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Disruptive Future of Blockchain for Brasil

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Tudu acaba em blockchain: Productivity gains: Capital investment in technology, Provide data centers with Blockchain as a Service
Skilled work force development: Train 1000 software developers: Hyperledger, Ethereum, Corda
Focus on global markets beyond the internal economy: Scale efficiencies
Natural resources, regional strength, large companies
Low-hanging fruit: secure information transfer

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Disruptive Future of Blockchain for Brasil

  1. 1. Disruptive Future of Blockchain Melanie Swan Philosophy, Purdue University melanie@BlockchainStudies.org Porto Alegre, Brasil, 24 May, 2018 Slides: http://slideshare.net/LaBlogga Boa Tarde~!
  2. 2. 1 Melanie Swan, Technology Theorist  Founder, Institute for Blockchain Studies  Philosophy Department, Purdue University, Indiana, USA  Singularity University Instructor; Institute for Ethics and Emerging Technology Affiliate Scholar; EDGE invited contributor; FQXi Advisor Traditional Markets Background Economics and Financial Theory Leadership New Economies research group Source: http://www.melanieswan.com, http://blockchainstudies.org https://www.facebook.com/groups/NewEconomies
  3. 3. Blockchain 2 Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491  To inspire us to build this world
  4. 4. basics. 3
  5. 5. internet content. 4 information. email. voice. video. money.
  6. 6. 5 Conceptual Definition: Blockchain is a software protocol; just as SMTP is a protocol for sending email, blockchain is a protocol for sending money Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491 What is Blockchain/Distributed Ledger Tech?
  7. 7. Blockchain Technology: What is it? 6  Blockchain technology is the secure distributed ledger software that underlies cryptocurrencies like Bitcoin  “Internet of Money” leapfrog technology; Skype is an app allowing phone calls via Internet without POTS; Bitcoin is an app allowing money transfer via Internet without banks; ‘decentralized Paypal’ Internet (decentralized network) Blockchain Bitcoin Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491 Application Layer Protocol Layer Infrastructure Layer SMTP Email VoIP Phone calls OSI Protocol Stack:
  8. 8. Context of the Blockchain Revolution 7 Source: Expanded from Mark Sigal, http://radar.oreilly.com/2011/10/post-pc-revolution.html I. Transfer Information II. Transfer Value 6 7 2020s 2030s Simple networks Smart networks  Blockchain is fundamentally the next phase of the Internet, not just a FinTech, could impact every industry  Two fundamental eras of network computing
  9. 9. blockchain. 8 software. secure cryptographic transfer. internet.
  10. 10. killer apps. 9 secure transfer of value, of… money & securities. property. contracts. identity credentials.
  11. 11. 10 public chains. private chains. trustless. mined. p2p software. trusted. not-mined. enterprise software.
  12. 12. How does Bitcoin work? Use eWallet app to submit transaction 11 Source: https://www.youtube.com/watch?v=t5JGQXCTe3c Scan recipient’s address and submit transaction $ appears in recipient’s eWallet Wallet has keys not money Creates PKI Signature address pairs A new PKI signature for each transaction
  13. 13. P2P network confirms & records transaction 12 Source: https://www.youtube.com/watch?v=t5JGQXCTe3c Transaction computationally confirmed Ledger account balances updated Peer nodes maintain distributed ledger Transactions submitted to a pool and miners assemble new batch (block) of transactions each 10 min Each block includes a cryptographic hash of the last block, chaining the blocks, hence “Blockchain”
  14. 14. mining. Source: https://www.illumina.com/science/technology/next-generation-sequencing.html 13 Proof of Work: secure but expensive.
  15. 15. What is Bitcoin mining? 14  Mining is the accounting function to record transactions, fee-based (CAD 160,000)  Mining ASICs “find new blocks” (proof of work)  Network regularly issues random 32-bit nonces (numbers) per specified cryptographic parameters  Mining software constantly makes nonce guesses  At the rate of 2^32 (4 billion) hashes (guesses)/second  One machine at random guesses the 32-bit nonce  Winning machine confirms and records the transactions, and collects the rewards  All nodes confirm the transactions and append the new block to their copy of the distributed ledger  “Wasteful” effort deters malicious players Sample code: Run the software yourself: Fast because ASICs represent the hashing algorithm as hardware
  16. 16. 15 $2.1 billion 2018 global spend (IDC). ($9.2 billion in 2021) $3.86 trillion IT spend 2018 (Gartner) (digital transformation, blockchain, IoT, ML, and AI) 57% global corporations (Juniper). $325 billion USD asset class. 1551 cryptocurrencies. 1206 token projects. Sources: https://www.cnbc.com/2017/07/31/blockchain-technology-considered-by-57-percent-of-big-corporations-study.html, https://coinmarketcap.com/all/views/all/, https://www.stateofthedapps.com/, https://www.blockchaintechnology-news.com/2018/01/26/idc-global-blockchain-hit-9-2-billion-2021/ adoption: hype vs. value-creation.
