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Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Blockchain
The technologies ...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Me & Blockchain
• Miner 2011...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
What is
Bitcoin?
Ethereum?
I...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
History: 2008 - Present
Tech...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Basic Technical Topics
• Blo...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
History
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2008 - Bitcoin Paper
Satoshi...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
https://bitcoin.org/bitcoin....
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
• Decentralised digital curr...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
What is Bitcoin?
• 1 Bitcoin...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)image from: weusecoins.com
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)image from: weusecoins.com
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2009 - Early days
Open Sourc...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
bitcoin.org July, 2009
image...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)image from: archive.org
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin in 2009 - 2011
• No ...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin in 2009 - 2011
• 10,...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2011: Tipping Point
https://...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
What happened in 2011?
GPU M...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2011: My first miner
15 GPUs ...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2012 - 2015
+ Speculators (n...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2012 - 2015
https://bitcoinc...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2015 - Now
The Biggest Thing...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
What is Ethereum?
• Decentra...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
2015 - Now: Other Big Things...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Now
https://coinmarketcap.co...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Trading
Coinbase: Good for s...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
GDAX: Professional version o...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Trading
Bitstamp: Profession...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Others
See bitcoincharts.com
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Initial Coin Offering (ICO)
•...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
• Better than IPO in some ar...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Initial Coin Offering (ICO)
•...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Initial Coin Offering (ICO)
•...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Initial Coin Offering (ICO)
•...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Career Opportunities
Friends...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Tech
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Blockchain
Goal: Design a di...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Blockchain
Solution: Store t...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Blockchain
Issues: How do we...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
• Fully d...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Address: ...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Transacti...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
verify tr...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Transactions
Example...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Transactions
• Can h...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
1. Store ...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
blockchai...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Issue: Mo...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Goal: min...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Bitcoin M...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
More on M...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Bitcoin b...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Proof-of-...
Copyright 2017 Aaron Li
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Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
Blocks an...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
If someon...
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(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
respecting every participant...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Bitcoin Blockchain
incentive...
Copyright 2017 Aaron Li
(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
General Blockchain
: State o...
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(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Ethereum
Instead of wasting ...
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(aaron@sudoreview.com)
Copyright 2017 Aaron Li (aaron@sudoreview.com)
Ethereum
Resources: 

Ethere...
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Copyright 2017 Aaron Li (aaron@sudoreview.com)
Litecoin
Based on Bitcoin. D...
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Blockchain: the technologies behind Bitcoin, Ethereum, ICO, and more

Beginner level lecture for blockchain. Topics covered: the history and technologies behind Bitcoin, trading, ICO, applications, job opportunities, and more. These are the slides accompanying my online live lecture at BitTiger (Nov 15, 2017).
Video (Chinese): https://www.youtube.com/watch?v=lVVCu_Pxshk
Event page: https://www.bittiger.io/events/2SS4xnfKzKYvwBpPQ

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Blockchain: the technologies behind Bitcoin, Ethereum, ICO, and more

  1. 1. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Blockchain The technologies behind Bitcoin, Ethereum, ICOs… Aaron Li aaron@sudoreview.com Oct 28, 2017
  2. 2. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Me & Blockchain • Miner 2011-2012 • Built several mining clusters and tools • Evangelist / supporter 2011 - • Investing / trading occasionally • Interested in core tech / products / apps https://www.linkedin.com/in/aaronqli/
  3. 3. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) What is Bitcoin? Ethereum? ICO? Blockchain?
