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05 Blockchain Technology 2018

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05 Blockchain Technology 2018

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05 Blockchain Technology 2018

  1. 1. 1 Blockchain Technology Please discontinue use of cell phone and turn off ringer Innovation & IT Management Never before has humanity been so interested in a database (Richard Cook, 2018).
  2. 2. 2Neosperience S.p.A. (Oct 4, 2017). Strategic Predictions For 2018 and Beyond From Gartner Symposium pt3, https://www.youtube.com/watch?v=Y_a9L8V0lu8, last access Oct 13, 2017. Introduction
  3. 3. 3Neosperience S.p.A. (Oct 4, 2017). Strategic Predictions For 2018 and Beyond From Gartner Symposium pt3, https://www.youtube.com/watch?v=Y_a9L8V0lu8, last access Oct 13, 2017. Introduction
  4. 4. 4Nones, P. (March 18, 2018). Blockchain Technology: Hype … or Hope? https://nonesnotes.com/2018/03/18/blockchain-technology- hype-or-hope/, last accessed July 25, 2018. Introduction
  5. 5. 5 Introduction
  6. 6. 6 In December 1969, the first ARPANET maps were drawn. There were only 4 nodes in the network. December 1969 Introduction
  7. 7. 7 June 1970, the network reached the east coast. June 1970 Introduction
  8. 8. 8 March 1972. March 1972 Introduction
  9. 9. 9 July 1977. July 1977 Introduction
  10. 10. 10 In March 1989 Tim Berners-Lee from the CERN created what was to become known as the World Wide Web. March 1989 Introduction
  11. 11. 11 1993: The Internet went global connecting networks from several countries, and continued expanding thereafter. 1993 Introduction
  12. 12. 12 0:2 3 Coin Republic (Aug 30, 2013). Milton Friedman predicts the rise of Bitcoin in 1999! https://www.youtube.com/watch?v=6MnQJFEVY7s, last accessed Mar 10, 2018. Introduction
  13. 13. 13 The Internet was built around the idea of decentralization and redundancy! Likewise, blockchain provides all parties involved in a business network with a secure and synchronized record of transactions. Blockchain works as a network of computers all of which must approve a transaction that has taken place before it is recorded in a chain of computer code. The transaction, along many others, is collected online in a block. The block is broadcast to all nodes in the P2P network. Finance Train (Jul 13, 2016). How Blockchain Technology Works, https://www.youtube.com/watch?v=zRRiOnv3C-I, last accessed Aug 23, 2017. IBM Think Academy (Sep 23, 2016). IBM Think Academy Blockchain, How it works-1, https://www.youtube.com/watch?v=lD9KAnkZUjU, last accessed Aug 23, 2017. Introduction
  14. 14. 14 It was in November 2008 that a paper was published by Satoshi Nakamoto describing blockchain and Bitcoin to digitally send payments between any two entities without the need for a third-party. Introduction It was in November 2008 that a paper was published by Satoshi Nakamoto describing blockchain and Bitcoin to digitally send payments between any two entities without the need for a third-party. It is believed that Satoshi Nakamoto was the name adopted by the person or group of people who created bitcoin and the concept of the blockchain.
  15. 15. 15 They also devised the first blockchain database, and validated the first block ever on January 3, 2009. CuriousInventor (Jul 14, 2013). How Bitcoin Works Under the Hood, https://www.youtube.com/watch?v=Lx9zgZCMqXE, last accessed Aug 21, 2017. This block has come to be known as the genesis block. Introduction
  16. 16. 16CuriousInventor (Jul 14, 2013). How Bitcoin Works Under the Hood, https://www.youtube.com/watch?v=Lx9zgZCMqXE, last accessed Aug 21, 2017. Introduction - Bitcoin
  17. 17. 17 Introduction
  18. 18. 18 There are more than 5.000 cryptocurrencies in the world, all of which comprising what we call Altcoins. Introduction
  19. 19. 19https://blockexplorer.com/block/000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f Introduction: www.blockexplorer.com
  20. 20. 20https://blockexplorer.com/block/000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f Introduction: www.blockexplorer.com
  21. 21. 210:0 Today there are more than 1500 blockchain based systems: Introduction
  22. 22. 22 Introduction The number of bitcoin transactions per day: Source: https://www.blockchain.com/fr/charts/n-transactions, July 22, 2018.
  23. 23. 23Source https://www.blockchain.com/charts/market-price, July 22, 2018. Introduction Bitcoin market price:
  24. 24. 24 Introduction Bitcoin market price:
  25. 25. 25 Introduction Bitcoin market price:
  26. 26. 26 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Let’s pick a transaction As of Feb 18, 2018 Introduction
  27. 27. 27 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Introduction
  28. 28. 28 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Introduction
  29. 29. 29 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Introduction
  30. 30. 30 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Introduction
  31. 31. 31 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Bitcoin miners confirmed 1690 transactions for this block. Introduction
  32. 32. 32 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. The term “Relayed by: AntPool” refers to the fact that this particular block was completed by AntPool, one of the more successful mining pools. Introduction
  33. 33. 33 The nonce that generated the “winning” hash was 3940594194 Introduction
  34. 34. 34 The nonce that generated the “winning” hash was 3940594194 The target hash is shown above Introduction
  35. 35. 35 Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Introduction
  36. 36. 36 All hashes begin with zeros; at least 8 and up to 63. Inspired by Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/, last accessed Feb 17, 2018. Introduction
  37. 37. 37 Introduction The Merkle root is the hash of all the hashes of all the transactions in the block.
  38. 38. 38 Inspired from The Economist (Oct 31st 2015).The great chain of being sure about things, https://www.economist.com/news/briefing/21677228-technology-behind-bitcoin-lets-people-who-do-not-know-or-trust-each-other- build-dependable, last accessed Jan 4, 2018.
  39. 39. 39 Blockchain defined A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. Nash, K.S. (2016-07-14). IBM Pushes Blockchain into the Supply Chain, Wall Street Journal, https://www.wsj.com/articles/ibm- pushes-blockchain-into-the-supply-chain-1468528824, last accessed Aug 24, 2017. Ledgers have been used in double-entry bookkeeping since the 13th century. Thanks to IT, 21st century ledgers are shared and distributed. As such, they become an immutable record of all trans- actions on the network, a record that all network participants can access.
