SlideShare a Scribd company logo

Upfront Ventures blockchain and crypto deck

Mark Suster of Upfront Ventures gives a presentation primer on Cryptocurrencies & Blockchain. This is best consumed with a video that will be released and available on Upfront's YouTube page: https://www.youtube.com/user/upfrontventures/videos

1 of 56
Download to read offline
1
A Guide to
Blockchain and
Cryptocurrency
Mark Suster, @msuster
The problem with understanding cryptocurrencies and blockchain is that
people conflate too many issues.
2
• Will Bitcoin price keep going up?
• Will the fed crack down on Bitcoin?
• Will cryptocurrencies disrupt governments?
• Will ICOs replace venture capital?
Anti-Authoritarians
• Libertarians
• Emerging Market
Citizens
3
And to understand anybody making arguments in Crypto you of course have
to understand their role / biases in evaluating the potential or risks.
Incumbents
• Governments
• Banks
• VCs
Disruptors
• Technologists
• Crypto funds
Crypto
4
I. What is Bitcoin
II. What are Ethereum, alt coins, and Internet 3.0
III. Unresolved problems
5
Bitcoin
2008
6
Bitcoin
Bitcoin
Blockchain
2013
7
Bitcoin
Bitcoin
Blockchain
“Gold”
Software
“contracts”
Bitcoin Ether
Bitcoin
Blockchain
Ethereum
Blockchain
2014
8
Bitcoin
Bitcoin
Blockchain
Bitcoin Ether
Bitcoin
Blockchain
Ethereum
Blockchain
ICOs
Ether
Ethereum
Blockchain
2015-16
Ethereum’s biggest “use
case” to date seems to be
helping other coins create
a market.
9
Bitcoin
Bitcoin
Blockchain
Bitcoin Ether
Bitcoin
Blockchain
Ethereum
Blockchain
ICOs
Ether
Ethereum
Blockchain
New
currency,
“alt coins”
New
Blockchains
2017-18
• Stellar
• Tezos
• Stratis
10
I like to think of the topic as three distinct layers that are related but need to
be understood in their own rights.
ICOs
Cryptocurrencies / tokens
Blockchain
11
Historically digital assets on the Internet have been freely copied and
distributed. This obviously doesn’t work when it’s money.
Pictures
CDs
DVDs
• Napster
• BitTorrent
12
The goal of blockchains is to:
P2P computer
nodes
• Make each digital asset identifiably unique (through cryptography),
• Create a record that is trusted (a ledger),
• Without a central issuer (decentralized),
• And form consensus among computers of which transactions are valid.
13
The foundational concept that underpins digital property rights is
cryptography.
Input
Output
Algorithm
6e812e782R52Bx
Long string of transaction data, sender, recipient, quantity, amount, etc…
“Hash” of fixed length
14
Algorithm
Hash
Data Data Data
Any computer can run the
same data through the
algorithm and will always get
the same hash. This is critical
for verification.
15
Algorithm
Hash
Algorithm
Hash A Hash B
Data Data Data Data A Data B
If you get different
hashes, then you know
the input data wasn’t
identical.
16
Algorithm
Hash
Algorithm
Hash A Hash B
Data Data Data Data A Data B
Algorithm
Hash
? ? ?
?
There is no way to run the
hash in reverse to figure
out the original data,
making anonymity &
security possible.
17
Cryptographic hashes are just data and can be combined.
Hash AB
Bob 0.5 Bitcoin debit, Mary 0.5 Bitcoin credit Steve 2.2 Bitcoin debit, Susan 2.2 Bitcoin credit
SHA-256
(Secure hash algorithm)
Hash A Hash B
SHA-256 This hash is a digital
fingerprint that represents
both sets of transactions.
SHA-256
18
Most importantly you can create a single hash that represents all the transaction
data. The “root hash” that represents the entire dataset is still just 256 bits.
Root Hash
ABCD
Hash AB Hash CD
Hash A Hash B Hash C Hash D
Used to efficiently compare
large datasets
Transaction A Transaction B Transaction C Transaction DTransaction data
“Merkle Tree”
19
A “block” is just a row of data that has a hash calculation from an underlying
Merkle Tree, so it ensures that the underlying data haven’t been changed.
Transaction Data
Block Header
Root hash of current transaction data +
hash of previous header +
nonce +
timestamp, etc)
Components of a block
(simplified)
20
A blockchain is a sequence of blocks that stores every transaction and each links to the
previous block, so that anyone can easily confirm that the entire data structure is accurate.
Rest of headerRoot Hash
Current block
Genesis block Data
Hash of Prev Header Root Hash Rest of header Data
Block Header
Hash of Prev Header Root Hash Rest of header Data
Hash of Prev Header Root Hash Rest of header Data
21
The next big concept is to understand how a trustless and decentralized P2P
network works. Historically we required trusted, central authorities.
Store of value Transfer of value
KYC
3rd
party
Bank
or
You
Another
person
Business
Financial
intermediary
Custody, Remediation
22
In a decentralized system you have peer-to-peer nodes that interact with each
other. This is how Napster & Skype worked and how BitTorrent works.
Decentralized data transfer:
• Each user is a “node” that can use the
