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Introducing blockchain

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Bitcoin & Blockchain
An introduction...
1

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Why are we here?
Lon Barfield & Andy Baker
(tweeting photos)
We get a chance to find partners
and develop interesting proj...

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What am I going to talk about?
Blockchain is cross disciplinary: Consensus, economics, cryptography,
monetary theory, voti...

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Introducing blockchain

  1. 1. Bitcoin & Blockchain An introduction... 1
  2. 2. Why are we here? Lon Barfield & Andy Baker (tweeting photos) We get a chance to find partners and develop interesting projects You get an introduction to blockchain 2
  3. 3. What am I going to talk about? Blockchain is cross disciplinary: Consensus, economics, cryptography, monetary theory, voting models, trust, contract law, organisational structures, optimisation, markets, distributed systems… Not going to cover it all! NO Deep technical detail. NO How to set-up and use Bitcoin… NO How to become a crypto-millionaire! NO How to speculate... 3
  4. 4. Speculation 4
  5. 5. Speculation Back in the 1600’s The Dutch Golden Age There was a new commodity to invest in... 5
  6. 6. Speculation Back in the 1600’s The Dutch Golden Age There was a new commodity to invest in… TULIP MANIA 6
  7. 7. Speculation… always good headlines “Boom and bust” “Speculative Bubbles” Tulip bulbs, Housing, Gold, Railway shares South sea bubble, Dot com stocks 7
  8. 8. Speculation… always good headlines Bitcoin 8
  9. 9. Bitcoin 9
  10. 10. ‘everything you don’t understand about money combined with everything you don’t understand about computers’ - John Oliver 10
  11. 11. What is Bitcoin? Digital money Transfer bitcoins to other people with phone/laptop Just software There is no bank - just a trusted list of transactions 11
  12. 12. What is bitcoin? 12 Bitcoin Blockchain Bitcoin
  13. 13. Paper based information Writing on paper can be changed Contracts are written to prevent this Written to be ‘immutable’! 13
  14. 14. Digital based information Digital media can be changed Editing Word documents Photos can be photoshoped Debugging programs... 14
  15. 15. Blockchain A blockchain is digital media that CAN’T be changed “Immutable!” So what…? 15
  16. 16. Blockchain Banks Lawyers Certificate providers… Verification details Recording transactions 16
  17. 17. My presentation of it... 17 Bitcoin Blockchain Bitcoin
  18. 18. 18
  19. 19. No such thing as ‘a Bitcoin’ No such thing as ‘A Bitcoin’! No such thing as ‘A digital wallet’ full of Bitcoins! There is only a list of transactions 19
  20. 20. No such thing as ‘a Bitcoin’ Your ‘Bitcoin wallet’ is just your ID number for transactions Bitcoin works by recording JUST transactions between these ID numbers I say ‘Here’s my ID number, transfer 3 Bitcoins to Jon’s ID number’ and that transaction gets written down 20
  21. 21. Other cryptocurrencies 21
  22. 22. Bitcoin and Blockchain... 22 Bitcoin Blockchain Bitcoin
  23. 23. Bitcoin and Blockchain... 23 Bitcoin Blockchain LonCoin Blockchain Bitcoin LonCoin Bitcoin LonCoin
  24. 24. Bitcoin and Blockchain... 24 Bitcoin Blockchain Comet Blockchain Bitcoin Comet Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Even easier with the Ethereum blockchain!
  25. 25. Over 1,600 Digital currencies 25
  26. 26. ICO: 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’ ...are they making their ideas real? 26
  27. 27. 27
  28. 28. 28
  29. 29. 29
  30. 30. 30
  31. 31. Random selection... 31
  32. 32. 32
  33. 33. 33
  34. 34. Javascript Token - has a GitHUB 34
  35. 35. 35
  36. 36. Useless Ethereum Token (Market Cap 53,000 USD) 36
  37. 37. Useless Ethereum Token 37
  38. 38. SquidToken...
  39. 39. SquidToken...
  40. 40. 40
  41. 41. 41
  42. 42. 42
  43. 43. 43
  44. 44. 44
  45. 45. 45
  46. 46. It’s beginning to sound a lot like Christmas 46
  47. 47. It’s beginning to sound a lot like The Wild West! 47
  48. 48. Regulation is playing catch up Do we need new laws? Can we apply existing laws? Is crypto really currency? (IRS treats it as ‘property’) 48
  49. 49. Regulation is playing catch up SEC in USA is getting going 49
  50. 50. Is there any precedent? Have we ever had alternative currencies before? 51
  51. 51. Plenty of alternative currencies When you want a degree of control: ● Casino chips ● Disney Dollars When there are problems with existing financial systems: ● Irish cheques - ad-hoc solution to bank strike ● Chinese jiaozi used in Sichuan province 11C - paper! 52
  52. 52. … alternative currencies Swiss WIR system - fiscal stability 80 years, 2B CHF pa, 62,000 SMBs Bristol Pound, German Chiemgauer - keeping money local 53
  53. 53. Bristol Pound Uses paper money… Or smartphone app and ledger Cryptocurrencies No paper money, just a ledger... Just a ledger? 54
  54. 54. Ledgers & Blockchains Recording everything in a book 55
  55. 55. Bitcoin and Blockchain... 56 Bitcoin Blockchain Bitcoin Bitcoin LiteCoin Blockchain LiteCoin Comet Blockchain Comet Other cryptocurrencies
  56. 56. Bitcoin and the other cryptocurrencies... 57 Bitcoin Blockchain Comet Blockchain Bitcoin Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Bitcoin Comet LiteCoin
  57. 57. Now: blockchain & ledgers 58 Bitcoin Blockchain Comet Blockchain Bitcoin Comet Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Bitcoin Blockchain Comet Blockchain LiteCoin Blockchain
