Where we explain how the concept of a crypto currency can lead to the creation of a new kind of autonomous corporation. This one part of a three part slide deck. For the full deck and the context please visit http://bit.ly/pm-bbc

1. Bitcoin,
Blockchain &
CryptoContracts
Part 3
Digital Autonomous
Corporations
Prithwis Mukerjee, PhD, Praxis Business School, Calcutta, India

2. Imagine a company that ...
★ Offers customers a way to track their assets and transfer them to others
on the basis of validated instructions
○ this is similar to a current or checking account, offered by any bank
★ “Hires” employees for this bookkeeping activity and pays them with
company shares
○ “employees” may also collect transaction fees in form of company shares
★ Has been operating since 2009 without any interruption of its services
★ Has a current (2016) market capitalization of nearly US$ 5.5 billion
★ Has no managers, no CEO and no physical assets in any geography

3. What is Bitcoin ?
★ Is it a currency ?
○ a new, efficient way to pay for goods and
services
○ because it offers anonymity, been used for
illegal cross-border trade, the “SilkRoute”
○ most conversion gateways (“exchanges”) have
installed Know Your Customer processes
★ Is it a commodity ?
○ something like gold or crude that needs to be
“mined” using CPU power
○ can be bought, sold, held or exchanged for other
currency or commodity
○ total amount limited to 21 million BTC
★ Is it a digital autonomous corporation
?
○ performs a bookkeeping service, tracks
assets, allows transfer of assets
○ “employs” miners, pays them with
bitcoin to validate transfers
○ has a real US$ denominated market
capitalisation, based on current value of
BTC

4. “Smart” Contracts
Defined by Nick Szabo in 1997
A way to use hardware and / or software to
programmatically encode various clauses into
a contract so that assets are released if and
only if certain conditions are met for example
if signature is valid
if asset has been received
if date has passed
if { other conditions have been met}
Used in Bitcoin validation
KPuC 700
KPuD 2500
KPuC 800
KPuB 500
sigC
sigC
sigC
sigC
to understand the Bitcoin
validation process, please
see this slide deck

5. The Bitcoin Contract -- a little more detail
KPuC 800sigC
TXN SEQ
DUP
HASH
160
PubK
Hash
Equal
Verify
Check
Sig
800sig PubK
refers to an
unspent
UTXO on
blockchain
retrieve locking script
encumbrance or “locking script”
attached to asset by previous owner
before it was given to current owner
“unlocking script” by
current owner who
wishes to spend
asset
“Script”
language
interpreter
joins two &
evaluates.
800TRUE
FALSE
true
800TRUEfalse

6. Programmable Contracts
❖ contain code written in the “script” language of the Bitcoin protocol
➢ reverse-polish notation stack based execution language
➢ is evaluated to simple “TRUE” or “FALSE” value to allow or disallow a contract
➢ it is deliberately not Turing-complete for security reasons
❖ other, non Bitcoin, blockchains, like Ethereum, have created more
sophisticated programming languages
➢ these can be used to encode more functionality, “smartness” into the contracts
➢ for example, we can require
■ multiple signatures to release an asset
■ a certain date before which a contract is not valid
■ other, third party, external conditions to be met
DUP
HASH
160
PubK
Hash
Equal
Verify
Check
Sig
sig PubK

7. Possible scenarios for smart contracts
❖ “Internet of Things”
➢ Ignition of car will start when purchaser presents his public key IF mortgage payments
have been made, ELSE banker’s public key can be used to start and take the car away
❖ Escrow Accounts
➢ Money can be spent by owner of account only if certain quantum of money has been
deposited, otherwise money will go back to depositors after a certain date
➢ Automatic lottery : Only the funds of the highest bidder are can be spent by the lottery
organiser, other bidders automatically get their money back at close of lottery
➢ After death of owner, heirs can automatically access assets
❖ Stock & Securities Market
➢ the blockchain can more efficiently, accurately, and openly track the excha
bonds, and other financial securities

8. Wall Street has started to move ….
❖ US Depository Trust & Clearing
Corporation
➢ organisation that tracks and manages
the transaction of all financial
instruments in the US
➢ Jan 2016 - issues a white paper that talks
about a once-in-a-generation change of
technology
➢ has teamed up with the Linux
Foundation to create the Hyperledger
project -- an open source project for
blockchain technology
➢ Mar 2016 -- organises a symposium to
explore the way forward
❖ US Securities and Exchanges
Commission
➢ Has permitted Overstock, a NASDAQ
listed company to release equity shares
on an alternate trading platform
■ Overstock has in the past released
corporate bonds to qualified
institutional investors on the T0
blockchain

9. Two major open source initiatives
❖ Hyperledger project
➢ https://www.hyperledger.org/
➢ managed by the Linux Foundation and
funded by IBM and the DTCC
➢ the project wishes to create distributed
ledger as a permanent, secure tool that
makes it easier to create cost-efficient
business networks without requiring a
centralized point of control. With
distributed ledgers, virtually anything of
value can be tracked and traded. The
application of this emerging technology
is showing great promise in the
enterprise.
❖ Ethereum
➢ Ethereum is a decentralized platform that
runs smart contracts: applications that run
exactly as programmed without any
possibility of downtime, censorship, fraud
or third party interference.
➢ Ethereum is how the Internet was
supposed to work.
➢ Ethereum was crowdfunded during August
2014 by fans all around the world. It is
developed by ETHDEV with contributions
from great minds across the globe.

10. Ethereum is a new kind of Law
“Traditional law is a form of agreement. It is an agreement among people and
their leaders as to how people should behave. There are also legal contracts
between individuals. These contracts are a form of private law that applies to
the participants. Both types of agreement are enforced by a government's
legal system. But Agreements are ambiguous. And enforcement is hard.
Ethereum solves both these problems. It does this with the marriage of two
special ingredients: a digital currency, and a complete programming
language.” http://etherscripter.com/what_is_ethereum.html
Ethereum is a platform for building the Digital Autonomous Corporation