Topic: HOW BLOCKCHAIN TECHNOLOGY CAN BE USED TO PREVENT FAKE FIAT CURRENCIES? (Read 190 times)

blockchain and crypto are only great at proving coins are real when the amounts are clear to see and the source of the amounts are clear to trace back

some altcoins (and bitcoin proposals) are having systems implimented where coin amounts are not clear, and this can invite fake coins being created.

these "privacy" tools instead of having
in:  
1 btc
1 btc
out:
0.8btc
1.2btc

instead look like
in
+6
-6
out
+9
-9

where all people can see is the in's calculate to result in 0 and the outs result in 0 to show the ins and outs balance out, and that would be the network rule. that numbers have to balance out to 0 (cancel each other out) but not reveal the real amounts hidden.
many people say that it all works out because those trading get to see the hidden math of turning a in from +-6 to 2btc and the +-9 to be 2btc.

by the network not being able to know what the amounts are breaks the fundimental point of validating value. and it just becomes a bunch of people aggregating data that could be anything.
the person who moves the +-9 to the next person knows the hidden privacy maths of the +-6 but the new person does not.
and the network does not know the math of the +-6 or the +-9  so the person making a transaction using the +- balance to a new person can manipulate things so that the +-9 is actually 6btc total and there is no way in the network of proving otherwise.
this is simply because if the network knows the math of the privacy tool. there is no point having the privacy tool because everyone can see the amounts by using the math.
because the privacy tool math is unique per transaction anyone can alter the math to show the new recipient any amount the tweaker wanted

imagine a 'commitment' that had this
in A =true amount *6
in B =true amount -7
out A =true amount +8.2
out B =true amount -10.2

you could decode that and see the in as being 1btc, 1btc and out as 0.8, 1.2
but only the next recipient gets to see this. all the network does is have a rule that A and B have to cancel each other out to 0
so while the network is happy to set a transaction thats only validation is A cancels b
the user can make a malicious commitment of
in A =true amount *2        (making the value 3btc but still encodes to +6)
in B =true amount -9        (making the value 3btc but still encodes to -6)
out A =true amount +8.2  (making the value still 0.8 and still encodes to +9)
out B =true amount -14.2 (making the value still 5.2 and still encodes to -9)

and no one else on the network can tell the difference or audit it. as all they see is +-6 +-9 so the receiver just has to take the word of the commitment they got is what it is

like i said. if a math commitment was to be fixed so that someone could use that same exact math on every previous transaction to validate it all right back to the source minted coin years before. then privacy is broken and everyone could use that maths to rebuild data of true values clearly displayed.

in short
my examples are very simplified for easy demo and miss out many point.. but the point being:
in a system where everyone uses the same commitment math to decode and validate true value.. there is no point having a privacy tool because everyone can decode it anyway
and if the privacy tool math differs per user transaction. a malicious user can tweak the individual math to fake new value and make the next person think they are getting more or less than what the true value should be. and the new user has no blockchain network audit to tell them any different

so transparency of true value trumps privacy in finance if you want a system of true un-manipulable finance network. whereby the only privacy people should rely on is that their name, and personal life story is not embedded into a blockchain
as soon as a blockchain stores stupid things like numbers that dont represent the true value beneath, and users cannot validate the true value beneath as a network. its no longer a financial blockchain. its just a chain of random data that can be manipulated to the whims of the individual making the commitment(maliciously)

a blockchain is only as good as the data a network of users can separately validate and know for sure thee actual data is true. if users cannot validate true data, they might as well not validate. and thus there is no point of a blockchain. and instead it just becomes a distributed database that is not audited

The blockchain technology which has helped in developing cryptocurrencies like bitcoin checks against double spending because of the fact that the distributed ledger of bitcoin contains all the transactions of bitcoin and it is very secured to the extent that you cannot tamper with any transaction unless you unconfirm all transactions that come before that particular one.

You have a good point there, but your statement would be really confusing to anyone who is new to blockchain technology. Blockchain technology and crypto are two separate things and yes blockchain technology is decentralized but yet very transparent.

Well you are right because through the creation of bitcoin using the blockchain technology issues like double spending and the creation of fake currencies can be avoided because all transactions occuring on the blockchain ledger system are fully decentralized and secured. I wonder why our governments don't want to accept cryptocurrencies into the system looking at some of the benefits that it offers.

Bitcoin is PoW based as an implication of PoW and these are all the pros that exist in Bitcoins. The details you mention belong to PoW and blockchain technology is not limited to this only.
Concerning your question, blockchain technology can be used to prevent fake fiat currencies and many other financial problems as it can help to create cryptography based currencies that are completely digital. These crptos will not only ensure decentralization but transparency, privacy and security as well.

Well, bitcoin has the ability to do such since its protocol is designed to do such, and is complementary with blockchain that displays records of transactions and proofs that something happened within the network. It can be incorporated to fiat but up to what extent and how 'deep' would the transaction records be is the question. Imagine having a whole network catering a whole country's transactions from a day-to-day basis, involving brick and mortar stores as well. That's a lot of tracking to do, and a lot of storage space needed IMO. I'm pretty sure counterfeit fiat and bank notes are already being monitored by the banks, and people are also keen on inspecting the money they receive so I think using blockchain tech is not necessary.

what he meant was, how would blockchain technology be implemented in a bank system, it could prevent money laundering because all transactions were recorded in the blockchain ledger and could not be manipulated (maybe).

you are confusing bitcoin with blockchain technology. things you say here such as being decentralized, prevent  double spends, prevent creation of fake "money",... are all true about bitcoin not the technology. the technology is just a tool that these coins use. the way they use it can be decentralized and prevent all that or it may be centralized, shady and allow you to do anything you want. it doesn't even have to be a distributed and open ledger.

According to literature cryptocurrencies can help avoid double spending and generating of fake currencies into the system. The blockchain technology which serves as a distributed ledger system for all transactions of bitcoin prevents double spending and also because the honest nodes on the bitcoin network outweighs the attacker nodes, the nodes within the network only confirms true transactions unto the blockchain other than any suspicious transactions.
Also, because the blockchain technology is an open source decentralized network everything occurring on the network is very transparent and therefore people can just make their own currencies into the system.