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Block Chains and Consensus Algos

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Presentation I made for Bloomberg Blockchain event in Tokyo

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Block Chains and Consensus Algos

  1. 1. Block chains and Consensus Algorithms BY JERRY D CHAN WALLSTREETTECHNOLOGIST.COM BITTOKU.CO.JP
  2. 2. Public Block chain (Bitcoin,Ethereum) Block chain, not Blockchain! A collection of transactions Time-stamped grouping in blocks Proof of Work to decide sequencing Token to incentivize validators (block writers) to remain in consensus Public, permission-less, censorship-resistant, pseudo-anonymous
  3. 3. Private Block chains (Consensus Ledgers) aka distributed ledgers, aka private block chains Shared multi writer database Control and participation in the network is private/permissioned Ownership of the assets represented is public Use of cryptographic keys to restrict asset ownership changes into the ledger If no PoW, why blocks?
  4. 4. Private Block chains vs multi-writer Dbs Better immutability guarantees with simplified audit trail No super-user roles Ownership of the data / Ownership of the Db No central 3rd party acting as a gatekeeper for controlling the modification of that data Token vs Token-less ◦ PBFT + Merkel Root + PGP + P2P + TRUST == Private Block chain ◦ PBFT + Merkel Root + PGP + P2P + TOKEN == Permissioned Block chain Are they secure?
  5. 5. Benefits of Private Block Chains Allows a group of companies to pool resources and reduce costs in a trust reduced way Local money corporate money Real time settlement between counterparties (for certain markets) Potentially replace SWIFT, but only if money is taken off banks and put into settlement chain Potentially replace 3rd party settlement business, trade aggregators/netting services
  6. 6. Benefits of Public Block Chains Global permission-less Trust minimized Censorship resistant Commodity like deflationary money which is not based on debt IoT, DAOs, DACs Internet vs AOL, Napster (mp3), Telecoms (skype), Personal Banking (?)
  7. 7. Potential Issues Flash crash (liquidity) risk Increased attack risk Systematic risk Legal risk Operational risk vs Systematic risk
  8. 8. About me Blog: wallstreettechnologist.com twitter: @digitsu jerry.d.chan@bittoku.co.jp
  9. 9. Proof of Stake More akin to equity shareholder voting. Weak subjectivity (external systems required to ensure truth) Cheap simulation, nothing at stake problem Internal network Value->Security
  10. 10. Proof of Work Alignment of incentives, and reduces the risk of dishonest actors, the more valuable the token becomes Objective truth Solution to Byzantine generals problem Energy->Security->Network Value

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