  40. 40. 40 The Code of Hammurabi
  41. 41. 41 Blockchain defined A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. Nash, K.S. (2016-07-14). IBM Pushes Blockchain into the Supply Chain, Wall Street Journal, https://www.wsj.com/articles/ibm- pushes-blockchain-into-the-supply-chain-1468528824, last accessed Aug 24, 2017. Ledgers have been used in double-entry bookkeeping since the 13th century. Thanks to IT, 21st century ledgers are shared and distributed. As such, they become an immutable record of all trans- actions on the network, a record that all network participants can access.
  42. 42. 42 Blockchain defined A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. Nash, K.S. (2016-07-14). IBM Pushes Blockchain into the Supply Chain, Wall Street Journal, https://www.wsj.com/articles/ibm- pushes-blockchain-into-the-supply-chain-1468528824, last accessed Aug 24, 2017. The difference between decentralized and distributed : Centralized Decentralized Distributed
  43. 43. 43 At a very high level, the blockchain is a decentralized ledger, or list, of all transactions across a peer-to-peer network. This is the technology underlying Bitcoin and other cryptocurrencies, and it has the potential to disrupt a wide variety of business processes. PwC (January 2016). Q&A: What is blockchain? http://www.pwc.com/us/en/financial-services/publications/viewpoints/assets/qa- what-is-blockchain.pdf,last accessed Aug 24, 2017. Blockchain defined IBM (May 9, 2016). IBM Blockchain on Bluemix is now Beta! https://www.ibm.com/blogs/internet- https://www.ibm.com/blogs/bluemix/2016/05/blockchain-on-bluemix-now-beta/, last accessed Aug 24, 2017.
  44. 44. 44 At a very high level, the blockchain is a decentralized ledger, or list, of all transactions across a peer-to-peer network. This is the technology underlying Bitcoin and other cryptocurrencies, and it has the potential to disrupt a wide variety of business processes. PwC (January 2016). Q&A: What is blockchain? http://www.pwc.com/us/en/financial-services/publications/viewpoints/assets/qa- what-is-blockchain.pdf,last accessed Aug 24, 2017. Blockchain defined IBM (May 9, 2016). IBM Blockchain on Bluemix is now Beta! https://www.ibm.com/blogs/internet- https://www.ibm.com/blogs/bluemix/2016/05/blockchain-on-bluemix-now-beta/, last accessed Aug 24, 2017.
  45. 45. 45 A B Blockchain defined
  46. 46. 46 A wants to send currency to B. The transaction, along many others, is collected online in a block. The block is broadcast to all nodes in the P2P network.A B Blockchain defined
  47. 47. 47 Question: How do we know that the message between A and B is valid? i.e., that it is A that initiated the transaction? The role of cryptography Question: How do we know that the message between A and B is valid? i.e., that it is A that initiated the transaction? Answer: Through cryptography. Namely asymmetric cryptography.
  48. 48. 48 A key is a string of bits. DI Management (not dated). An Introduction to Using Keys in Cryptography, http://www.di-mgt.com.au/cryptokeys.html, last accessed July 25, 2013. 1111 1110 1101 1100 1011 1010 1001 1000 0111 0110 …. 0101 The role of cryptography A key is a string of bits. A 256-bit key will have exactly 256 bits in it, i.e. 32 bytes To make it less cumbersome, keys can also be written in hexadecimal format where each character represents 4 bits, e.g.: FE1CBA98765432100123456789ABCDEF which represents 16 bytes or 128 bits. Expressed in bits, the above example yields this string: 11111110 00011100 10111010 10011000 01110110 01010100 00110010 00010000 00000001 00100011 01000101 01100111 10001001 10101011 11001101 11101111 A key is a string of bits. A 256-bit key will have exactly 256 bits in it, i.e. 32 bytes (32x8).
  49. 49. 49 A key is a string of bits. DI Management (not dated). An Introduction to Using Keys in Cryptography, http://www.di-mgt.com.au/cryptokeys.html, last accessed July 25, 2013. 1111 1110 1101 1100 1011 1010 1001 1000 0111 0110 …. 0101 The role of cryptography A key is a string of bits. A 256-bit key will have exactly 256 bits in it, i.e. 32 bytes To make it less cumbersome, keys can also be written in hexadecimal format where each character represents 4 bits, e.g.: FE1CBA98765432100123456789ABCDEF which represents 16 bytes or 128 bits. Expressed in bits, the above example yields this string: 11111110 00011100 10111010 10011000 01110110 01010100 00110010 00010000 00000001 00100011 01000101 01100111 10001001 10101011 11001101 11101111 A key is a string of bits. A 256-bit key will have exactly 256 bits in it, i.e. 32 bytes (32x8). 1111
  50. 50. 50 A key is a string of bits. DI Management (not dated). An Introduction to Using Keys in Cryptography, http://www.di-mgt.com.au/cryptokeys.html, last accessed July 25, 2013. 1111 1110 1101 1100 1011 1010 1001 1000 0111 0110 …. 0101 The role of cryptography To make it less cumbersome, keys can also be written in hexadecimal format where each character represents 4 bits, e.g.: FE1CBA98765432100123456789ABCDEF which represents 16 bytes or 128 bits. Expressed in bits, the above example yields this string: 11111110 00011100 10111010 10011000 01110110 01010100 00110010 00010000 00000001 00100011 01000101 01100111 10001001 10101011 11001101 11101111 1111 0001 A key is a string of bits. A 256-bit key will have exactly 256 bits in it, i.e. 32 bytes (32x8).