  58. 58. Bitcoin and Blockchain... 59 Bitcoin Blockchain Comet Blockchain Some other Blockchain Some other Service Bitcoin Comet Bitcoin LiteCoin Blockchain LiteCoin Other cryptocurrencies Some other Blockchain Some other Service Some other Blockchain Some other Service New services...
  59. 59. Ledgers Recording everything in a book 60
  60. 60. 61
  61. 61. Keeping track of money is important... 62
  62. 62. Many ways of doing it Remembering it IOUs Keeping a ledger 63
  63. 63. 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). 64
  64. 64. 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 65
  65. 65. 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 66
  66. 66. Keeping track of money King Henry Introduced a technology In the 1100s 67
  67. 67. Tally sticks Recording a debt Notches on a stick, then split the stick Two copies of ledger/transaction Embodies trust Good for over 600 years! 68
  68. 68. Tally sticks Stopped in 1826 Leftovers stored in the old houses of parliament Burnt in the furnaces in 1834 A workman; Mr Cross was given the job 69
  69. 69. Tally sticks The burning of the houses of parliament 70
  70. 70. Blockchain is a ledger 71
  71. 71. 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” 72
  72. 72. 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. 73
  73. 73. 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. 74
  74. 74. 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 75
  75. 75. Blockchain technical ingredients Some of the technologies date back to the late 70s 76
  76. 76. How does it do it? Immutable and distributed! 77
  77. 77. Paper based information Writing on paper can be changed Contracts are written to prevent this Written to be ‘immutable’! 78
  78. 78. Immutable (do ‘Distributed’ later) Anything stored digitally can be changed We can check if it’s been tampered with, check its integrity 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. 79
  79. 79. Tamper alarm - use a Hash code “It’s a bit like a shadow”... “A bit like a fingerprint”, “like DNA”, “like…” A code generated from some information. You always get the same code from that information. If someone changes the information then you get a different code. 80
  80. 80. Hashing - industry strength 81
  81. 81. Hashing - industry strength 82
  82. 82. Hashing - a simple version 2, 4, 6. Total is 12, units part is 2, this is recorded as the hash code (hash=2) If someone changes the last digit to a 7 then… 2, 4, 7 I check it, total is 13, units part is 3, doesn’t match the recorded hash! 83
  83. 83. Paper blockchain 84
  84. 84. 85 Sheet 1 - Hash in a block
  85. 85. 86 Sheet 2 - Checking for tampering
  86. 86. 87 Sheet 3 - The chain of blocks
  87. 87. Faking a block deep in the blockchain You have to Recalculate the hash for that block and then recalculate the hash for the next block And so on. And there are half a million blocks on the bitcoin blockchain! 88
  88. 88. 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 single person has the ledger? 89
  89. 89. 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 different new block of transactions that are floating around in a pool, trying to finish their own block. When a block gets finished it is sent off to the other computers. Then it all starts again! 91
  90. 90. 92 Sheet 4 - First to complete the next block Shout ‘YES’ and put your hand up when you are done
  91. 91. Immutable & Distributed All computers will finish at about the same time! Leads to collisions, ‘chaos’, lots of sorting out which block to use. 93
  92. 92. Slow it down... Get a clear winner, give the new block time to be broadcast Give all the others time to get the winning block so that everyone can start at about the same time Ensure a ‘level playing field’ Make it artificially difficult! 94
  93. 93. 95 Slow it down Shout ‘YES’ and put your hand up when you are done
  94. 94. Throttle control That’s the ‘mining’ bit! As more computers do mining, more likely to get a block done quickly. System reacts to keep the time-span wide, so it makes it even more difficult! 96
  95. 95. 97
  96. 96. 98
  97. 97. 99
  98. 98. Alternative solutions to a distributed system Bitcoin blockchain - it works, but it works by being energy hungry Other solutions - difficult to devise, difficult to prove that they work since they depend on participants behaviour ...it is difficult! 100
  99. 99. Blockchain pros and cons 101
  100. 100. It is difficult Security - what if lots of participants try to alter it? Motivation of participants - why would the participants bother? Scope - what if the blockchain is really massive? Speed - what if it takes half a day to add something AND get it confirmed Decentralised! - no single participant is in charge of things, no-one is! 102
  101. 101. Security Distributed! No central point to hack! (good) Consensus can still be subverted - ‘51% attack’ (bad) Who is doing the mining, perhaps it’s being done on 1,000 computers; (good) But they are all in one company; (bad) 103
  102. 102. Security Privacy, all data is very much ‘out there’ (bad?) Transparent, all data is very much ‘out there’ (good?) Integrity; Bitcoin is worth $ 160 Billion, never missed a beat! (good) 104
  103. 103. 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) 105
  104. 104. Anonymity Can be totally anonymous (bad, for crime prevention) Can show all transactions transparently (good, for crime prevention, if you can identify who owns the wallet ID!) Even with Bitcoin “investigators can follow the money” Brett Nigh (FBI Assistant General Counsel) 106
