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20170620 MEETUP intro to blockchain and smart contracts (1)

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Blockchain &
Smart Contracts
Kristof Verslype, Smals Research20/06/2017

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2
Bitcoin
Smart Contracts
Applications
Prescriptions
Agenda
Blockchain1.0Blockchain2.0

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Blockchain

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20170620 MEETUP intro to blockchain and smart contracts (1)

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Kristof V. explained the basics of blockchain and smart contracts. Starting with the mechanics of bitcoin (introduced by the 2009 paper of Satoshi Nakamoto) he explains concepts of pseudonymisation, encryption, blockchain, mining, and distribution. After skimming high-level through some use cases he moves to "(smart) contracts", using the example of an auction.

Link to examples of "smart contracts": https://dapps.ethercasts.com

Link to the event follow-up page: https://www.meetup.com/Brussels-Legal-Hackers/messages/boards/thread/50920056

Legal hackers: https://www.meetup.com/Brussels-Legal-Hackers

Kristof V. explained the basics of blockchain and smart contracts. Starting with the mechanics of bitcoin (introduced by the 2009 paper of Satoshi Nakamoto) he explains concepts of pseudonymisation, encryption, blockchain, mining, and distribution. After skimming high-level through some use cases he moves to "(smart) contracts", using the example of an auction.

Link to examples of "smart contracts": https://dapps.ethercasts.com

Link to the event follow-up page: https://www.meetup.com/Brussels-Legal-Hackers/messages/boards/thread/50920056

Legal hackers: https://www.meetup.com/Brussels-Legal-Hackers

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20170620 MEETUP intro to blockchain and smart contracts (1)