  51. 51. 51 A key is a string of bits. DI Management (not dated). An Introduction to Using Keys in Cryptography, http://www.di-mgt.com.au/cryptokeys.html, last accessed July 25, 2013. 1111 1110 1101 1100 1011 1010 1001 1000 0111 0110 …. 0101 The role of cryptography To make it less cumbersome, keys can also be written in hexadecimal format where each character represents 4 bits, e.g.: FE1CBA98765432100123456789ABCDEF which represents 16 bytes or 128 bits. Expressed in bits, the above example yields this string: 11111110 00011100 10111010 10011000 01110110 01010100 00110010 00010000 00000001 00100011 01000101 01100111 10001001 10101011 11001101 11101111 A key is a string of bits. A 256-bit key will have exactly 256 bits in it, i.e. 32 bytes (32x8). 1111 0001 1111
  52. 52. 52 Key Size Possible Key Combinations 2-bit 22 =4 3-bit 23 =8 4-bit 24 =16 5-bit 25 =32 . . . . . . . . 40-bit 240 =1099511627776 . . . . . . . 56-bit 256 =72057594037927900 . . . . . . . . 64-bit 264 =18446744073709600000 . . . . . . . . 128-bit 2128 =340282366920938000000000000000000000000 The role of cryptography
  53. 53. 53 Key Size Possible Key Combinations 2-bit 22 =4 3-bit 23 =8 4-bit 24 =16 5-bit 25 =32 . . . . . . . . 40-bit 240 =1099511627776 . . . . . . . 56-bit 256 =72057594037927900 . . . . . . . . 64-bit 264 =18446744073709600000 . . . . . . . . 128-bit 2128 =340282366920938000000000000000000000000 The role of cryptography
  54. 54. 54 3-bit 23 =8 4-bit 24 =16 5-bit 25 =32 . . . . . . . . 40-bit 240 =1099511627776 . . . . . . . 56-bit 256 =72057594037927900 . . . . . . . . 64-bit 264 =18446744073709600000 . . . . . . . . 128-bit 2128 =340282366920938000000000000000000000000 * 200 computers working simultaneously. The role of cryptography
  55. 55. 55 The asymmetric key encryption scheme Bella’s public key The private key For every user, a pair of private and public keys are created, which go hand in hand but are totally independent one from the other The public key
  56. 56. 56 The private key The public key Like a jigsaw The asymmetric key encryption scheme
  57. 57. 57 The asymmetric key encryption scheme Network Associates (1999). An Introduction to Cryptography, pp. 1-88, ftp://ftp.pgpi.org/pub/pgp/6.5/docs/english/IntroToCrypto.pdf, last accessed on March 29, 2004. A pair of keys are used: a public key, which encrypts data,A pair of keys are used: a public key, which encrypts data, and a corresponding private, or secret key for, decryption. A pair of keys are used: a public key, which encrypts data, and a corresponding private, or secret key for, decryption. The public key is published to the world while the private key is kept secret.
  58. 58. 58 B’s public key 751A696 C24D970 10121261 Transaction B’s private key² 751A696 C24D970 10121261 Encrypted message Encrypted message A encrypts his message using B’s public key. Upon reception, B decrypts the message with his private key. A B The asymmetric key encryption scheme – An example
  59. 59. 59 A to John A to Leila A to Abdu A to Haykel A to Shakti 5 BTC 12 BTC 2000 BTC 143 BTC 10 BTC 04344244233344454778877..999 12443444543344454773344..877 44450434447733244234541..123 12443444543344454773344..877 75444788332443443344774..181 Even though all these transactions have been signed by A, the digital signature is different every time because the recipient is different every time. The asymmetric key encryption scheme – An example
  60. 60. 60 The asymmetric key encryption scheme – An example From the movie Eyes Wide Shut (Stanley Kubrick, 1999) @1:07:28. 0:2 7
  61. 61. 61 The asymmetric key encryption scheme – An example
  62. 62. 62 The public keys are stored in public servers accessible to everyone. The public keys are stored in public servers accessible to everyone. Since there is only one key (the private key) which goes hand in hand with the public key, the risk to decipher an encrypted message is reduced The public keys are stored in public servers accessible to everyone. Since there is only one key (the private key) which goes hand in hand with the public key, the risk to decipher an encrypted message is reduced because it is almost impossible to generate a private key from the public key. The asymmetric key encryption scheme
  63. 63. 63 A sealed authenticator system safe at a missile launch control center. Under the two-man rule all access and actions require the presence of two authorized people. The asymmetric key encryption scheme
  64. 64. 64
  65. 65. 65 The hybrid key encryption scheme - Another example
  66. 66. 66 A B Blockchain defined
  67. 67. 67 Parties validate the block in which the transaction was inserted through a process called mining. Blockchain defined
  68. 68. 68 Parties validate the block in which the transaction was inserted through a process called mining. Once the transactions are approved, the new block is added to the blockchain, which is a ledger of all past transactions. Blockchain defined
  69. 69. 69 Once the block has been added, it is linked to the one before it, and the one after it (hence the word chain). The ledger balances are updated to reflect the new balances for all parties. The process goes on and a new block is formed every 10mn, with a new set of transactions, all having occurred at about the same time. Blockchain defined
  70. 70. 70 Once the block has been added, it is linked to the one before it, and the one after it (hence the word chain). The ledger balances are updated to reflect the new balances for all parties. The process goes on and a new block is formed every 10mn, with a new set of transactions, all having occurred at about the same time. Blockchain defined
  71. 71. 71 Once the block has been added, it is linked to the one before it, and the one after it (hence the word chain). The ledger balances are updated to reflect the new balances for all parties. The process goes on and a new block is formed every 10mn, with a new set of transactions, all having occurred at about the same time. Blockchain defined
  72. 72. 72 A blockchain is thus a linked list of blocks, each block containing transactions. Each block is limited to 2,400 transactions. 3Blue1Brown (Jul 7, 2017). Ever wonder how Bitcoin (and other cryptocurrencies) actually work?, https://www.youtube.com/watch?v=bBC-nXj3Ng4, last accessed Aug 23, 2017. A blockchain is thus a linked list of blocks, each block containing transactions. Each block is limited to 2,400 transactions (~ 1Mb). Blockchain defined
  73. 73. 73 Remember that everyone has a copy of the blockchain. Blockchain defined Remember that everyone has a copy of the blockchain. If anyone tries to alter it to claim ownership of currency that is not really theirs, the discrepancy is immediately obvious to everyone. Hinchcliffe, D. (July 31, 2015). How blockchain is likely to transform IT and business, ZDNet, http://www.zdnet.com/article/how-blockchain-is-likely-to-change-it-and-business-forever/, last accessed Aug 20, 2017. A B
  74. 74. 74 Remember that everyone has a copy of the blockchain. If anyone tries to alter it to claim ownership of currency that is not really theirs, the discrepancy is immediately obvious to everyone. Hinchcliffe, D. (July 31, 2015). How blockchain is likely to transform IT and business, ZDNet, http://www.zdnet.com/article/how-blockchain-is-likely-to-change-it-and-business-forever/, last accessed Aug 20, 2017. Blockchain defined Parties validate the block in which the transaction was inserted through a process called mining performed by the miners.
  75. 75. 75 Question: Who are the miners? Mining and the miners
  76. 76. 76 Mining and the miners Question: Who are the miners and what do they do? Answer:
  77. 77. 77 Mining and the miners Question: Who are the miners and what do they do? Answer:
  78. 78. 78 Question: Who are the miners and what do they do? Answer: Miners are individuals who provide the computing power for Bitcoin’s validation process. They use this computing power by solving a cryptographic problem, called a hash function. By using their computing power for this work, miners are rewarded with bitcoins. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners Question: Who are the miners and what do they do? Answer: Miners are individuals who provide the computing power for Bitcoin’s validation process. They use this computing power by solving a cryptographic problem, called a hash function. By using their computing power for this work, miners are rewarded with bitcoins. In fact, that is how new bitcoins enter the money supply (more about this later).
