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Blockchain and Bitcoin

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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.

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Blockchain and Bitcoin

  1. 1. Presenter: Nelson M. Rosario Date: February 7, 2017 Location: IIT Chicago-Kent College of Law 1
  2. 2. Blockchain Bitcoin New Technology 2
  3. 3. 3 Block 1 Block 2 Block 3
  4. 4. Definition: A blockchain is “an ordered, back-linked list of blocks of transactions.” – Mastering Bitcoin: Unlocking Digital Currencies 1. Concepts A. Trust B. Consensus 2. Technology A. Ledgers B. Cryptography C. Merkle Tree 3. Applications 4
  5. 5. 1. What is “trust?” 2. Problem a. How do you trust information on a trustless system? 3. Solutions a. You could know the person b. You could trust the math 5
  6. 6. 1. What is “consensus?” 2. Problem a. How do you achieve consensus among parties that don’t trust each other? 3. Solution a. You could use a trusted third party as an official record keeper b. You could trust a decentralized consensus mechanism 6
  7. 7. 1. Typically an accountant’s tool 2. Keeps track of who has what 3. Has been used for ages a. Proven b. Conceptually well understood 7
  8. 8. 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 8
  9. 9. 1. Way to securely store information 2. A data structure of cryptographic hashes 3. Trivial to verify information in the tree 9
  10. 10. 1. Bitcoin 2. Land Registry 3. Real Estate Transactions 4. Financial Trade Clearing and Settlement 5. Logistics 6. Supply Chain Management 7. Identity Management 8. Smart Contracts 10
  11. 11. 11
  12. 12. 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 System 1. Concepts a. Double Spend Solution b. Addresses c. Wallets d. Mining 2. Applications a. Undetermined b. Currency c. Something Else 12
  13. 13. 1. Problem a. How do you stop someone from spending electronic money twice? 2. Solution a. Use a blockchain b. Everyone knows all transactions conducted on the blockchain c. Trivially verify those transactions 13
  14. 14. 1. Abstraction based on public keys derived from private keys 2. Used for receiving bitcoin 3. Used to verify ownership of bitcoin 14
  15. 15. 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 15
  16. 16. 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 16
  17. 17. 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 17
  18. 18. 1. Used as a currency to purchase things 1. Overstock 2. Amazon 3. PayPal 4. Expedia 5. Ebay 2. Not recognized as legal tender in any jurisdiction 3. Price fluctuations make it risky 18
  19. 19. 1. Decentralized 2. Trustless 3. Limited 4. Looks like a value transfer vehicle 1. Exclusionary 2. Alienable 3. Adaptable 19
  20. 20. 1. Anti-Money Laundering 2. Know Your Customer 3. Taxes 4. Patents 5. Securities 20
  21. 21. 21
  22. 22. 1. New work at your job 2. New clients 3. Add on benefits 22
  23. 23. 1. Can count on you for work 2. Can advertise your expertise to clients 23
  24. 24. 1. Internet of Things 2. Augmented Reality 3. 4D Printing 4. Drones 5. Smart Contracts 6. Quantum Computing 7. Personalized Medicine 8. ??? 24
  25. 25. Resources Books: Mastering Bitcoin Blockchain Revolution White Papers: Bitcoin Ethereum Websites: Coin Center Bitcoin.org nrosario@marshallip.com nelsonmrosario.com 25

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