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Blockchain explained

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Blockchain
What is it and what can we use it for?
1

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Simpleweb Studio Block
Lon Barfield
Studio Block spun out from Simpleweb: 10 year history of humanising
technology.
A dedi...

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Simpleweb Studio Block
We get a chance to find partners and develop interesting projects
You get an introduction to what B...

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Blockchain explained

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Blockchain workshop PwC March 2018. Explanation of bitcoin and blockchain, Historical analogies, pros and cons, examlples. (Slides don't tell the full story, it included hands on activtiies)

Blockchain workshop PwC March 2018. Explanation of bitcoin and blockchain, Historical analogies, pros and cons, examlples. (Slides don't tell the full story, it included hands on activtiies)

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Blockchain explained

  1. 1. Blockchain What is it and what can we use it for? 1
  2. 2. Simpleweb Studio Block Lon Barfield Studio Block spun out from Simpleweb: 10 year history of humanising technology. A dedicated and experienced team of experts with a shared vision ● Expertise in thinking and building ● Research and development of new products and tools 2
  3. 3. Simpleweb Studio Block We get a chance to find partners and develop interesting projects You get an introduction to what Bitcoin is and what blockchain is… and the sort of things blockchain can be used for. 3
  4. 4. Q&A after each part! 4
  5. 5. Blockchain What is it and what can we use it for? 5
  6. 6. A lot of coverage... Blockchain; because it’s the tech behind Bitcoin Bitcoin; because people have been speculating on it Speculation is nothing new... Bitcoin and Blockchain are very new… and very interesting 6
  7. 7. Bitcoin A digital currency based on blockchain 7
  8. 8. Bitcoin Digital money It’s a computer program, it’s software I can use an app on my phone or a program on my computer to pay bitcoins to other people 8
  9. 9. Bitcoin... 9 Bitcoin
  10. 10. Bitcoin… Digital wallets... 10 Bitcoin
  11. 11. No such thing as a Bitcoin No such thing as ‘a Bitcoin’, no such thing as ‘a digital wallet’ Your ‘Bitcoin wallet’ is not a wallet… it’s your ID number Bitcoin works by recording transactions between these ID numbers I say “here’s my ID number and I transfer 3 Bitcoins to this ID number” Bitcoin records this on a blockchain… ‘An immutable distributed ledger’ 11
  12. 12. Bitcoin and Blockchain... 12 Bitcoin Blockchain Bitcoin
  13. 13. It’s software It’s all public I can download it, make a few changes and start running my own slightly different version of Bitcoin 13
  14. 14. Bitcoin and Blockchain... 14 Bitcoin Blockchain MyCoin Blockchain Bitcoin MyCoin Bitcoin MyCoin
  15. 15. Bitcoin... and the rest Cryptocurrencies 15
  16. 16. Bitcoin and Blockchain... 16 Bitcoin Blockchain Ethereum Blockchain Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies
  17. 17. Over 1,500 Digital currencies… and counting 17
  18. 18. Some you might have heard of... ● Ethereum, Litecoin And others you might not have… ● Monero: Anonymous ‘Dark coin’ ● Hicky: For profile data on dating sites ● Bitcoiin 2: Brand ambassador is… Steven Segal?! ● Cryptorouble:Putin announcement January this year ● Putincoin: Russian cryptocurrency already in place 18
  19. 19. And more... ● Ponzicoin: Has been forced to shut down now ● Paragon coin: For the cannabis industry ● TheresaMayCoin… ● Useless Ethereum Token: A parody ICO that raised $40,000 at its ICO... 19
  20. 20. ICO Initial Coin Offering 20
  21. 21. Initial Coin Offering Like an IPO, an Initial Public Offering of shares in a company ICO initial offering of a cryptocurrency that will be part of an ecosystem that they are going to build… A bit like crowdfunding - ‘here’s our idea, buy our coins and we’ll use the money to make it real’ 21
  22. 22. Example Solarcoin: Register your solar panels, get coins for generating solar electricity (on top of other incomes from it). Spend the coins at selected retailers of solar-equipment. Steem: Token eco system based around publishing blogs and videos 22