  79. 79. 79 Question: Who are the miners and what do they do? Answer: Miners are individuals who provide the computing power for Bitcoin’s validation process. They use this computing power by solving a cryptographic problem, called a hash function. By using their computing power for this work, miners are rewarded with bitcoins. Stanley, J. (February 5, 2018).Blockchain Explained: How It Works, Who Cares and What Its Future May Hold, https://www.techspot.com/article/1567-blockchain-explained/, last accessed Feb 5, 2018. Mining and the miners Question: Who are the miners and what do they do? Answer: Miners are individuals who provide the computing power for Bitcoin’s validation process. They use this computing power by solving a cryptographic problem, called a hash function. By using their computing power for this work, miners are rewarded with bitcoins. In fact, that is how new bitcoins enter the money supply (more about this later). An essential feature of blockchain is its ability to encrypt each “block” of data for a unique hash output that is also stamped onto the succeeding block, creating a chain of sequential information which is then verified through a consensus of activity across a network of participants.
  80. 80. 80Antonopoulos, A.M. (Jan 31, 2016). Consensus Algorithms, Blockchain Technology and Bitcoin UCL, https://www.youtube.com/watch?v=fw3WkySh_Ho, last accessed Aug 23, 2017. In 1997 Adam Back created a system for antispam called hashcash. The concept of hashcash Hashcash is an algorithm that requires a sizeable amount of work to compute. Hashcash is an algorithm that requires a sizeable amount of work to compute. For an email, for example, a hashcash stamp is added to the header of the message to prove that the sender has expended a modest amount of CPU time calculating the stamp prior to sending the email. Hashcash is an algorithm that requires a sizeable amount of work to compute. For an email, for example, a hashcash stamp is added to the header of the message to prove that the sender has expended a modest amount of CPU time calculating the stamp prior to sending the email. Adam Back figured that this mechanism will make spammers do some work: a few hundred thousand SHA operations in a row, which, by definition, produce a fingerprint with a specific value that proves that a certain amount of work was done.
  81. 81. 81 The concept of hashcash Why don’t spammers like this concept? For example, consider that to send an email, you have to spend half a second of computing. Why don’t spammers like this concept? For example, consider that to send an email, you have to spend half a second of computing. If you are a spammer, and you want to send a million messages, you will have to do half a million seconds of computing! (a million times .5s). Why don’t spammers like this concept? For example, consider that to send an email, you have to spend half a second of computing. If you are a spammer, and you want to send a million messages, you will have to do half a million seconds of computing! (a million times .5s). That is a lot of work. Why don’t spammers like this concept? For example, consider that to send an email, you have to spend half a second of computing. If you are a spammer, and you want to send a million messages, you will have to do half a million seconds of computing! (a million times .5s). That is a lot of work. In Back’s rationale, if the sender goes through some amount of time and effort to generate the stamp and send the email, it is unlikely that they are a spammer.
  82. 82. 82 0:1 0 The concept of hashcash WatchMojo.com (May 27, 2014). Top 10 Bitcoin Facts, https://www.youtube.com/watch?v=2UC_8NdR1To, last accessed Nov 6, 2017.
  83. 83. 83 Question: How do miners validate the new transactions? Antonopoulos, A.M. (Jan 31, 2016). Consensus Algorithms, Blockchain Technology and Bitcoin UCL, https://www.youtube.com/watch?v=fw3WkySh_Ho, last accessed Aug 23, 2017. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Question: How do miners validate the new transactions? Answer: 1. Every 10 minutes, they look at a set of unconfirmed transactions and see whether a. The individual transactions conform to some rules (private/public keys). b. The block conforms to some rules. Mining and the miners Question: How do miners validate the new transactions? Answer: 1. Every 10 minutes, they look at a set of unconfirmed transactions and see whether a. The individual transactions conform to some rules (private/public keys). b. The block conforms to some rules. 2. They then race to bundle data from the last block in the ledger and data in the current block, by finding a number called nonce. number used oncenumber nonce number used oncen once
  84. 84. 84https://blockexplorer.com/block/000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f Mining and the miners
  85. 85. 85 Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. 5. When a miner finds a hash with the correct number of zeroes, the discovery is broadcast to the rest of the network.
  86. 86. 86 Block Number Previous Block • Transaction 6992… • Transaction 6993… • Transaction 6993… • . • . • Transaction 6994... Nonce The miner’s task: Apply the hash (SHA256) so that: SHA256 (current and previous blocks + nonce) < Target Mining and the miners The miner’s task: Apply the hash (SHA256) so that: SHA256 (current and previous blocks + nonce) < Target (i.e., starts with n zeroes) The miner’s task: Apply the hash (SHA256) so that: SHA256 (current and previous blocks + nonce) < Target (i.e., starts with n zeroes) Example: starts with 4 zeroes
  87. 87. 87Inspired by CuriousInventor (Jul 14, 2013). How Bitcoin Works Under the Hood, https://www.youtube.com/watch?v=Lx9zgZCMqXE, last accessed Aug 21, 2017. Mining and the miners
  88. 88. 88Inspired by CuriousInventor (Jul 14, 2013). How Bitcoin Works Under the Hood, https://www.youtube.com/watch?v=Lx9zgZCMqXE, last accessed Aug 21, 2017 and Hong, E. (Oct 17, 2017). Read more: How Mining and the miners The amount of processing performed to find the target is what constitutes the proof-of-work (PoW). The amount of processing performed to find the target is what constitutes the proof-of-work (PoW). All target hashes begin with 0s--at least eight 0s, and up to 63 0s. The amount of processing performed to find the target is what constitutes the proof-of-work (PoW). All target hashes begin with 0s--at least eight 0s, and up to 63 0s. There is a maximum target set by the Bitcoin Protocol. The amount of processing performed to find the target is what constitutes the proof-of-work (PoW). All target hashes begin with 0s--at least eight 0s, and up to 63 0s. There is a maximum target set by the Bitcoin Protocol. No target can be greater than this number: 0000 0000 ffff ffff ffff ffff ffff ffff ffff ffff ffff ffff ffff ffff ffff ffff
  89. 89. 893Blue1Brown (Jul 7, 2017). Ever wonder how Bitcoin (and other cryptocurrencies) actually work? https://www.youtube.com/watch?v=bBC-nXj3Ng4, last accessed Aug 23, 2017. Mining and the miners
  90. 90. 90 If the calculation takes more than 10mn, the miner will have to drop this block and move to the next one. Again, to do this more and more efficiently, more and more powerful hardware has to be used. Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. Hiếu, L. Th. (May 13, 2017). Bitcoin Transaction - Double-Spending Attack (51% Attack), https://www.youtube.com/watch?v=9U2MWaHG-xM, last accessed Aug 21, 2017. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners
  91. 91. 91 If the calculation takes more than 10mn, the miner will have to drop this block and move to the next one. Again, to do this more and more efficiently, more and more powerful hardware has to be used. Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. Hiếu, L. Th. (May 13, 2017). Bitcoin Transaction - Double-Spending Attack (51% Attack), https://www.youtube.com/watch?v=9U2MWaHG-xM, last accessed Aug 21, 2017. Lead Blockchain Editor (September 12, 2016). Why Investors Should Care About Bitcoin Mining Pools, Bitcoin Investment News, https://bitcoinira.com/articles/investors-care-bitcoin-mining-pools, last accessed Nov 26, 2017. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners If the calculation takes more than 10mn, the miner will have to drop this block and move to the next one. Again, to do this more and more efficiently, more and more powerful hardware has to be used. To avoid that miners with modest computing power wait more time to earn BTC rewards, pools were formed to group miners and distribute BTC rewards on a fairer basis.
