Agenda

Database Type: Constrained Relational – 1.00

Executive Summary

TNT stands for True-Node-Trust achieved by omnipresent True-Node-Transparency utilizing Transparent-Network-Technology, or TNT. This type of True-No-Trust distributed relational database truly necessitates no trust in any of your counterparties in trade, instead forming a real-world Nash equilibrium by guaranteeing full symmetrical information across all peer-to-peer nodes through batch processing. The purpose of this white paper is to explain that a TNT relational database is dually constrained, not only allowing updates during specified time periods (batch processing) but also restricting database updates to debit-credit pairs.

TNT specifications

To begin with, it is a real-world fact that there is no universal agreement on what exactly constitutes money in theory. The pinnacle of mainstream modern economics is a formal system rooted in a strict set of axioms, from which the first and second welfare theorems are logically deduced in the context of the Arrow-Debreau general equilibrium framework developed in 1954, earning the authors the 1983 Nobel Prize in Economics. In the context of the Arrow-Debreau framework, money has no role other than as a unit of account in which prices in a theoretical equilibrium are measured. While this viewpoint aligns with Karl Marx’s writings, where he also hypothesized that the function of money is a unit of measure, Jevons, Menger, and Walras in the 1870s hypothesized that the key role of money is as a medium of exchange, necessary to solve the double coincidence of wants problem that plagues direct barter. In this sense, theoretical opinions about money differ, hence the ongoing arguments about whether gold or Bitcoin classify as money today.

The key reason for these arguments is that according to the ‘money is a medium of exchange’ hypothesis, if something is not used as an exchange medium, then it is not money. Since gold or Bitcoin is almost never used to pay for things, despite the fact that gold is used as a monetary reserve asset by all central banks, no self-respecting economist would call gold money – owing to the fact that it is no longer used to pay for things, and hasn't been since 1933, at least in the US, after Roosevelt confiscated all monetary gold assets.

However, we do not live in theory. We live in reality. And in reality, there is no disagreement about what money is, what roles it plays, or how it functions. According to the real-world empirical evidence collected by the Federal Reserve Bank of the United States, every currency ever used in every observed instance of every real-world economy, both past and present, invariably serves three roles: that of a unit of account, a medium of exchange, and a store of value. Moreover, while there are all sorts of money in theory, in reality, there are two, and only two types of money: physical money and representative money, and those are the only two options as to the type of money that exist in reality. What is the difference between the two? Physical money is tangible – like a cowrie shell, a paper dollar bill, a gold coin, or a paper Deutschmark. In order to spend this money, the spender has to physically deliver the actual real-world object to the recipient. That’s physical money. Representative money is simply a certificate of fractional ownership of either physical money or nothing. When representative money represents fractional ownership of nothing, it is referred to in economics as “fiat” money.

As we are about to explain, either fiat or representative money, being fractional ownership certificates, is spent in a totally different way from physical money – by having each transaction recorded as a debit-credit pair in a double-entry ledger – which is also how Bitcoin works. In this sense, while in theory, a paper dollar bill is the same as funds sitting in your checking account, and it isn’t even clear in theory what Bitcoin is, in reality, Bitcoin and US dollar bank funds function in an exactly identical way, which is totally different from how paper dollars work. And now, we can discuss TNT specs.

Before we proceed, it's essential to explain the end-user specifications for this TNT distributed accounting double-entry database, which have remained unchanged for about 500 years. We are implementing a relational database that is further constrained in terms of the functionality it offers. Such a constrained relational database is typically reconstructed from a general ledger, representing all debit-credit pair transactions that collectively reconstruct (or sum to form) all the current relational database tables.

A double-entry bookkeeping system, originally described by Luca Pacioli in the 1490s and used as the foundational accounting system by all modern banks since Renaissance Italy, can be understood in modern computer science terms as a “constrained” relational database. In this system, “tables” are constrained to “assets” and “liabilities,” and only one type of transaction—a debit-credit swap—is allowed.

The reason for having two types of tables, assets and liabilities, is that to a bank, your deposit of $100 is a liability (a debt the bank owes you), whereas to you, as the depositor, the $100 is an asset (the $100 you gave to the bank becomes a debt the bank owes you but remains an asset of $100 to you as the bank account holder).

