These are slides from a presentation that I gave at IIT Chicago-Kent College of Law on blockchains and bitcoin. The presentation covers the concepts behind both technologies, and some of the legal issues surrounding these new technologies. In particular, the core concepts for both blockchain technology and bitcoin are addressed in an iterative manner.
Definition: A blockchain is “an ordered, back-linked list of blocks of transactions.” –
Mastering Bitcoin: Unlocking Digital Currencies
C. Merkle Tree
1. What is “trust?”
a. How do you trust information on a trustless system?
a. You could know the person
b. You could trust the math
1. What is “consensus?”
a. How do you achieve consensus among parties that don’t trust each other?
a. You could use a trusted third party as an official record keeper
b. You could trust a decentralized consensus mechanism
1. Typically an accountant’s tool
2. Keeps track of who has what
3. Has been used for ages
b. Conceptually well understood
1. Art and science of keeping secrets
2. Blockchains typically use public key cryptography
a. Public key is used as an address for storage
b. Corresponding private key is used as the key to unlock whatever is stored by the public key
1. Way to securely store information
2. A data structure of cryptographic hashes
3. Trivial to verify information in the tree
2. Land Registry
3. Real Estate Transactions
4. Financial Trade Clearing and Settlement
6. Supply Chain Management
7. Identity Management
8. Smart Contracts
Definition: Bitcoin is “an electronic payment system based on cryptographic proof
instead of trust, allowing any two willing parties to transact directly with each other
without the need for a trusted third party.” - Bitcoin: A Peer-to-Peer Electronic Cash
a. Double Spend Solution
c. Something Else
a. How do you stop someone from spending electronic money twice?
a. Use a blockchain
b. Everyone knows all transactions conducted on the blockchain
c. Trivially verify those transactions
1. Abstraction based on public keys derived from private keys
2. Used for receiving bitcoin
3. Used to verify ownership of bitcoin
1. Software programs that manage public key cryptographic pairs
2. May hold multiple key pairs for a person
3. Most people’s entry into the Bitcoin network
1. System by which transactions are validated
2. Miners guess a solution to a cryptographic puzzle
3. Miners are rewarded for contributing their resources
4. The network that makes transferring bitcoin possible
1. Could be money?
a. What is money?
i. Much more of a social invention than we realize
b. Is it just a medium of exchange?
c. Is it also a unit of account, and a store of value?
2. Could be digital gold?
a. There is a limited amount of both
b. People horde it assuming future value
1. Used as a currency to purchase things
2. Not recognized as legal tender in any jurisdiction
3. Price fluctuations make it risky
4. Looks like a value transfer vehicle