  92. 92. 92See https://www.blockchain.com/fr/pools, July 22, 2018. The biggest mining pools in July 2018 80% as of June 30, 2018
  93. 93. 93 A mining farm is a site for the production of crypto currency. A farm is also a collection of powerful computers that you need to calculate. Mining farms See http://www.sciencedebate2008.com/fermy-dlya-mayninga-kriptovalyut-eto-uzhe-realnost/, last accessed Nov 26, 2017.
  94. 94. 94 Mining and the miners
  95. 95. 95 Block Number Previous Block • Transaction 1100… • Transaction 1101… • Transaction 1201… • . • . • Transaction 2600... Nonce Block Number Previous Block • Transaction 2100… • Transaction 2101… • Transaction 1201… • . • . • Transaction 4600... Nonce Block Number Previous Block • Transaction 4700… • Transaction 4801… • Transaction 4901… • . • . • Transaction 5700... Nonce Time Mining and the miners
  96. 96. 96 Block Number Previous Block • Transaction 1100… • Transaction 1101… • Transaction 1201… • . • . • Transaction 2600... Nonce Block Number Previous Block • Transaction 2100… • Transaction 2101… • Transaction 1201… • . • . • Transaction 4600... Nonce Block Number Previous Block • Transaction 4700… • Transaction 4801… • Transaction 4901… • . • . • Transaction 5700... Nonce Mining and the miners Time
  97. 97. 97 Potential new blocks How do we decide which should be the next blockchain block? Mining and the miners
  98. 98. 98 Potential new blocks How do we decide which should be the next blockchain block? Mining and the miners
  99. 99. 99 Potential new blocks How do we decide which should be the next blockchain block? Mining and the miners
  100. 100. 100 Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. 5. When a miner finds a hash with the correct number of zeroes, the discovery is broadcast to the rest of the network. Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. 5. When a miner finds a hash with the correct number of zeroes, the discovery is broadcast to the rest of the network. 6. The miner gets a reward valued in BTC.
  101. 101. 101Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. 5. When a miner finds a hash with the correct number of zeroes, the discovery is broadcast to the rest of the network. 6. The miner gets a reward valued in BTC. The reward is then registered in the blockchain as if it was a transaction.
  102. 102. 102 The reward has not always been 50 BTC, and will not always be 50 BTC: Jan 2009: 50 BTC per mined block. 3Blue1Brown (Jul 7, 2017). Ever wonder how Bitcoin (and other cryptocurrencies) actually work?, https://www.youtube.com/watch?v=bBC-nXj3Ng4, last accessed Aug 23, 2017. The miner’s reward
  103. 103. 1033Blue1Brown (Jul 7, 2017). Ever wonder how Bitcoin (and other cryptocurrencies) actually work? https://www.youtube.com/watch?v=bBC-nXj3Ng4, last accessed Aug 23, 2017. The miner’s reward The reward has not always been 50 BTC, and will not always be 25 BTC: Jan 2009: 50 BTC per mined block. Nov 2012: 25 BTC per mined block. July 2016: 12.5 BTC Feb 2020: 6.25 BTC Sep 2023: etc. The reward gets cut in half every 210.000 blocks (every 4 years or so). The reward has not always been 50 BTC, and will not always be 25 BTC: Jan 2009: 50 BTC per mined block. Nov 2012: 25 BTC per mined block. July 2016: 12.5 BTC Feb 2020: 6.25 BTC Sep 2023: etc. The reward gets cut in half every 210.000 blocks (every 4 years or so). Note: This means that there will never be more than 21.000.000 bitcoins in existence: 210,000 (50+25+12,5+6,25….) < 21.000.000.
  104. 104. 104 The miner’s reward The reward has not always been 50 BTC, and will not always be 25 BTC: Jan 2009: 50 BTC per mined block. Nov 2012: 25 BTC per mined block. July 2016: 12.5 BTC Feb 2020: 6.25 BTC Sep 2023: etc. The reward gets cut in half every 210.000 blocks (every 4 years or so). Note: This means that there will never be more than 21.000.000 bitcoins in existence: 210,000 (50+25+12,5+6,25….) < 21.000.000. 210 000,00 x 50,00 = 10 500 000,000210 000,00 x 50,00 = 10 500 000,000 210 000,00 x 25,00 = 5 250 000,000 210 000,00 x 50,00 = 10 500 000,000 210 000,00 x 25,00 = 5 250 000,000 210 000,00 x 12,50 = 2 625 000,000 210 000,00 x 6,25 = 1 312 500,000 210 000,00 x 3,13 = 656 250,000 210 000,00 x 1,56 = 328 125,000 210 000,00 x 0,78 = 164 062,500 210 000,00 x 0,39 = 82 031,250 210 000,00 x 0,20 = 41 015,730 210 000,00 x 0,10 = 20 507,760 210 000,00 x 0,05 = 10 253,880 210 000,00 x 0,02 = 5 126,940 210 000,00 x 0,01 = 2 563,470 210 000,00 x 0,01 = 1 281,840 210 000,00 x 0,00 = 640,920 210 000,00 x 0,00 = 320,460 210 000,00 x 0,00 = 160,230 210 000,00 x 0,00 = 80,010 210 000,00 x 0,00 = 40,110 210 000,00 x 0,00 = 20,034 210 000,00 x 50,00 = 10 500 000,000 210 000,00 x 25,00 = 5 250 000,000 210 000,00 x 12,50 = 2 625 000,000 210 000,00 x 6,25 = 1 312 500,000 210 000,00 x 3,13 = 656 250,000 210 000,00 x 1,56 = 328 125,000 210 000,00 x 0,78 = 164 062,500 210 000,00 x 0,39 = 82 031,250 210 000,00 x 0,20 = 41 015,730 210 000,00 x 0,10 = 20 507,760 210 000,00 x 0,05 = 10 253,880 210 000,00 x 0,02 = 5 126,940 210 000,00 x 0,01 = 2 563,470 210 000,00 x 0,01 = 1 281,840 210 000,00 x 0,00 = 640,920 210 000,00 x 0,00 = 320,460 210 000,00 x 0,00 = 160,230 210 000,00 x 0,00 = 80,010 210 000,00 x 0,00 = 40,110 210 000,00 x 0,00 = 20,034 20 999 980,134 3Blue1Brown (Jul 7, 2017). Ever wonder how Bitcoin (and other cryptocurrencies) actually work? https://www.youtube.com/watch?v=bBC-nXj3Ng4, last accessed Aug 23, 2017.