Let us use a simple double-entry accounting system as an example. In this example, we will illustrate how a brokerage, such as Fidelity or JP Morgan, maintains account balances in clients' brokerage accounts. These brokerage accounts represent full ownership of a certain amount of fiat currencies like the US dollar and the British Pound, as well as fractional ownership of real-world assets such as shares of IBM, oil futures, or a collection of assets like the S&P 500 ETF. Additionally, Bitcoin fractional ownership certificates, known as Bitcoin ETF shares, are now available for sale. Ethereum ETFs, as well as soon-to-follow Cardano, Solano, and Ripple ETFs, are also emerging.

Each client of Fidelity, JP Morgan, or any other bank has an account, which, in Bitcoin terminology, is called a wallet. This account contains multiple assets, represented by how many dollars or shares of IBM are deposited in the client’s brokerage account. In a double-entry accounting system, each real-world event is represented as a debit-credit pair. A “debit” takes an asset out of a “spending” account, and a matching credit deposits the same asset into an account “receiving” (or being “credited”) the asset. For example, if you send someone $100, your bank will debit (deduct $100 from) your account, and the other bank will credit the recipient's account with the $100 you sent.

In some real-world banking databases, additional tables are stored outside the double-entry constraints. These tables often describe the underlying assets of which the debits and credits represent the transfer of fractional ownership. Sometimes, these additional tables are missing entirely, as in the Bitcoin database, where there is no underlying asset. Bitcoins, like fiat money units, represent fractional ownership of nothing. To explain how this works, we need to revisit what is commonly referred to these days as bank money.

Bank money originated as fractional ownership of physical gold stored in a bank vault. Over time, as fractional reserve banking developed, the number of issued fractional share certificates, represented by paper bank notes like paper US dollars or balances in checking and savings accounts redeemable on demand into the underlying asset—gold—grew, while the amount of underlying gold remained the same. This resulted in arbitrage and eventually led to banking crises and the Great Depression. More importantly, it led to the demonetization of gold, meaning that US dollars now, in reality, represent fractional ownership certificates of nothing. However, just like fractional ownership certificates of real-world assets, like shares of IBM for example, they are transferred between bank and brokerage accounts using debit-credit pairs, debiting the spending account and crediting the receiving account.

For instance, when you sell someone 100 shares of IBM, your Fidelity account is debited 100 shares, and the buyer's E*TRADE account is credited 100 shares of IBM. Similarly, a transfer of Bitcoin debits the spending wallet and credits the receiving wallet – in precisely the same way as transferring dollars results in the spending account being debited and the receiving bank account being credited with the funds. In this sense, Bitcoin transactions and the general ledger are no different from US dollar transactions and the general ledger recorded by a pure US dollar commercial bank, like JP Morgan Chase.

So, the relational database we are implementing is essentially a distributed version of this system. However, we need to finalize what tables will be stored in it and how each debit-credit pair will be authorized before we even discuss anything else, like network recovery or any other details. In this sense, let us begin with a minimal set of tables (no underlying assets). Then, we need to figure out how to manage voting, in terms of appointing delegate nodes responsible for forming the core ring of trust. And then, we apply the voting to appoint fractional asset ownership custodians. However, we need to provide for additional tables, such as pending smart contracts, and so on. This is where we should start the discussion: how do we make the structure expandable so that we may add additional tables as needed on demand, and in what exact format should we store all the data and stored procedures. This is where Luigi and I ended up talking about Scheme and lambda functions. Smart contracts using lambda functions are easy to write and read.

Also, with respect to fractional ownership, the TNT database is not required to show proof that it is the official ‘shareholder registry’ for any one asset. In reality, the burden of proof is on the original owner of the asset to show that a particular TNT database represents the "real, honest" shares of the underlying asset. To prove to potential buyers that they are purchasing the "real thing," the original owner must first select a one-true, legitimate version of the TNT blockchain to accurately define the fractional ownership structure of the asset. This is done by providing the public key of the one-true money wallet in which the underlying fractional ownership coin was originally deposited. In this way, any potential purchaser of the fractional ownership can be assured that they own a real-world asset, such as a water source in New Hampshire, by checking the registry of deeds in that town. There, in the officially recorded deed, they will find a reference to an easement that transfers water rights to the shareholders of the asset recorded in the TNT wallet with that public key. The fractional ownership percentage will be recorded in a specifically referenced True-Node-Trust TNT ledger database, which will now serve as the officially designated public ownership registry for the underlying asset.