, benefiting from recent breakthroughs in the performance of SMT solvers. SMT solvers are complex algorithms used to identify errors in software and hardware logic or confirm the absence of errors.

The increased use of tools inspired by formal methods has the potential to significantly increase the robustness of Smart Contract protocols and make them less susceptible to costly security breaches.

ZK-SNARKs: Is this Finally the Revolution in Computation Verification?

Verification of computations has played a crucial role in the world of technology. There are several approaches to ensuring the trustworthiness of computations.

One of these approaches is to re-run the computation on a machine considered trustworthy. This is a reliable method but comes with its own costs and scalability limits.

An alternative strategy is to perform the computation on specialized machines known as Trusted Execution Environments (TEE). While this can circumvent some issues, it is not always practical.

Another option is to perform the computation on a neutral infrastructure like a blockchain. This approach shows promising possibilities but also faces its own challenges.

Recently, an exciting development has the potential to fundamentally change how computations are verified: ZK-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). ZK-SNARKs allow the creation of a “cryptographic receipt” for a computation by an untrusted “prover.” This is remarkable as it is practically impossible to forge such a receipt.

However, in the past, creating such a receipt came with significant overhead, roughly ten times the original computation. This was a significant drawback. But thanks to recent advancements, we are now moving towards an overhead of only one-millionth of the original computation.

What does this mean? It means that ZK-SNARKs are becoming practical in situations where the original computation provider can bear this overhead while clients may not have the ability to re-run or store the original data.

The potential use cases for ZK-SNARKs are diverse. For example, edge devices in the Internet of Things could verify upgrades, media editing software could embed authenticity and transformation data, and even redesigned memes could express their appreciation for the original sources.

But that’s not all. ZK-SNARKs could also enable authentic LLM inferences. For example, self-verifying IRS forms that cannot be forged or bank audits that are secure against manipulation.

The introduction of ZK-SNARKs promises to revolutionize computation verification in the world of technology. They offer the ability to verify computations in a new way and open up a world of use cases that consumers and businesses alike can benefit from. It will be exciting to see how this technology continues to evolve and the impact it will have on how we verify computations in the future.

Conclusion and Closing Remarks

The field of cryptography is facing exciting challenges and developments in 2024. Key concepts such as Zero-Knowledge Proofs, Multi-Party Computations, and Post-Quantum Cryptography are of fundamental importance. Zero-Knowledge Proofs like ZK-SNARKs need to be further developed to become more efficient and trustworthy. Threshold ECDSA signatures could make multi-party computations more secure and efficient. Post-Quantum signatures offer new possibilities for security in the post-quantum era. In the energy sector, a decentralized future is emerging, where blockchains could play a crucial role. Microgrids, storage and transmission networks, and renewable energy certificates on the blockchain are promising developments. User experience in the DLT (Distributed Ledger Technology) world is being fundamentally improved. Passkeys, smart accounts, embedded wallets, MPC (Multi-Party Computation) technology, and advanced RPC (Remote Procedure Call) endpoints could make interactions with Web3 applications easier and more secure. The gaming industry is evolving from “Play to Earn” to “Play and Earn” to create a more sustainable economic model and finally shift the focus more on the enjoyment of playing. The fusion of AI (Artificial Intelligence) and blockchain enables broader participation and democratic control of generative AI. In Web3 games, the security of AI agents is crucial, and cryptographic technology provides guarantees for their integrity. Formal verification is becoming increasingly important in smart contract development to ensure security and reliability. New tools greatly facilitate the formal verification of smart contracts. ZK-SNARKs are revolutionizing computation verification and opening up diverse use cases, from IoT (Internet of Things) devices to bank audits. The future of cryptography, blockchain, and AI promises exciting innovations and improvements in various industries and application fields.

In conclusion, the choice between modular and monolithic architecture could also be crucial for the future of network technologies and blockchain. The modular approach offers long-term benefits such as flexible innovation and increased competition, making it particularly valuable in an open-source-dominated world. The importance of network effects should be emphasized, showing how the right balance between modularity and integration is crucial for the future development of technologies and business models.

The outlook for the year 2024 in the world of blockchain technology is characterized by exciting developments and promising trends. These developments are likely to exceed our expectations and open up new horizons as we look forward to more secure and efficient blockchain technologies, a decentralized energy future, improved user experiences, blockchain in the gaming world, the convergence of artificial intelligence and DLT, formal verification for smart contracts, and efficient computation verification. The year 2024 promises to fundamentally change the way we do business, communicate, and interact, even if it’s just a wish list for Santa Claus in the end. 😄

Ed Prinz is the co-founder and CEO of https://loob.io. The platform serves as a digital marketplace for digital assets secured through blockchain technology. On this platform, digital assets can be created, showcased in a gallery, and traded on a marketplace, all completely decentralized through smart contracts on the public blockchain. Usage rights are also secured on the blockchain, along with the entire trading history.

Additionally, he serves as the chairman of https://dltaustria.com, the most prestigious nonprofit organization in Austria specializing in blockchain technology. DLT Austria actively engages in educating and promoting the value and applications of distributed ledger technology. This is achieved through educational events, meetups, workshops, and open discussions, all done in voluntary collaboration with leading industry stakeholders.

Disclaimer: This is my personal opinion and not financial advice. Therefore, I cannot guarantee the accuracy of the information in this article. If you are unsure, you should consult a qualified advisor you trust. This article makes no guarantees or promises of profits. All statements in this and other articles reflect my personal opinion.


By Ed Prinz

Ed Prinz co-founded https://loob.io, a digital marketplace for blockchain-secured assets, and chairs https://dltaustria.com, a leading blockchain non-profit.

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