  105. 105. 105 The last Bitcoin will be mined somewhere between May 7th and October 8th, 2140. Bitcoins created Reward halved every 4 years The miner’s reward
  106. 106. 106 Where does the 50 BTC come from when mining? The first 50 BTC come from devaluing all the following bitcoin rewards by a tiny amount. Which explains why the reward decreases with time. When all bitcoins have been exhausted, they disappear. The miner’s reward
  107. 107. 107 In PoW, validating transactions requires significant resources: electricity, bandwidth, hardware, time, data storage, … CuriousInventor (Jul 14, 2013). How Bitcoin Works Under the Hood, https://www.youtube.com/watch?v=Lx9zgZCMqXE, last accessed Aug 21, 2017. Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Validating transactions
  108. 108. 108 0:5 6 Martin, W. (16 Oct 2017). The electricity required for a single Bitcoin trade could power a house for a whole month, https://www.weforum.org/agenda/2017/10/the-electricity-required-for-a-single-bitcoin-trade-could-power-a-house-for-a-whole-month, last accessed Dec 15, 2017. Validating transactions
  109. 109. 109 In PoW, validating transactions requires significant resources: electricity, bandwidth, hardware, time, data storage, … Source: https://www.blockchain.com/fr/charts/n-transactions?timespan=1year, July 23, 2018. Validating transactions In July 2018, Bitcoin reached 182,000 transactions per day.
  110. 110. 110 10,649,600 computer cores See https://www.top500.org/list/2016/06/, last accessed Jan 25, 2017. Validating transactions
  111. 111. 111 In the beginning, miners solved these math problems with ordinary processors. Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. In the beginning, miners solved these math problems with ordinary processors. Then they realized that graphics cards used for gaming were better suited to this kind of working: Graphics cards (GPUs) are faster Validating transactions - GPUs
  112. 112. 112 Hong, E. (Oct 17, 2017). Read more: How Does Bitcoin Mining Work? Investopedia, https://www.investopedia.com/tech/how-does- bitcoin-mining-work/, last accessed Feb 17, 2018. Here, the graphics cards are the rectangular blocks with whirring circles. Again, this is probably no longer the most efficient way to mine. Validating transactions - GPUs
  113. 113. 113 2300 transistors In 2017, the largest transistor count in a traditional commercially available single-chip processor was 19.2 billion: AMD’s Ryzen- based Epyc. Moore’s Law
  114. 114. 114 Allard, C. (Dec 8, 2017). Nvidia dévoile la Titan V, la plus puissante carte graphique au monde, infos et prix, http://www.gameblog.fr/news/72317-nvidia-devoile-la-titan-v-la-plus-puissante-carte-graphique-, last accessed Dec 11, 2017. 0:5 9 Validating transactions - GPUs
  115. 115. 115 In the beginning, miners solved these math problems with ordinary processors. Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. In the beginning, miners solved these math problems with ordinary processors. Then they realized that graphics cards used for gaming were better suited to this kind of working: Graphics cards (GPUs) are faster In the beginning, miners solved these math problems with ordinary processors. In the beginning, miners solved these math problems with ordinary processors. Then they realized that graphics cards used for gaming were better suited to this kind of working: Graphics cards (GPUs) are faster, but they use more electricity and generate a lot of heat. Validating transactions - GPUs
  116. 116. 116 FPGAs are generic hardware that offer significant advantages compared to the traditional CPUs and GPUs. While most FPGAs hash slower than GPUs, they allow a single computer to run stacks of FPGA miners, compared with just a few GPUs under normal conditions. Validating transactions - FPGAs
  117. 117. 117 In the beginning, miners solved these math problems with ordinary processors. Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. In the beginning, miners solved these math problems with ordinary processors. Then they realized that graphics cards used for gaming were better suited to this kind of working: Graphics cards (GPUs) are faster, but they use more electricity and generate a lot of heat. In the beginning, miners solved these math problems with ordinary processors. Then they realized that graphics cards used for gaming were better suited to this kind of working: Graphics cards (GPUs) are faster, but they use more electricity and generate a lot of heat. The first commercial Bitcoin mining chips that were reprogrammed for mining Bitcoin were faster but still power-hungry. In the beginning, miners solved these math problems with ordinary processors. Then they realized that graphics cards used for gaming were better suited to this kind of working: Graphics cards (GPUs) are faster, but they use more electricity and generate a lot of heat. The first commercial Bitcoin mining chips that were reprogrammed for mining Bitcoin were faster but still power-hungry. ASIC, or Application Specific Integrated Circuit, for example, are chips that are designed specifically for Bitcoin mining. Validating transactions - FPGAs
  118. 118. 118Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. 4.73 Tera Hash per second Validating transactions - ASICs
  119. 119. 119Bitcoin Mining (n.d.). Bitcoin Knowledge Podcast, Bitcoin Mining, Hesiod Services LLC, https://www.bitcoinmining.com/, last accessed Aug 20, 2017. 4.73 Tera Hash per second Validating transactions - ASICs
  120. 120. 120 The D-Wave 2X quantum computer developed by D- Wave, Google and the NASA is 100 million times faster than a traditional computer. Benazdia, N. (2015). L’ordinateur quantique de la NASA est Google est hallucinant, http://fr.ubergizmo.com/2015/12/10/ordinateur- quantique-nasa-google-est-hallucinant.html, last accessed Dec 12, 2015. Which means that it can compute in one second what a one-processor computer computes in 10 000 years. Validating transactions
