GEO: Decentralization and Privacy Without Blockchain

GEO: Decentralization and Privacy Without Blockchain

Once bitcoin and other cryptocurrency networks have emerged, decentralization and privacy of transactions started to be associated with the concept of blockchain. Over the course of the bitcoin ecosystem’s development, the trend of centralization was gradually becoming apparent.

It turned out that bitcoin transactions are neither free, nor instant, whereas block size would only make the tendency to centralization stronger. Besides, as transaction explorers like Chainalysis were developing, it became quite clear that privacy of pseudonymous transactions is rather conventional.

Boosting Decentralization and Privacy

Attempts to solve the aforementioned problems are being made within bitcoin ecosystem as well as via creating altcoins. In Bitcoin, the ban on block size increase is about protecting the current level of decentralization, whereas bitcoin mixers and CoinJoin combined with Confidential Transactions are about enhancing transaction privacy. Recently announced Mimblewimble solution is a further development of CoinJoin and Confidential Transactions and may be employed both as a bitcoin softfork or as a sidechain.

Zerocash is arguably the most anticipated “anonymous” altcoin, as it provides anonymity of transactions using the so-called zero knowledge proof. As for more or less established altcoins, Dash could be a good example as it offers greater privacy and faster transactions using PrivateSend and InstantSend technologies, while the overall network centralization used to be halted with X11 hashing algorithm. ASIC for the latter has entered the market recently.

Anyway, once there is a blockchain recording all transactions, this means there is a possibility to track these transactions. Using PoW and PoS algorithms keeps the impetus to increase the computational power share or the overall number of coins in the network, which leads to more centralization.

The conclusion here may seem absurd or even heretical: in order to enhance the network’s decentralization and transaction privacy, one should abandon mining and blockchain altogether.

However, this idea will look less absurd once you remember off-chain transactions projects with Lightning Network standing out from the rest. Still, LN does not break up with blockchain completely as it is built on top of it. Secondly, it has been designed as a means to scale bitcoin and not to enhance privacy or prevent centralization. Bolt, another announced recently project, seeks not only to improve bitcoin scalability, but also to support anonymity of off-chain transactions. Yet, just as LN, Bolt is a mere add-in too.

And then there is GEO, a decentralized credit network first presented at Bitcoin & Blockchain Conference Kiev 2016. Similar to Lightning Network or Ripple, GEO transactions are built on atomic transactions. For instance, if there are payment channels AB, BC and CD, node A may transact to node D via a chain of atomic transactions AB, BC and CD. Still, in the context of decentralization and privacy, GEO is substantially different from both Lightning Network and Ripple.

What Is GEO?

Essentially, GEO is a protocol which may underlie a decentralized credit network. In a credit network, nodes transact obligations instead of money with each node creating its own obligations. Whatever is the substance of such obligations (these may be bonds, promissory bills, coupons, etc), the issuing node may exchange them for goods or money with the nodes that agree to accept them. Unlike national currency systems, each node within such network decides upon which nodes to accept obligations from, and to what extent.



A credit line between two nodes is the basic relation within a decentralized credit network. Node A agrees to accept obligations from node B to the overall amount of n, whereas the amount of a credit limit may be denominated in any equivalent. Node B may have a credit from node A within the stipulated amount. Then node A requests node B to settle the obligations, which it does in a way that depends on the substance of such obligations.

Node B, in turn, may also agree to accept obligations to the amount of n. This increases the sum of transactions between the nodes. For instance, if node A receives obligations to the amount of 0.5n from node B, now it is entitled to receive goods or money to the amount of (0.5n + n): repayment of the credit to the amount of 0.5n plus the credit to the amount of n.

The two nodes that have opened credit lines to each other are not the sole participants of the network transactions as the network allows for transactions between the nodes that do not trust each other once a chain of trust between them is created. This chain works on the principle of trust transitivity. For instance, if node D trusts node C with the amount of 0.5n, node C trusts node B with 2n, and node B trusts node A with n, then node A may have a credit of 0.5n from node C. Node C assigns the right to use node C’s credit line to node A.


If node C, aside from the node D’s 0.5n credit line, has the latter’s obligations to the amount of 0.5n, then node A may have a credit from node D to the amount of (0.5n + 0.5n). In this instance, node C assigns not just the right to use node D’s credit line, but also the right to request settlement of node D’s obligations.

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