  23. 23. Are they all really ‘currency’? Commodity currency - bits of silver and gold Representative currency - can be exchanged for silver and gold Fiat currency - just ‘backed by the government’ Currency is money that is in circulation It can be freely exchanged (liquidity) It is a store of value It is a measurement of value 23
  24. 24. Bitcoin; not a real currency… Struggling with a classification (IRS treats it as ‘property’) A sort of ‘alternative currency’ 24
  25. 25. Plenty of alternative currencies When you want a degree of control: ● Casino chips ● Disney Dollar ● Company scrip Or when there are problems with existing financial systems: ● Irish cheques - ad-hoc solution to bank strike ● Industrial Revolution - fast and small payments needed ● Chinese jiaozi used in Sichuan province 11C 25
  26. 26. Stamp scrip German currency crash post WW I Scrip that encouraged use. Pay for monthly stamps if you hold it. Central government got worried, banned them and everything crashed again! 26
  27. 27. … alternative currencies can fulfil a purpose Stamp scrip - boosting the economy Prison scrip - Geneva convention says pay prisoners Swiss WIR system - fiscal stability 80 years, 2B CHF pa, 62,000 SMBs Bristol Pound, German Chiemgauer - keeping money local 27
  28. 28. … the underlying ledger Bristol Pound Uses paper money - or app and ledger Cryptocurrencies No paper money, just a ledger... Just a ledger? 28
  29. 29. Bitcoin and Blockchain... 29 Bitcoin Blockchain Ethereum Blockchain Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies
  30. 30. Bitcoin and Blockchain... 30 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services...
  31. 31. Bitcoin and the other cryptocurrencies... 31 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services... Bitcoin Ether LiteCoin
  32. 32. Blockchain: the Ledger ... 32 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services... Bitcoin Blockchain Ethereum Blockchain LiteCoin Blockchain Some other Blockchain
  33. 33. Ledgers Recording everything in a book 33
  34. 34. Ledger - a list Old style ledger: ● ‘Principal book of account’ ● Centralised - there’s only one copy ● Changeable - owner can alter the entries Modern day digital ledgers are still old-style ledgers really… Centralised, changeable, (and open to hacking). 34
  35. 35. Commodity ledgers - gold German gold repatriation 366 tons of gold shifted from New York And Paris Owned by Germany but was in other countries Ownership on a ledger, commodity is based elsewhere 35
  36. 36. Other sorts of ledgers? My bank account ● Bank has a ledger ● I have a ledger (my bank statements) I alter my copy, can I convince the bank?... Yes, two people have a copy, but only one has the ledger Trust resides in the institution, not in the ledger 36
  37. 37. Tally sticks Recording a debt Notches on a stick, then split the stick Two copies of ledger/transaction Good for 600 years! 37
  38. 38. Tally sticks - embodying trust Less changeable than a ledger, ● I try adding/filling-in a notch to my part ● I try and make a different version of my part from another piece of wood ● I can add notches (transactions) by bringing the two halves together Less central than a ledger ● Two copies in circulation, both of equal value, no ‘master copy’ It embodies trust in the ledger technology, not in the institution that holds it 38
  39. 39. Tally sticks Stopped in 1826 Leftovers burnt in houses of parliament 1834 New houses of parliament built and in use 1847 39
  40. 40. Blockchain is a ledger It’s a technology that enables other things 40
  41. 41. A new sort of ledger Not an old sort of ledger in digital form, it’s a new sort of ledger: These are actually terms that we don’t use much! “Distributed Ledger Technology is immutable and distributed” 41
  42. 42. Immutable & Distributed Ledger: It’s a list Immutable: It is a permanent list, once you add an entry no one can take it off, or hack it or alter it. It has high data-integrity. Distributed: There are copies on many different computers. It is in the public arena. Everyone (on the internet) can access it. It’s a bit like… carving information in stone for everyone to see it. 42