  121. 121. 121 Quantum Computing - The boost in horsepower that quantum computing is expected to bring over the coming years could enable encryption cracking that is not thinkable on conventional computer hardware. Stanley, J. (Feb 5, 2018). Blockchain Explained: How It Works, Who Cares and What Its Future May Hold - Is Blockchain the Swiss Army Knife to All of Our Cyber-Insecurities?, TechSpot, https://www.techspot.com/article/1567-blockchain-explained/, last accessed Feb 17, 2018. Researchers1 warn that by 2027, quantum computers could pose a threat to blockchain as it could one day become so powerful as to crack blockchain encryption or mount a 51% attack. 1. Aggarwal, D., Brennen, G.K., Troy, L. Santha, M., and Tomamichel, M. (Oct 28, 2017). Quantum attacks on Bitcoin, and how to protect against them, arXiv preprint arXiv:1710.10377, https://arxiv.org/pdf/1710.10377.pdf, last accessed Feb 18, 2018. Validating transactions
  122. 122. 122 Issues with the PoW scheme include: The more difficult the problem, the longer it takes to solve it. The more difficult the problem, the more electricity it takes to compute. Thus, the value of PoW-based cryptocurrencies costs time and money. For instance, it is believed that both Bitcoin and Ethereum burn over $1 million worth of electricity and hardware costs per day1. 1. GitHub (2018). Proof of Stake FAQ, https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ, last accessed Jan 15, 2018. Mamoria, M. (Jul 5, 2017). Is Proof of Stake really the solution? https://hackernoon.com/is-proof-of-stake-really-the-solution- 2db68487f4ba, last accessed Jan 14, 2018. PoW vs. PoS
  123. 123. 123 As a consequence: With time, miners may ask for higher transaction fees to offset the diminishing block reward. This will cause the transactions on the network to be more costly compared to alternatives, causing more network participants to leave. If there is a reduction in the number of miners, the mining pool will become more centralized, increasing the likelihood of 51% attacks. This could potentially destabilize the network and cause participants to lose trust in Bitcoin. PoW vs. PoS
  124. 124. 124 The proof-of-stake (PoS) scheme is one of the alternatives to the (PoW) scheme. PoW vs. PoS In the PoS scheme, the creator of a new block is chosen depending on its wealth (the stake). This means that the more coins are owned by a validator, the more validating (mining) power it has. Note: In the PoS scheme, blocks are “forged” or “minted”, not mined. Users who validate transactions and create new blocks in this system are referred to as “forgers” or “validators”, not miners. Greenfield, R. (Jul 20, 2017). Explaining How Proof of Stake, Proof of Work, Hashing and Blockchain Work Together, https://medium.com/@robertgreenfieldiv/explaining-proof-of-stake-f1eae6feb26f, last accessed Jan 14, 2018.
  125. 125. 125 Forgers first put their coins at “stake”, that is held in an escrow account. If they validate a fraudulent transaction, they lose their holdings, as well as their rights to participate as a forger in the future. In the basic version of POS, there are no block rewards like bitcoin. The forgers take only the transaction fees. Greenfield, R. (Jul 20, 2017). Explaining How Proof of Stake, Proof of Work, Hashing and Blockchain Work Together, https://medium.com/@robertgreenfieldiv/explaining-proof-of-stake-f1eae6feb26f, last accessed Jan 14, 2018. PoW vs. PoS
  126. 126. 126 Excerpted from Cryptonauts (Jul 3, 2017). Proof of Work VS Proof of Stake - Simplified Explanation, https://www.youtube.com/watch?v=SiKnWBPkQ4I, last accessed Jan 14, 2018 @4:30. 0:4 4 PoW vs. PoS
  127. 127. 127 The first cryptocurrency to adopt the PoS scheme was Peercoin. Investopedia (n.d.). Proof of Stake (PoS), https://www.investopedia.com/terms/p/proof-stake-pos.asp, last accessed Jan 14, 2018. Ray, S. (Oct 6, 2017). What is Proof of Stake? https://hackernoon.com/what-is-proof-of-stake-8e0433018256, last accessed Jan 14, 2018. PoW vs. PoS The first cryptocurrency to adopt the PoS scheme was Peercoin. It was then followed by Blackcoin ShadowCash Lisk Nxt and Ethereum.
  128. 128. 128 As a result, PoS systems are more environmentally friendly and efficient, because the electricity and hardware costs are much lower than the costs associated with mining in a PoW system. Mamoria, M. (Jul 5, 2017). Is Proof of Stake really the solution? GitHub (2018). Proof of Stake FAQ, https://hackernoon.com/is-proof- of-stake-really-the-solution-2db68487f4ba, last accessed Jan 14, 2018. PoW vs. PoS As a result, PoS systems are more environmentally friendly and efficient, because the electricity and hardware costs are much lower than the costs associated with mining in a PoW system. A greater number of people are encouraged to run nodes and get involved because it is easy and affordable to participate in this system; this results in more decentralization. As a result, PoS systems are more environmentally friendly and efficient, because the electricity and hardware costs are much lower than the costs associated with mining in a PoW system. A greater number of people are encouraged to run nodes and get involved because it is easy and affordable to participate in this system; this results in more decentralization. However, below some threshold, poor stay poor. As a result, PoS systems are more environmentally friendly and efficient, because the electricity and hardware costs are much lower than the costs associated with mining in a PoW system. A greater number of people are encouraged to run nodes and get involved because it is easy and affordable to participate in this system; this results in more decentralization. However, below some threshold, poor stay poor. Selection solely by account balance would result in very undesirable centralization, as the single richest member would have a permanent advantage. Several different methods of selection have thus been devised.
  129. 129. 129 SHA256
  130. 130. 130 SHA256 SHA256 is a 64 character long chain considered a fingerprint for the data.