  1. 1. Blockchain & Smart Contracts Kristof Verslype, Smals Research20/06/2017
  2. 2. 2 Bitcoin Smart Contracts Applications Prescriptions Agenda Blockchain1.0Blockchain2.0
  3. 3. Bitcoin Blockchain
  4. 4. Traditional International Transaction 4 Bob Alice
  5. 5. Traditionele Internationale Transactie 5 Bob Alice Can this be done without trusted party? 1e Distributed cryptocurrency (2009) Shock trough financial world Much attention by financial world for Bitcoin/Blockchain
  6. 6. Blockchain is about Distributed Trust 6 Blockchain Network Storage Integrity, timestamp, non-removable Enforcing rules More flexible with smart contracts
  7. 7. Idea 7 Transactions 5,1 BTC → 0,7 BTC → Transactions 5,1 BTC → 0,7 BTC → Transactions 5,1 BTC → 0,7 BTC → Transactions 5,1 BTC → 0,7 BTC → I transfer 0,4 BTC to . Ok! Ok! Ok! 0,4 BTC → Bob Alice Charlie Dave 0,4 BTC → 0,4 BTC → 0,4 BTC →
  8. 8. Idea 8 Transactions 5,1 BTC → 0,7 BTC → Transactions 5,1 BTC → 0,7 BTC → Transactions 5,1 BTC → 0,7 BTC → Transactions 5,1 BTC → 0,7 BTC → I transfer 0,4 BTC to . Ok! Ok! Ok! 0,4 BTC → Bob Alice Charlie Dave 0,4 BTC → 0,4 BTC → 0,4 BTC → Blockchain Atomic Everyone writes transaction in his/her append-only spreadsheet or no one → Consensus mechanism Valid Only valid transactions accepted by the network E.g. bob owns the money & did not yet spent it previously Secure & robust Systems functions, even if part of members offline or malicious Relatively fast Distributed
  9. 9. Blockchain 9 At predetermined frequency new block appended with most recent transactions blockchain contains ALL transactions Transaction in blockchain cannot be removed Blockchain = concatenation of blocks, which contain transactions Many entities possess the same copy of the blockchain Block 51 Header Block 52 Header Block 53 Header Header Block 54 5,10 BTC → 0,70 BTC → Blockchain specific: 10 minutes in Bitcoin, 10 seconds in Ethereum,… 0,40 BTC →
  10. 10. Blockchain 10 Block 51 Header Block 52 Header Block 53 Header Header Block 54 5,10 BTC → 0,70 BTC → 0,40 BTC → 1Nf311Qb8rLDk 1F1tAaz5x1HUX 3BcMuv1VJqm Bob Alice Charlie Dave
  11. 11. Mining 11 Transaction Transaction Transaction Header code Block 51 Transaction Transaction Transaction Header code Block 52 Transaction Transaction Transaction Header code Block 53 Transaction Transaction Transaction Header code Block 54 - Every valid block contains a code (crypto puzzle) - Finding code requires a lot of computation power - Finder (‘miner’) receives a reward in bitcoin
  12. 12. - Mining 12
  13. 13. Network 13 Miner Validating (full) node Light node Once accepted by the network, it is impossible to remove block or transaction from the blockchain. (51% attack theoretically possible)
  14. 14. Bitcoin & Privacy 14Fleder, Michael, Michael S. Kester, and Sudeep Pillai. MIT. "Bitcoin transaction graph analysis." arXiv preprint arXiv:1502.01657 (2015). Bitcoin’s privacy properties are not perfect ‘Identified’ persons linked to
  15. 15. 15
  16. 16. Blockchain.info 16 Schaalprobleem - Alle transacties op blockchain - 3 transacties / sec. ↔ Visa: 10 000 / sec. - En blockchain toch al 120GB groot Scaling problem - All transactions on blockchain - 3 transactions / sec. ↔ Visa: 10 000 / sec. - And already 120GB Bitcoin Blockchain Size blockchain.info/charts/blocks-size
  17. 17. Bitcoin is inefficient 17Bron: http://digiconomist.net/beci
  18. 18. 18 Blockchain Properties Inefficient / competition Bitcoin properties Open for everyone Append-only Keys & PseudonymsRobust Consensus mechanism General blockchain properties
  19. 19. Bitcoin – Some Thoughts 19 Eliminating the trusted authority is a tremendous achievement • Despite limitations & use of simple crypto Bitcoin is a first blockchain experiment • But it got a bit out of hand • Blockchain challenges & progress ahead Idea of distributing trust with technology now widespread • Applicable in many domains
  20. 20. 20 Blockchain Applications
  21. 21. Data in the Blockchain 21 Transaction 0,01 BTC → Trusted entity Transaction Data Unmodifiable (integrity) Unremovable Timestamped Some properties of data in the blockchain TransparentAuthentic → Applications other than crypto-currencies
  22. 22. 22 Applications: Record Keeping Properties, certificates, rights, … Vaccination IdentityDiplomaMarriage Medical records TaxesSupply chain Tracking Driving license Political mandates Official documents History / traces Not all data necesarily on blockchain → Fingerprint (hash) might suffice
  23. 23. 23 Applications: Transfer Assets Ticket .bitDomain name Copyrights Bitcoin Monero Ethereum Crypto currencies Untangible assets DiamondCar Land register Tangible assets
  24. 24. 24 Transfer Assets Transaction 23F → Transaction XP0 → 9BG Transaction 9BG → 23F Authority (hypotheekbewaarder) The lawful owner is . The lawful owner is . Owner 1 (Bob) Owner 2 (Charlie) The lawful owner is . Authority required for initial registration Full history on the blockchain
  25. 25. Smart Contracts
  26. 26. Enforced rules Smart Contracts (aka chaincode) 26 Money transfer Rules are: - Hard-coded in client - Application specific Blockchain network enforces rules without need to trust individual nodes Can a blockchain network also enforce flexibly other sets of rules for other applications?
  27. 27. Enforced rules Smart Contracts (aka chaincode) 27 Enforced rules Money transfer Prescripion processing Elections Insurance Rules are: - Hard-coded in client - Application specific - Smart contract = set of application specific rules - Blockchain network enforces rules in contract - We can add/destroy contracts Blockchain network enforces rules without need to trust individual nodes Hugely Increases the potential of blockchain technology
  28. 28. Examples 28 http://dapps.ethercasts.com/ Elections Crowdfunding Insurance
  29. 29. Smart Contracts 29 Contract Auction{ function bid() function pay () HighestBid: € HighestBidder: Beneficiary: Charlie } bid(), 20€ pay() bid(), 10€ 20€ 02010 Bob Alice Charlie Alice 10€ Bob Money can be temporarily blocked by contract Contract executed by full nodes of the blockchain network
  30. 30. Smart Contract Blockchain 30 contract c Header Block 51 c.bid(), 10€ Header Block 52 Header Block 53 c.bid(), 20€ Header c.pay() Block 54 Transaction type 1 Publish contract Transactie type 2 Call function
  31. 31. Network 31 Miner Validating (full) node Light node Blockchain append-only History of smart contract Smart contract Modifiable by calling its functions
  32. 32. Smart Contract Challenges 32 Confidentiality & Privacy Blockchain & contracts usually fully transparent => Extra crypto might help Bugs The DAO hack (*) * https://www.smalsresearch.be/smart-contracts-autonome-code-op-een-blockchain/ Interpretation Code for most people harder to understand than human written language
  33. 33. 33 Bitcoin Smart Contracts Applications Prescriptions Agenda Blockchain1.0Blockchain2.0
  34. 34. 34 (Un)permissioned blockchain Unpermissioned Permissioned Examples Bitcoin, Ethereum Multichain, Hyperledger Efficiency (Now) mostly horrible Good Who has access Everyone Flexible, controled Confidentialitity & privacy Fully transpararent More control Trust Distributed Decentralised Crypto-currency Required for proper incentives Not always required E.g. Processing medical prescriptions - Only RIZIV/INAMI can publish smart contracts - Cooperation of 5/7 mutualities for creation valid block - Only accredited doctors can ask the contract to issue a new prescription
  35. 35. Conclusions It’s about trust • Great technology for application that traditionally require trust in one or some central entities • That’s why it’s considerd as disruptive No solutions for everything • It is possible with blockchain ≠ Blockchain is the best solution Challenges • Scalability, key management, privacy, confidentiality, … • A lot of research (MIT, KU Leuven, TU Delft, IBM, …) 35
  36. 36. 36 Smals www.smals.be @Smals_ICT www.smalsresearch.be @SmalsResearch Kristof Verslype @KristofVerslype 02 787 53 76 kristof.verslype@smals.be be.linkedin.com/in/verslype