  4. 4. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) History: 2008 - Present Tech: P2P Distributed Cryptographic Ledger Coins: Bitcoin, Ethereum, Litecoin, … Applications: Finance, Law, Businesses, Computing, … Jobs: Security, Infrastructure, Trading, Applications, …
  5. 5. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Basic Technical Topics • Blockchain Overview • Proof of Work, Transactions, Consensus • Bitcoin • Mining: Hardware, Pools, Mechanism… • Ethereum • Ether, Smart Contract, Applications • Others: Litecoin, ICO, …
  6. 6. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) History
  7. 7. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2008 - Bitcoin Paper Satoshi Nakamoto image from: Google Image
  8. 8. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) https://bitcoin.org/bitcoin.pdf
  9. 9. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) • Decentralised digital currency • Backed by math & algorithms • No government / company control • Low fee P2P international transfer • “Anonymous” & verifiable transactions What is Bitcoin? https://youtu.be/Gc2en3nHxA4 https://www.weusecoins.com/
  10. 10. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) What is Bitcoin? • 1 Bitcoin = 1 BTC = 1 (Ƀ, ฿, …) • BTCs are stored in an address • e.g. 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy • Max circulation: 21 millions (by ~2033) • Minimum unit: 0.00000001 (1e-8) = 1 satoshi • Transaction = one address send BTC to another
  11. 11. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com)image from: weusecoins.com
  12. 12. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com)image from: weusecoins.com
  13. 13. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2009 - Early days Open Source Software & early supporters
  14. 14. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) bitcoin.org July, 2009 image from: archive.org
  15. 15. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com)image from: archive.org
  16. 16. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin in 2009 - 2011 • No applications • People just doing it for fun • Almost no one accepts Bitcoin • First community: bitcointalk.org
  17. 17. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin in 2009 - 2011 • 10,000 Bitcoins = 2 pizzas • Alpaca Socks • First vendor accepting Bitcoin image from: Google Image search
  18. 18. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2011: Tipping Point https://bitcoincharts.com/charts/ mtgoxUSD#czsg2010-10-29zeg2012-10-30ztgSzm1g10zm2g25zvzcv
  19. 19. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) What happened in 2011? GPU Mining Mass Media Reports Alternatives & Forks (Litecoin, etc.)
  20. 20. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2011: My first miner 15 GPUs (HD5850) Power: 4kWh Cooling: Water / Fan @ Balcony & Tent
  21. 21. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2012 - 2015 + Speculators (non-tech people) + Exchanges (- MtGox) + Merchants (Shipito, Overstock, …) + Services (POS, Wallets, …)
  22. 22. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2012 - 2015 https://bitcoincharts.com/charts/ bitstampUSD#czsg2012-10-29zeg2015-10-30ztgSzm1g10zm2g25zvzcv
  23. 23. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2015 - Now The Biggest Thing “Decentralised Turning Complete Virtual Machine” image from: ethereum.org
  24. 24. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) What is Ethereum? • Decentralised Computer • Run “Smart Contracts” (programs) • Turing-complete machine • Use Ether (ETH) to operate • Not a currency, but is treated as one https://ethereum.org/
  25. 25. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) 2015 - Now: Other Big Things ICOs Ripple, Tether, BitGo, Qtum, … Coinbase & GDAX Regulations: SEC, China, US Laws …
  26. 26. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Now https://coinmarketcap.com/
  27. 27. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Trading Coinbase: Good for starters. Easiest to setup. High fees (1-5%) Use credit card / banks. Need ID verification. Support BTC, ETH, LTC in USA, Canada, Australia, Singapore, most Europe USA based (reports earning to IRS!)
  28. 28. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) GDAX: Professional version of Coinbase; Low fees (0% - 0.3%) limit/stop orders, depth graph, order book, history, … margin trading (temporarily unavailable) USA based (reports earning to IRS!) Trading
  29. 29. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Trading Bitstamp: Professional exchange, low fees (0% - 0.3%) Supports BTC, XRP, LTC, ETH and many fiat currencies
  30. 30. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Others See bitcoincharts.com
  31. 31. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Initial Coin Offering (ICO) • Similar benefits compared to IPO: • Allow general public to participate • Raise large sum of money ($1M’s - $100M’s) • Public trust, public audit & examination New way to raise money for a project / company
  32. 32. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) • Better than IPO in some areas: • Much less complicated legal paperwork • Can be started by any person / team • Much easier for the public participate & trade Initial Coin Offering (ICO) Successes: Ethereum, Filecoin, Bancor, Tezos, BAT
  33. 33. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Initial Coin Offering (ICO) • Issues, compared to IPO: • Many projects are scams / impossible to deliver • No regulations exist to sue / recoup damages • No supervision to project owners Failures: DAO, and many others
  34. 34. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Initial Coin Offering (ICO) • Usual Process: • Get a team • Write a white paper • Get people to talk about it • Set up a beautiful website • ICO!
