In their ‘programming lab’ students of the University of Maryland developed a near free auction. The auction uses blockchain technology combined with state-of-the-art programming software named ‘Hawk’.
Hawk introduces privacy preservation for financial services on blockchains. For the public auction this means that it no longer leaks the price paid by the winning bidder. The privacy feature opens up many new possibilities for blockchain technology in real-world applications. Programmers create the financial services by developing so-called ‘smart-contracts’. These digital contracts offer businesses and consumers all sorts of financial services. Until recently these services on blockchains could not hide the value going through them, making them not very useful.
Hawk is a new product of the three million dollar, US government funded, research initiative for cryptocurrency and contracts (IC3). With Hawk the development of complex financial products and services becomes much easier and therefore dirt cheap. The smart-contracts that can be produced with the software can be used with many different types of blockchain technology. It is compatible with Bitcoin and Ethereum but it can also be used with the more anonymous brands out there. The students tested the software on different blockchains and created playful functions like rock-paper-scissors. But there were also more serious developments, such as the mentioned sealed-bid auction, crowdfunding services and even financial swaps. The costs to execute services built with Hawk are extremely low, especially when we compare them to traditional financial services. As an example, the execution of a crowdfunding contract with one hundred participants costs just under $0.13.
What is remarkable is that the financial products were built by undergraduate students. Hawk allows non-specialist programmers build secure, privacy-friendly and financially fair services. As the technology is open-source, it is expected that in the foreseeable future more financial products will appear. The software can help tremendously with the development of cheap, fair and honest financial products that anyone on earth can use.
There is one catch though
Blockchain is often compared to the internet. Where email and the World Wide Web are apps on the internet, digital money and smart-contracts are apps on the blockchain. The big difference is this: When a mishap or error occurs on a website, the site might show wrong information or maybe present some bad layout. There’s a big difference in hobbyists developing websites and hobbyists developing financial services, with MtGox as the most striking example. If an error occurs in a smart-contract, it can result in someone losing money. Customers and businesses can lose money if the programmers, that create the smart-contracts, make mistakes or include dishonest routines.
Thinking about a world where finance becomes ubiquitous and cheap, like information on the internet, it seems inevitable that people and businesses will increasingly integrate financial aspects in the real economy that surrounds them. Adoption of decentralized financial services leads to creative destruction in the financial markets and necessitates financial liberalisation. As the fintech industry grows, the need for combined auditing in finance and technology increases simultaneously. What then comes to mind is that consumers and businesses will probably need help making sure they use products that consist of financially fair contracts that are prudently built on validated blockchains. Who’s first to help them out?