  105. 105. Bitcoin is totally anonymous... Philip and Diana Koshy. Graduate students at Penn State in 2014 Built their own version of a Bitcoin node that gathered all data, then analysed the data 107
  106. 106. De-anonymising Distributed systems can be inefficient, can get ‘glitches’ Lots of transaction clusters being broadcast... Very occasionally a computer running bitcoin at a certain internet address broadcasts just one transaction - they probably made that transaction! Philip and Diana mapped IP numbers to wallet IDs! 108
  107. 107. De-anonymising Ross Ulbricht: Got life, February 2015 Tomáš Jiříkovský: Assets seized, March 2015 Trendon Shavers: Guilty of Bitcoin securities fraud, September 2015 Mark Karpelès: Charged with fraud and embezzlement Fake nodes have been observed with government IP addresses probably hoovering up data packets for surveillance 109
  108. 108. Bitcoin and Blockchain... 110 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...
  109. 109. Smart contracts... 111 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
  110. 110. Smart contracts & internet of things 112
  111. 111. 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) 113
  112. 112. 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 for us on that date! A ‘smart contract’ 114
  113. 113. 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 115
  114. 114. Long way to go... Very early stages Clumsy, restricted language, easy to make mistakes Can’t correct mistakes once they are on the blockchain “I’ll just debug it… oh, I can’t!” Recipe for disaster… and disasters have happened! 116
  115. 115. Disaster 117 Multi-sig contract Wallet Wallet Wallet Wallet
  116. 116. Disaster 118 Multi-sig contract Wallet Wallet Wallet Wallet
  117. 117. Disaster November 2017 Novice looking at the multi-signature contract to learn from it Contract had not been initialised, they tried initialising it and discovered that the result was that they had become the owner of the contract! Unable to believe this they tried issuing the kill command 119
  118. 118. Disaster
  119. 119. Disaster A newcomer poking around had permanently locked over 500 accounts Totalling over 100 Million pounds You can’t ring up the bank and get them to help sort it out… there is no bank! There was nothing anyone could do. 121
  120. 120. Looking for examples... Blockchain too is very much a ‘work in progress’ 122
  121. 121. Many companies, many ledgers 123
  122. 122. 124 Full service history
  123. 123. Provenance 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 the diamond around. 125
  124. 124. Internet of Things, provenance/tracking Charity/aid donations Pharmaceutical authenticity Provenance (UK based company), using blockchain and smart tagging to track sustainably fished tuna from fishing line to dining plate Usually companies have ledgers, but things don’t 126
  125. 125. Proof of Concept MIT MedRec project, a private blockchain, demonstration only Medical records on a blockchain Researchers do the processing/mining in exchange for aggregate medical information from the records 127
  126. 126. 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. 128
  127. 127. Government interest Estonia (population 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 national blockchains 129
  128. 128. GovCoin trials In the UK! In 2016! Department of Work and Pensions trialed a cryptocurrency for benefit payments. 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.” Objections raised on the idea of opening up the data to commercial enterprises 130
  129. 129. 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.” 131
  130. 130. UN World Food Program CoinDesk article - June 13, 2017 “As revealed exclusively to CoinDesk, the platform was successfully used to record and authenticate transfers for about 10,000 individuals” Wfp.org press release - May 30, 2017 “In Jordan’s Azraq camp, 10,000 refugees are now able to pay for their food by means of entitlements recorded on a blockchain-based computing platform.” 132
  131. 131. Banks using blockchain! Santander using blockchain technology: OnePay FX Madrid, 12 April 2018 – PRESS RELEASE Banco Santander today announced the launch of a new international payments service using blockchain-based technology [...] With the launch of the service, Santander will become the first bank to roll out a blockchain-based international payments service to retail customers in multiple countries simultaneously. 133
  132. 132. Banks using blockchain! Using Ripple technology, a blockchain company Santander invested in Part of Ripple suite being used is xCurrent xCurrent is built around Interledger Protocol (ILP), an open, neutral protocol, that enables interoperation between different ledgers Blockchain technology… YES… but NOT a blockchain 134
  133. 133. Conclusions 135
  134. 134. Blockchain is A solution, not THE solution Blockchain bandwagon Blockchain is a solution Other technologies are available... 136
  135. 135. Blockchain is revolutionary It is a new concept, with many possibilities It incorporates elements of behaviour in the technology (like economics) It enables new services 137
  136. 136. 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 138
  137. 137. Gartner Hype Cycle
  138. 138. Feedback forms... 141
  139. 139. Facebook & Twitter @Simpleweb
  140. 140. 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 143

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