  17. 17. When to use Blockchain Technology 16  Blockchain is enterprise software  Solid business use case  How does a decentralized solution improve over a centralized one?  Ideal use case:  Many parties in the value chain  Intensity of information and monetary exchange Use Case Example: Factom: Health insurance claims billing • Automated claims billing, validation, payment, and settlement • Multi-party value chain: patient, service provider, billing agent, insurance company, payor, government, collections adoption: hype vs. value-creation.
  18. 18. sample apps. 17
  19. 19. 18 financial services. quantified risk: 2.5 yr payback (securities clearing 3-days to d-days).
  20. 20. 19 food supply chain safety monitoring. chain of custody.
  21. 21. 20 vaccine and cold storage tracking.
  22. 22. 21 birth registry, QR code resumes. MIT Digital Certificates (diplomas); Criminal Records
  23. 23. 22 vehicle information chains.
  24. 24. 23 supply chain asset tracking.  Private views and controlled-use credentials issued to multiple parties in the value chain using single shared blockchain
  25. 25. 24 enterprise platform comparison. Source: https://medium.com/@philippsandner/comparison-of-ethereum-hyperledger-fabric-and-corda-21c1bb9442f6
  26. 26. 25 blockchains in space. Jan. 13, 2018 - NASA has awarded a grant to the University of Akron for research into data analysis and other topics related to space exploration. The allocation will help a team led by associate professor Jin Wei to pioneer a resilient networking system based in part on the Ethereum blockchain.
  27. 27. network futures. 26
  28. 28. peer-hosted. Source: https://bitnodes.21.co 27 Bitcoin: 10,081 nodes (Jun 2018).
  29. 29. peer-hosted. Source: https://www.ethernodes.org/network/1 28 Ethereum: 15,055 nodes.
  30. 30. store money. 29 old model. networks. banks. new model.
  31. 31. change. 30 https://www.coindesk.com/jpmorgan-says-it-may-have-to-adapt-to-counter-crypto-adoption “…financial institutions…face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation” Annual 10K, Mar 2018
  32. 32. power of the press. 31 old model. networks. newspapers. new model.
  33. 33. power of the wallet. 32 old model. peer networks. banks. new model.
  34. 34. blockchain economics. 33
  35. 35. Blockchain Economics  New economic model’s distinguishing aspects 1. Open platform business model  vs. proprietary platform (GOOG, FB, NFLX) 2. Initial Coin Offerings as a novel and official financing method for projects 3. Token-based money supply 34 Source: Swan, M. Forthcoming. Blockchain Economic Networks. Palgrave Macmillan. Two-way network effects (Metcalfe’s Law (n2 ))
  36. 36. 35 Mar 2018 $8.84 bn total Source: https://www.coindesk.com/ico-tracker ICOnomics. Comissão de Valores Mobiliários (CVM): ICOs regulated as securities, Howey Test (Oct 2017)
  37. 37. 36 participation. earn money. access resources. vote on decisions. tokens = “money +”. functions of money. store of value. medium of exchange. unit of account. +
  38. 38. participation. 37 information internet: static information social internet: engage with content token internet: participate in the community economy
  39. 39. 38 internet money. enterprise software. economic problem-solver. blockchain.
  40. 40. 39 economic challenges.
  41. 41. Economic Challenges 40 Source: Swan, M. Forthcoming. Blockchain Economic Networks. Palgrave Macmillan. Debt Systemic Risk Corruption Healthcare (Cost-Outcome)
  42. 42. 41 Source: http://www.europeanfinancialreview.com/?p=21755 debt.
  43. 43. 42 net settlement. payment channels. digital credit systems. Source: http://timreview.ca/article/1109 rethink debt.
  44. 44. Payment Channels: the concept 43  Contractually-obligated relationship  3-step economic contract executed over time 1. Party A opens a payment channel with Party B and posts a pre-paid escrow balance, Party B signs a full refund 2. Party A consumes against the escrow credit over the given time period (activity is tracked) 3. At the end of the period, cumulative activity is booked in one net transaction to close the contract  Lightning Network - Bitcoin  Raiden - Ethereum Source: https://www.slideshare.net/lablogga/blockchain-economics-payment-channels
  45. 45. Unilateral Payment Channel 44 Source: Extended from https://www.investinblockchain.com/lightning-network-bitcoin-scaling Opening Transaction: Broadcast to Network Interim Transactions: Signed between Wallets (both parties agree and are obligated; not Broadcast to Network) USD $50 Alice opens $50 “Monthly Payment Channel” with Starbucks Closing Transaction: Broadcast to Network Alice consumes coffee and Starbucks adjusts the refund balance from the initial deposit USD $5 4/1/18 4/30/18 1 2 Close “Monthly Payment Channel”: Starbucks broadcasts last refund amount to network Starbucks Coffee USD $50 USD $45 Starbucks acknowledges with unbroadcast refund of $50 4/2/18 USD $5 3 4/3/18 USD $5 4 4/4/18 USD $40 USD $35 USD $35 30
  46. 46. 45 risk.
