Open Transactions is incredibly important

I was able to attend the first Bitcoin mini-conference in Austin and to my surprised pleasure one of the speakers was FellowTraveler (Chris) who also lives here.  He works on the open source project Open Transactions which is part of the Monetas product.  In my mind this is absolutely the next generation in software tools for supporting digital currencies.

I will attempt to explain Open Transactions but I will warn you that it is a heady idea and I feel that I am only beginning to understand the full potential and implementation of it.

Open Transactions is a server model cryptographic contract clearinghouse.  Clients connect to it and can send each other encrypted messages that can take different forms from just being a memo, to being a transaction of a security, to being a security pair trade.  In layman's terms that is sending someone a message, sending someone money, or sending someone a contract to exchange one type of security (stock, bitcoin) for another type of security (stock, cash).

You might be thinking (as I did near the beginning of Chris's presentation) that this all sounds like a step backward.  And it would be if not for the next steps taken.  While the server is indeed a server, the server only acts as one signature of the contract.  The client is the first signature and the server cannot alter records sent by the client.  This is very different from current server thinking where clients are not to be trusted and the server is the master record.  Banks must have strict audits to prove that they don't just alter numbers in the system, Open Transactions is simply unable to do so in the first place.  The other step that needs to be taken for this to work is that the server needs to be part of a federated server cluster where contracts can be set up that need majority vote of the federation to occur.  For instance, instead of bitcoin being stored at one address whose key lives on one server, the bitcoin can be sent to a multi-signature address.  Now different servers controlled by different parties must sign the transaction to access the bitcoin.  You can set it up so that you need, say, 6 of the 11 signatures to make the transaction legitimate.  Now bitcoin cannot be stolen by rouge actors, bitcoin cannot be stolen from compromised servers, bitcoin cannot be lost by MIA servers.  What we see is that Open Transactions is a powerful enhancement to Bitcoin, and not something meant to replace it.

There are so many features that make Open Transactions a library that pushes the open, trust independent ideals of Bitcoin from currency into so many other venues.