  43. 43. Immutable & Distributed 43
  44. 44. Immutable & Distributed It is the opposite of the web! Web is plastic, editable. You can delete things, change things It’s run off a single server, under one agent’s control Blockchain is a permanent, trusted record of information, distributed to the public Less like the web revolution… more like the printing press revolution. 44
  45. 45. Distributed ledgers - no new tech! iPhone Not a breakthrough, but a novel amalgam of existing technologies A beautiful design Blockchain A novel amalgam of lots of existing data/cryptographic ideas A beautiful design 45
  46. 46. Blockchain technical ingredients Some of the technologies date back to the late 70s 46
  47. 47. Immutable & Distributed How does it do it? We’ll do ‘Immutable’ now and ‘Distributed’ later Anything stored digitally can be changed. Best we can do is check if it’s been tampered with and replace it with a good copy if required. A list of entries with a ‘tamper alarm’. I can tell if anyone tweaks it and replace it with my un-tweaked back-up copy. 47
  48. 48. Tamper alarm - use a Hash code “It’s a bit like a shadow…” “A bit like a fingerprint”, “like DNA”, “like…” “It’s like when James Bond puts a damp hair across the door in Doctor No” A code generated from some information. You always get the same code when you do it. If someone changes the information then you get a different code. 48
  49. 49. Hashing - industry strength 49
  50. 50. Hashing - a simple version Hashing a list of numbers. Add them all up and take the units digit of the result. 2, 4, 6 Add them up, total is 12, units part is 2 Is someone changes the last digit to a 7 then… 2, 4, 7 Add them up, total is 13, units part is 3 If I have a copy of the original hash (2) I can say; “Wait a minute, someone has been tampering with the data! I’ll replace it with the back-up.” 50
  51. 51. Making a chain of blocks We’re going to use that hash in a paper based model 1 First making a hash in a block 2 Then checking for tampering 3 Then linking blocks 51
  52. 52. It’s not that easy! 00000000000000000048afcd073 08786b558f7b96a6038b3d267ba 823dac2609 52
  53. 53. Immutable & Distributed I have a ledger, I can check it for tampering, and correct it with my back-up. I know I can trust the ledger, but everybody else has to trust me! I have the ledger. Only part of the solution. What about if no-one has the ledger? 53
  54. 54. Immutable & Distributed Have loads of copies on different computers. No one in charge deciding what transactions are in the next blocks. Each computer is trying to add a new block of transactions that are floating around, trying to finish that block. When a block gets finished it is sent off to the other computers. Then it all starts again! 54
  55. 55. Immutable & Distributed Each computer busy with a different new block. Sheet 4 - Got to get the tamper alarm finished off. All computers will finish at about the same time! Leads to collisions, ‘chaos’, lots of sorting out which block to use. 55
  56. 56. Immutable & Distributed Got to slow it all down, give all the others time to get the winning block so that it all happens on a level playing field. Make it artificially difficult. 56
  57. 57. Mining That’s the ‘mining’ bit! What if there are loads more computers joining in with the mining? That’s going to speed it all up again isn’t it? 57
  58. 58. Once again, it’s not that easy! 00000000000000000048afcd073 08786b558f7b96a6038b3d267ba 823dac2609 58
  59. 59. Mining/Proof of work 59 Big long hash has to have 8 preceding zeros in it Have to adjust a dummy value in the contents and then hash the contents and see if the hash begins with 8 zeros. Adjust the dummy value again and do it again. Eventually you will get a hash with 8 zeros at the start then you have ‘sealed’ that block. https://btc.com/ That’s what ‘mining’ is...
  60. 60. Mining
  61. 61. 62
  62. 62. Break... 63
  63. 63. Break... 64
  64. 64. Recap 65 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services... Bitcoin Ether LiteCoin
  65. 65. Ledgers, blockchain, paper version 66 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services... Bitcoin Blockchain Ethereum Blockchain LiteCoin Blockchain Some other Blockchain