Editor's Notes

  • TODO
    - smart contract.voorbeelden binnen overheid
  • Eerste toepassing van blockchain was Bitcoin
    De blauwe cirkel duidt aan waar ons vertrouwen ligt. Links is dat een centrale autoriteit, rechts is dit het netwerk (of, meer correct, vertrouwen we dat de meerderheid van het netwerk eerlijk is)
  • ASICS: hardware specifiek voor 1 applicatie
    Met een gewone PC kan je niet op tegen de gespecialiseerde hardware
    Zou meer zijn dan electriciteitsverbruik Ierland. Meeste miners in china, waar er al wat meer vervuild mag worden
    Anderzijds kun je stellen dat ook fysiek geld een ecologische footprint heeft die niet te verwaarlozen is (drukken, verspreiden, ATMs, …)
  • Vaccinatie: verschi!llende mensen plaatsen vaccinaties, verschillende entiteiten toegang nodig
    Gegevens die relevant zijn voor het berekenen van uw belastingsaangifte kunnen op de blockchain geregistreerd worden
  • Auteursrechten. registering a copyright, of transferring ownerships, of licensing from person A to B, things like consignment or loaning."
  • Notary in case two parties do not trust each other sufficiently (e.g. buying house from strianger)
  • Eforcement no longer by law but by technology
    Reality: legislation & notaries cannot be that easily eliminated. But can play another role that requires less trust
  • identity: kan gelinkt worden vb. aan rijbewijs. De persoon kan zelf attributen teovoegen die dan door een of meerdere autoriteiten bevestigd kunnen worden
  • We zullen te maken krijgen met een terughoudendheid, wat niet geheel onterexht is aangezien de technologie zich nog niet echt bewezen heeft.
    Aanpassingspijnen aangezien het misschien moeilijker in te passen is in bestaande processen en infrastructuren.

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