  131. 131. 131 SHA256
  132. 132. 132 Hashing – An example
  133. 133. 133 Hashing – An example
  134. 134. 134 Hashing – An example
  135. 135. 135 SHA256
  136. 136. 136 SHA256 - http://passwordsgenerator.net/sha256-hash-generator/
  137. 137. 137 SHA256 - http://passwordsgenerator.net/sha256-hash-generator/
  138. 138. 138 SHA256 - http://passwordsgenerator.net/sha256-hash-generator/
  139. 139. 139 SHA256 - http://passwordsgenerator.net/sha256-hash-generator/
  140. 140. 140 SHA256 is random but deterministic finding its inverse is impossible SHA256 SHA256 is random but deterministic finding its inverse is impossible what are the chances the first bit is going to be zero? 50% SHA256 is random but deterministic finding its inverse is impossible what are the chances the first bit is going to be zero? 50% 2 bits? 25% SHA256 is random but deterministic finding its inverse is impossible what are the chances the first bit is going to be zero? 50% 2 bits? 25% 10 bits?
  141. 141. 141Wan, T. and Hoblitzell, M. (June 26, 2014). Bitcoin - Fact. Fiction. Future, https://dupress.deloitte.com/dup-us-en/topics/emerging- technologies/bitcoin-fact-fiction-future.html, last accessed Aug 20, 2017. Mining and the miners Answer (cont’d): 3. Then they compute the hash to produce a unique fingerprint making the block and its transactions valid and verifiable. 4. The hashed block must have a set number of zeroes at the beginning. So the miner has to try different nonces to find the right value. 5. When a miner finds a hash with the correct number of zeroes, the discovery is broadcast to the rest of the network. 6. The miner gets a reward valued in BTC.
  142. 142. 1423Blue1Brown (Jul 7, 2017). Ever wonder how Bitcoin (and other cryptocurrencies) actually work? https://www.youtube.com/watch?v=bBC-nXj3Ng4, last accessed Aug 23, 2017. SHA256
  143. 143. 143Brownworth, A. (Nov 5, 2016). Blockchain 101 - A Visual Demo, https://www.youtube.com/watch?v=_160oMzblY8, last accessed Aug 22, 2017 [starting @ 5:09]. 2:5 SHA256
  144. 144. 144 3:13Brownworth, A. (Nov 5, 2016). Blockchain 101 - A Visual Demo, https://www.youtube.com/watch?v=_160oMzblY8, last accessed Aug 22, 2017 [starting @ 5:09]. SHA256
  145. 145. 145 Digital Signatures A B A computes the hash of the message she is sending B receives the hashcode of the message crypted with A’s private key The hashcode obtained is then crypted with A’s private key B receives the hashcode of the message crypted with A’s private key AND B receives the hashcode of the message crypted with A’s private key AND the original message
  146. 146. 146 Digital SignaturesThe hashcode obtained is then crypted with A’s private key
  147. 147. 147 B checks whether A’s public key B computes the message’s hash again B checks whether A’s public key matches her private key
  148. 148. 148 Digital Signatures
  149. 149. 149 Ethereum
  150. 150. 150 Ethereum is a blockchain-based distributed computing platform Ether is a cryptocurrency whose blockchain is generated by the Ethereum platform. The Ethereum platform is particular in the sense that it features smart contracts. Ethereum Ethereum was proposed in late 2013 by Vitalik Buterin, a Russian-Canadian (born Jan 31st, 1994) cryptocurrency researcher and programmer. In 2016, Ethereum was split into two separate blockchains – the new separate version became Ethereum (ETH), and the original continued as Ethereum Classic (ETC). The value of the Ethereum currency grew over 13,000 percent in 2017.
  151. 151. 151 Ethereum and smart contracts Understand the idea of an automated contract as a vending machine: put money in one end and hopefully get a single outcome at the other end. Understand the idea of an automated contract as a vending machine: put money in one end and hopefully get a single outcome at the other end. Hopefully?
  152. 152. 152 A smart contract is a self-enforcing software that is running on the blockchain system. Ethereum and smart contracts
  153. 153. 153 The difference between blockchain and bitcoin Network Internet Blockchain Bitcoin IBMBlockchain (May 8, 2017). What is the difference between Bitcoin and blockchain, https://www.youtube.com/watch?v=MKwa- BqnJDg, last accessed Aug 20, 2017.
  154. 154. 154 The difference between blockchain and bitcoin Network Internet Blockchain Bitcoin 0:1IBMBlockchain (May 8, 2017). What is the difference between Bitcoin and blockchain, https://www.youtube.com/watch?v=MKwa- BqnJDg, last accessed Aug 20, 2017.
  155. 155. 155 Application: Food Safety and Provenance A similar example was given by Richie Etwaru using tangerines. See Etwaru, R. (May 15, 2017). Blockchain: Massively Simplified, TEDxMorristown, https://www.youtube.com/watch?v=k53LUZxUF50, last accessed Aug 21, 2017. 1. Quick Respone Code How do we know that quality logo is legit? Imagine that the seller puts a QR code1 on the bananas. How do we know that quality logo is legit? How do we know that quality logo is legit? Imagine that the seller puts a QR code1 on the bananas. We can scan that code with our smartphone. An app shows all the transactions that took place on that merchandise including all the chemicals that were applied in the farm where it came from. And it is all running on a blockchain, so we know that we can trust it.
  156. 156. 156Excerpted from LibertyPen (August 26, 2008). Power of the Market - The Pencil, https://www.youtube.com/watch?v=R5Gppi-O3a8, last accessed J 1:09 Application: Food Safety and Provenance
  157. 157. 157 Application: Food Safety and Provenance See https://www.youtube.com/watch?v=fj9NM-MLuXc @8:19@ 0:1 9
  158. 158. 158 Application: Food Safety and Provenance Raw Material Suppliers End Customers Distribution Warehouses Manufacturing Plants Retailers
  159. 159. 159 Application: Food Safety and Provenance
  160. 160. 160 At each transaction, a new block is generated and added to the Blockchain. Each time, all parties validate the transaction. Application: Food Safety and Provenance
  161. 161. 161 Partz, H. (Mar 2, 2018). Walmart To Implement Blockchain-Based Delivery System, https://cointelegraph.com/news/walmart-to-implement-blockch 28, 2018. From grower to grocer. From farm to fork. From grass to glass. Application: Food Safety and Provenance
  162. 162. 162 Know Rube Goldberg? Concluding remarks
  163. 163. 163 Concluding remarks Kaplamino (Feb 4, 2018). The blue marble, YouTube, https://www.youtube.com/watch?v=Hmb0Q0Q_7jo&app=desktop, last accessed Mar 17, 2018. 1:31
  164. 164. 164 T T H H A A N N K K S SSong: Extracted from the song 141120 TK music sn04.-27510, by Artist: Pleasure Park Music - Licensed by AdRev for Rights Holder (on behalf of Pleasure Park Music), https://soundcloud.com/zoxfox87/141120-tk-music-sn05-1, last accessed July 27, 2018.

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