  66. 66. Blockchain pros and cons 67
  67. 67. Security No central point to hack! (good) Hash codes can be devised so that it takes a lot of work to generate them (Proof of Work). Re-doing a whole chain takes huge amounts of work. There are systems to catch a tweak but even doing that tweak in the first place takes a huge amount of effort. (good) 68
  68. 68. Security Consensus can still be subverted - 51% attack (bad) Who is doing the mining, is it mostly happening in one state? (bad) Privacy, all data is very much ‘out there’ (bad?) Integrity, BitCoin is worth $ 160 Billion, never had a glitch in the blockchain (good) 69
  69. 69. Anonymity Can be totally anonymous (bad, for crime prevention) Can show all transactions transparently (good, for crime prevention) 70
  70. 70. More Scalability - computation and storage is costly (bad) Scalability - energy consumption an issue (bad) Errors are difficult to ‘unwind’ - DAO hack $2B, Parity contract wallet self destruct $280M frozen (bad?) But they can be unwound! (good?) 71
  71. 71. Transparency Public documents, many people have a copy and anybody can read them (good) It’s like the plans in the council planning department … only much better. 72
  72. 72. No agent-in-the-middle Agent in the middle has to have the trust of both parties With blockchain the trust lies in the technology of the blockchain ● No corruption ● No high fees for shared trust ● No delays (all good) 73
  73. 73. Bitcoin and Blockchain... 74 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services...
  74. 74. Smart contracts... 75 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services... Some other Service Some other Service Some other Service
  75. 75. Smart contracts & internet of things 76
  76. 76. Contracts As immutable as possible (difficult to change) As durable as possible (lifetime longer than the contract terms) As high a level of integrity as possible (witnesses, authenticity stamps) 77
  77. 77. Blockchains store data Transactions are data: ‘I paid John 10 Bitcoins’ A promise/contract is data ‘John and I agree that I will pay John 10 Bitcoins on June 12th 2018’ But executable code is also data! ‘John and I agree that I will pay John 10 Bitcoins on June 12th 2018’ and the blockchain will actually do it! A ‘smart contract’ 78
  78. 78. Smart contracts Code that manipulates digital money and digital assets based on conditions and time. And because it is in the blockchain it is fixed, visible and trusted Software licensing, media licensing, digital assets Will need lawyers and coders working together Very early stages. Currently they are clunky And not really ‘smart’! 79
  79. 79. Internet of Things Things in the real world connected through sensors to the digital world ● Printer ordering more ink ● Where’s my iphone? ● Traffic jams “By 2020 there will be over 26 billion connected devices” - Gartner Tracking things that have smart tags. Shipping containers etc. 80
  80. 80. Many companies, many ledgers 81
  81. 81. Internet of Things, provenance/tracking Charity/aid donations Pharmaceutical authenticity Provenance (UK based), using blockchain and smart tagging to track sustainably fished tuna from fishing line to dining plate You and I are ‘things’! Usually companies have ledgers, but things don’t 82
  82. 82. Examples... 83 Bitcoin Blockchain Ethereum Blockchain Some other Blockchain Some other Service Bitcoin Ether Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services... Some other Service Some other Service Some other Service
  83. 83. Examples Blockchain is very much a ‘work in progress’ 84
  84. 84. A really good example Great to have other ‘in-the-wild’ blockchains that were being used and were publicly viewable, you’d be able to watch it grow in real time. Where should we be looking?... 85
  85. 85. Where should we be looking? Companies do not yet trust the idea of setting core data free. Grass-root individuals do not yet have the scale/resources NGOs and the disenfranchised, scarcity of tech and dedicated budget Supply chains, but who sets them up? Governments; admin savings, transparency 86
