Regulation

Metadata

The act of something can often be less interesting than the metadata surrounding it. For example, driving from Denver to Boulder is an act. Driving from Denver to Boulder in a Ferrari 488 at an average of 120 MPH is metadata. Certainly this infers a different experience than in a Toyota Prius at an average of 30 MPH.

Financial transactions are no different. The context surrounding them is extraordinarily important to economists, tax authorities, law enforcement, businesses and other entities. Sadly in our current fiat based system, most consumers never see how rich in metadata their transactions are or who they are shared with30.

For Cardano, we acknowledge that users could need or are legally required to share transactional metadata with certain actors like tax authorities. But we believe this sharing has to be at the user’s consent.

We also believe that blockchain systems have tremendous power to eliminate fraud, waste and abuse by providing auditability, timestamping and immutability. Thus some metadata should be posted to the Cardano blockchain.

The hard part is finding a correct balance that does not condemn our blockchain to substantial bloat. Given this concern, we have chosen a pragmatic approach.

First, Daedalus will support over the next 12 months a large array of features to label transactions and financial activity. These metadata can be exported and shared on demand with whoever the user deems necessary. Furthermore, the data can be operated on by three party applications for domain specific purposes (for example, tax accounting).

Second, we are exploring adding support for special addresses that can include hashes and encrypted fields. This structure would permit a user to post metadata on our blockchain without publicly revealing it. But if she wants to share the data, it would carry all the auditability, immutability and timestamp surety that a transaction enjoys.

We have already deployed an address structure that contains an attribute field. It is currently being used to store an encrypted copy of HD wallet trees structure for fast wallet recovery (see HD Wallet documentation). Later versions will generalize this construction.


Footnotes

30: On a more macro scale, author Juan Zarate writes about how this data is used by the US Treasury Department in the war on terrorism in Treasury's War. It provides a comprehensive view into how the current structure of global financial markets can be used for geopolitical ends.

Last updated: July 17, 2020 11:40 UTC

© IOHK 2015 - 2020


Cardano is an open-source project.

Cardano is a software platform ONLY and does not conduct any independent diligence on, or substantive review of, any blockchain asset, digital currency, cryptocurrency or associated funds. You are fully and solely responsible for evaluating your investments, for determining whether you will exchange blockchain assets based on your own judgment, and for all your decisions as to whether to exchange blockchain assets with Cardano. In many cases, blockchain assets you exchange on the basis of your research may not increase in value, and may decrease in value. Similarly, blockchain assets you exchange on the basis of your research may fall or rise in value after your exchange.

Past performance is not indicative of future results. Any investment in blockchain assets involves the risk of loss of part or all of your investment. The value of the blockchain assets you exchange is subject to market and other investment risks