  47. 47. reduce risk. 46 blockchain-registered digital assets. instantaneous transactability. real-time balance sheets. shared business processes. single ledger. Sources: http://www.europeanfinancialreview.com/?p=21755, http://timreview.ca/article/1109
  48. 48. Programmable Risk Black Swan Smart Contracts  Financial options (put/call) used to control/manufacture exposure  Convexity (Fig. 1): control down-side risk, upside gain, anti-fragile (robust)  Concavity: undesirable risk profile  Taleb: map event probabilities as s-curve (Fig. 2) in medicine, etc.  Convex-linear-concave profile  Use programmable risk dropdown feature of smart contracts to manage risk in more domains 47 Sources: Swan, M. Submitted. Programmable Risk: Black Swan Smart Contracts, IEEE; Taleb, Medicine: https://arxiv.org/ftp/arxiv/papers/1208/1208.1189.pdf Figure 1 Figure 2
  49. 49. smart contracts. 48 Launched: Nov 2017 500,000 sold, total: USD$40 million Source: http://fortune.com/2018/02/13/cryptokitties-ethereum-ios-launch-china-ether cryptokitties.
  50. 50. inclusion. 49 banking & credit. land registry. identity. electricity. vaccines & medicine. Source: https://www.unicef.org.au/blog/unicef-in-action/april-2017/photos-vaccines-reach-most-remote-places-earth Digital health wallet
  51. 51. 50 politics.
  52. 52. government as service provider. 51 old model. eResidency. Exclusivity: One default economic and political sovereign birth regime. new model. Source: http://blockchainstudies.org/Blockchain_Economics_CFP.pdf Plurality: Plug and play economic and political services regimes.
  53. 53. 52 net neutrality. anti-corruption. censorship-resistance. self-governance. political.
  54. 54. cryptocitizen. 53 “One ought to think autonomously, free of the dictates of external authority” - Immanuel Kant “Multiple private currencies should compete for customer business” - Friedrich Hayek
  55. 55. future-class tech. 54 blockchain networks are a new class of global computational infrastructure.
  56. 56. smart networks. 55  Future of AI: intelligence “baked in” to smart networks  Blockchains to confirm authenticity and transfer value  Deep Learning algorithms for predictive identification
  57. 57. deep learning chains. 56  Autonomous Driving & Drone Delivery, Social Robotics  Deep Learning (CNNs): identify what things are  Blockchain: secure automation technology  Track arbitrarily-many units, audit, upgrade  Legal liability, accountability, remuneration
  58. 58. fleet management. 57 secure automated
  59. 59. data. 58 big data ≠ smart data. clean, standardized, interoperable. Source: http://www.oyster-ims.com/media/resources/dealing-information-growth-dark-data-six-practical-steps 40 EB 2020e
  60. 60. scale. 59 Source: https://www.illumina.com/science/technology/next-generation-sequencing.html Population: 7.5 bn people worldwide big health data.
  61. 61. 60 technological unemployment. human-machine collaboration. automation economy.
  62. 62. risks. tech: scalability. political: regulation. social: adoption. Rapid Adoption Unfavorable Regulation Favorable Regulation Slow Adoption Future Scenarios 61
  63. 63. 62 Blockchain Opportunities for Brasil  Productivity gains  Capital investment in technology  Provide data centers with Blockchain as a Service  Skilled work force development  Train 1000 software developers: Hyperledger, Ethereum, Corda  Focus on global markets beyond the internal economy  Scale efficiencies  Natural resources, regional strength, large companies  Low-hanging fruit: secure information transfer  Barriers, lack of  Transparency  Disclosure  Standardized processes  Best practices  Trust
  64. 64. 63  First country with an official blockchain technology policy Brasil leads Proposed Policy toward Blockchain Technology It is the policy of Brasil to lead in encouraging the development and use of blockchain technology (distributed ledgers) pursuant to the following objectives: • Promote economic productivity gains, • and skilled work force development, • for a cohesive and inclusive society. Ordem e Progresso
  65. 65. Disruptive Future of Blockchain Melanie Swan Philosophy, Purdue University melanie@BlockchainStudies.org Porto Alegre, Brasil, 24 May, 2018 Slides: http://slideshare.net/LaBlogga Muita Obrigaga~!
  66. 66. Brasil Exports: R$ 669 billion Suggests blockchain to mg global td sc 65 Source: https://atlas.media.mit.edu/en/profile/country/bra/ Destinations
  67. 67. Brasil Imports: R$ 500 billion 66 Source: https://atlas.media.mit.edu/en/profile/country/bra/ Origins

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