  86. 86. Example (Proof of Concept) MIT MedRec Private blockchain, demonstration Medical record, researchers do the processing of transactions in exchange for aggregate medical information from the records 87
  87. 87. Example (“progressing development”) deBeers, Diamond tracking Public blockchain, deBeers are “progressing development” Each diamond has a unique signature in terms of its properties (cut, colour, clarity, carat). Record of provenance will be public and immutable and follow diamond around. 88
  88. 88. Example (First steps) CREDIT SUISSE AND ING EXECUTE FIRST LIVE TRANSACTION USING HQLAX SECURITIES LENDING APP ON R3’S CORDA BLOCKCHAIN PLATFORM Credit Suisse and ING swapped baskets of securities of value EUR 25 million using the HQLAx Corda-based collateral lending application. 89
  89. 89. Example (Government) Estonia (pop. 1.3 M, tech friendly laws) Advanced digital government infrastructure Only ever fill in your details once Uses blockchains for some of its government data Dubai, South Korea, Lichtenstein also talking about it 90
  90. 90. Example (undergoing trials) UK Department of Work and Pensions, cryptocurrency for benefit payments, Govcoin, project since early 2016 Fast transfer of benefits and help with targeted saving “Three days going through the banking system may mean using a payday lender, or being thrown out of your house.” But objections raised on the idea of opening up the data to commercial enterprises 91
  91. 91. Example (first steps again) Sweden’s land-ownership authority is soon expected to conduct their first Blockchain technology property transaction after two years of testing… Sierra Leone national elections 7 March 2018. Blockchain used in part of the counting process “A private, permissioned blockchain to oversee the results of a national election in real time. It then relayed the data to individuals entrusted to oversee and verify the nation's democratic process.” 92
  92. 92. “A company is a nexus of contracts” Jensen & Meckling 93
  93. 93. Example (new organisations) DAO, decentralized autonomous organization Investment body with no directors, investors vote on investments Based on Ethereum cryptocurrency Raised $168 million 94
  94. 94. Conclusions What’s the problem? 95
  95. 95. Blockchain useful if... You have multiple parties with a shared set of data Parties (may) have conflicting interests The database has to be immutable “Is it something you want set in stone on the marketplace” (but it can be private as well!) 96
  96. 96. Blockchain is a solution, not THE solution ● Blockchain getting a lot of coverage ● What is the problem you want to solve with it? ● Is it the best way of solving the problem? 97
  97. 97. And finally: Where should we be looking? Companies do not yet trust the idea of setting core data free. Grass-root individuals do not yet have the scale/resources NGOs and the disenfranchised, scarcity of tech and dedicated budget Supply chains, but who sets them up? Governments; admin savings, transparency 98
  98. 98. And finally: Where should we be looking? Companies do not yet trust the idea of setting core data free. Grass-root individuals do not yet have the scale/resources NGOs and the disenfranchised, scarcity of tech and dedicated budget Supply chains, but who sets them up? Governments; admin savings, transparency 99
  99. 99. And finally... Digital breakthroughs have enabled distributed individuals to do things that previously only organisations have done before: ● Open source software ● (and hardware) ● Wikipedia ● Crowdfunding ● Media distribution ● AirBnB 100
  100. 100. And finally... Blockchain... Blockchain now gives us the ability to enable groups of individuals to do other things that organisations do… ...but also new things that no-one has ever done before 101
  101. 101. The End 102
  102. 102. ITEMS list ● Bristol pounds ● Ledger book ● Tally stick ● Tulip bulbs BAG ● Casino chips BAG ● Silver sixpences BAG ● Clicker and spare bats ● Bic Pens ● Dice ● Cheque book ● Bank statement ● Vellum contract ● PRINT Feedback sheets ● PRINT Handouts ● HDMI cable, adapter cable ANDY ● Honey, water, strepsils ● USB stick ● Laptop and mains lead 103
  103. 103. 104

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