  35. 35. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Initial Coin Offering (ICO) • Future talks: • What is expected in whitepapers? • Open source tools for designing / launching ICO • Case studies • For startups: Future of ICOs v.s. VC?
  36. 36. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Career Opportunities Friends’ companies with successful ICO hiring engineers, etc. • Orchid ($4.7M, a16z, etc.) • WeTrust ($>10M) • doc.ai • many more…
  37. 37. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Tech
  38. 38. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Blockchain Goal: Design a distributed ledger such that • All transactions are recorded and verifiable • Owners can remain anonymous • No central authority required (“trustless”) • Resistant to malicious attacker • Participants are incentivised and rewarded
  39. 39. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Blockchain Solution: Store transactions distributively as a chain of blocks (“blockchain”) Issues: How to (efficiently) define create verify store transactions? track
  40. 40. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Blockchain Issues: How do we make sure the transactions are respecting every participant’s privacy? resilient to attackers? robust against malicious users?
  41. 41. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain • Fully decentralised network • Each node is a user • Some nodes are miners • Miners: nodes that verify transactions between users • Miners are incentivised by two types of rewards • Transaction fees • Validating a new block (hard) image from: Google Image Search
  42. 42. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Address: an object for receiving Bitcoins Address = Hashes of public key See this article of details • Controlled by corresponding private key • Key pairs can be arbitrarily generated (address too) • Intended to be used only once define and create transactions
  43. 43. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Transaction: A sends some X coins to B Process: 1. A controls an address P with X coins
 2. A obtain an address Q controlled by B
 (B could generate Q with a new private key)
 3. A creates a transaction T
 transfer X Bitcoins from P to Q
 4. A signs T using private key of P Define and create transactions
  44. 44. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain verify transactions • What about all transactions before that? • How do we know A did not spend his Bitcoin twice? • How do we know A has X Bitcoins before sending them to B? Single transaction: verifiable using hashes / public key (To be discussed later in “blocks”)
  45. 45. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Transactions Example: 1 Bitcoin transferred through owner 0, 1, 2, 3, … 1 Bitcoin …. track transactions image from: [Nakamoto, 2008] (Bitcoin paper)
  46. 46. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Transactions • Can have multiple in/out • Combine fractions / divide coins • Unspent coins are stored in new address 0.1 BTC 1.3 BTC …. 0.5 BTC … track transactions image from: [Nakamoto, 2008] (Bitcoin paper)
  47. 47. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain 1. Store transactions in blocks 2. Simplify the blocks (just enough to verify things) 3. Store blocks to all nodes in network How to efficiently store and verify transactions?
  48. 48. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain blockchain = A chain of blocks Bitcoin Block = Block Header + (Hashes of) Transactions Header = Last Block’s Hash + Nounce + (Root Hash of Transactions) Nounce = a sequence of bytes to show proof-of-work track transactions image from: [Nakamoto, 2008] (Bitcoin paper)
  49. 49. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Issue: Most nodes don’t want to store all transactions They only want to verify a transaction is in the blockchain
  50. 50. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Goal: minimise information needed to verify a transaction Solution: Merkle tree image from: [Nakamoto, 2008] (Bitcoin paper)
  51. 51. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Bitcoin Merkle tree construction: 1. Compute hashes of transactions in a block 2. Compute hashes of each pair of hashes recursively 1. Load / verify root hash R 
 2. Load H, the hash of T
 P(H), the ancestors of H
 S(P(H)), the siblings of P(H)
 3. Reproduce and verify 
 R and P(H) using these To verify a transaction T is in the blockchain: image from: [Nakamoto, 2008] (Bitcoin paper)
  52. 52. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain More on Merkle tree A Certified Digital Signature, R. Merkle (written in 1979) Proceeding CRYPTO '89 Proceedings on Advances in cryptology Protocols for public key cryptosystems, R. Merkle, 1980 IEEE Symposium on Security and Privacy Used in a wide range of applications • version controls (Git, …) • file systems (IPFS, ZFS, …) • databases (Cassandra, Dynamo, …) • P2P systems (BitTorrent, …) • and many more image from: Google Search
  53. 53. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Bitcoin block chain, with Merkle Tree Miners generate blocks, and validate transactions image from: [Nakamoto, 2008] (Bitcoin paper)
  54. 54. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Proof-of-work: 1. a block is valid iff hash (SHA2) of block header has N leading zero bits
 (miners must find it by solving the value of nounce by brute-force) 2. longest block chain is the only valid block chain 3. once a valid block is found, it is propagated to all nodes controls generation speed of new blocks (~1 block / 10 minutes) A valid nounce is (artificially made) hard to compute image from: [Nakamoto, 2008] (Bitcoin paper)
  55. 55. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain Blocks and transactions are immutable Transactions are secured by private/public keys resilient to attackers? resilient to forgery: resilient to DDOS: Miners can charge transaction fees
  56. 56. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain If someone wants to alter their own past transactions (using private keys), and create fake history, he must…. 1. Find the blocks which contain those transactions 2. Change the transactions and recompute Merkle trees 3. Re-compute all blocks on his own until his chain is longest In the meantime, other nodes continue to produce new blocks… Impossible to catch up unless he has >50% CPU of whole network! robust against malicious users?
  57. 57. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) respecting every participant’s privacy? Bitcoin Blockchain image from: [Nakamoto, 2008] (Bitcoin paper)
  58. 58. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Bitcoin Blockchain incentives? Miners are rewarded with… 1. X Bitcoins, for each valid new block found 
 (manifested by attaching a reward transaction in new block) 2. Transaction fees, for all transactions in the new block Bitcoin has controlled supply, so X is halved every 210000 blocks Year 2008: X = 50 210000 blocks ~= 4 years
  59. 59. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) General Blockchain : State of blockchain at timestamp t : The block, containing all (general) transactions : State transition function : Block finalisation function See details in Ethereum yellow paper image from: [Wood, EIP-150 2017] (Ethereum Yellowpaper)
  60. 60. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Ethereum Instead of wasting CPUs for computing hashes of proof-of-work, let nodes do some useful work! • Introduced new concepts: accounts, contracts, messages, … • Transactions: define function calls, execution model, data, … • Proof-of-work: still rely on nounce, but deprecating soon • (Theoretically) much broader applications • Not meant to be a currency, but people got crazy
  61. 61. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Ethereum Resources: Ethereum Wallet + Mist Browser & Serverless app tutorial White paper: https://github.com/ethereum/wiki/wiki/White-Paper Yellow paper: https://ethereum.github.io/yellowpaper/paper.pdf Programming: Build Helloworld DApp (decentralised app) DApps for Beginners: https://dappsforbeginners.wordpress.com/
  62. 62. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) Litecoin Based on Bitcoin. Designed to make GPU/FPGA/ASIC ineffective • 2.5 minutes per new block, instead of 10 minutes • Proof-of-work: use scrypt hashing algorithm, instead of SHA256 scrypt: • time-memory tradeoff: parallelisation becomes ineffective • fast with large memory, and slow with little memory • See paper for details

  63. 63. Copyright 2017 Aaron Li (aaron@sudoreview.com) Copyright 2017 Aaron Li (aaron@sudoreview.com) More • Mining: history, hardware, future alternatives • Ethereum: technical design, programming, applications
 • ICOs: applications and technical advancements • Blockchain: enterprise applications • and more… Topics for future talks

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