network for free.
• The only catch is that while your client
is open, the network uses your
computer & bandwidth to transfer
video files, music files or complete
phone calls.(BitTorrent, Napster, Skype)
User’s Computer = Node
23
Bitcoin created a P2P network in which nodes were servers attached to blockchain
databases. Every node stores every transaction that has ever happened so that a central
authority doesn’t need to.
24
New transactions are constantly broadcasted to the network.
Every 10 minutes a new block is added to the blockchain
representing the new transactions.
All nodes update their databases (ledgers) accordingly.
But how do they agree which transactions to include?
25
That is where mining comes into play. Mining is nothing more than the computers in the
Bitcoin network validating all of the new transactions and competing to be the first node
that gets to add the new block to the database.
Input: Transactions in the past 10 minutes
Output: Hash of fixed length
SHA-256
26
Miners are given an output parameter for which they need to guess the input. The only
way to get the right hash is for the computer to try billions of random inputs until it
guesses the right answer.
SHA-256
Input: Recent transaction data + Arbitrary number (“Nonce”)
Hash Goal
Must start with a fixed
number of zeroes
000006e812e782R52Bx
27
This process is called “proof of work” because by iterating through billions of
attempts you prove that you’ve dedicated computing resources to the network.
12345
12346
74623
SHA-256
Output Hash
Input: Transaction data + Nonce
Hash Goal
6e812e782R52Bx
28yB6zXuo87zS2
Iteratively guess numbers until one
randomly produces the right result.
000006e812e782R52Bx
28
When Bitcoin started it was just some cheap computers deployed by college
students, techies, etc. out of their homes.
Easy to solve for
the nonce, financial
reward was small.
29
When more money could be made people put more CPUs at work and hosted them in
faster hosting centers to solve the “proof of work” before others and win more Bitcoin.
Many CPUs, higher
power machines ,
professional hosting
30
With more money at stake, smart technical miners found that GPUs (for computer
graphics) were faster than CPUs (for general computing) at the “proof of work” task.
GPUs > CPUs
31
Eventually the largest miners built special-purpose ASIC chips that beat
GPUs. We now have an arm’s race that favors the large & powerful.
ASIC
This also favors
people in low-cost
or subsidized
electricity countries
like China.
32
This first person to solve for the nonce gets Bitcoin (today 12.5 BTC or ~$150,000). With
data + nonce other nodes can easily verify by running it through an algorithm. The one-
way function is very easy to check.
00000…
74623
SHA-256
Output Hash
Input: Transaction data + Nonce
Hash Goal
000006e812e782R52Bx
When >50% of Hash power (miners computing power in the network) agree that
the nonce is valid, consensus is reached without any authority (decentralized).
33
New block added
New block added
New block
added
34
What should you know about Bitcoin?
• Bitcoin is a digital fingerprint that can’t be repeated because two people can’t
own it at the same time.
• Its use case now is mostly gold (“store of value”).
• It’s impractical for a $3 for a coffee due to energy use, transaction fees, latency
& lack of price stability (not a great “transfer of value” today)
• In the future, someone could create a stable coin whose value doesn’t change
much—and which can be used more easily for transactions.
35
I. What is Bitcoin
II. What are Ethereum, alt coins, and Internet 3.0
III. Unresolved problems
36
Ethereum’s big idea: besides exchanging money, wouldn’t it be helpful to find
other trustless ways of doing business? “Smart contracts” were created.
Bitcoin Ethereum
Money Smart contracts
Blockchains
What should you know about Ethereum?
37
• Ethereum is the most scaled platform where a large number of
developers are competing to build infrastructure.
• It differs from the Bitcoin use case (i.e. gold) and is more of a
platform for software interactions (called smart contracts).
• But it could emerge as a dominant platform for distributed
apps (DAPPs) platform (time will tell).
38
As an example, businesses today are typically built by a centralized entity
which concentrates power and profits.
Example: Dropbox
$ for storage
$M
UsersDropbox
• Raise venture capital
• Invest $$$ in servers to
store your documents
• Recoup money by
charging users fees
39
Smart contracts allow you to build distributed businesses on top of the
blockchain where third-parties provide the resources and are rewarded directly.
Example: Decentralized Dropbox
$ for storage
UsersNetwork
• Provide server space,
processing power, bandwidth
• Collect a currency / token
• Pay a currency / token
40
What is an ICO? It is when an entity creates new coins and sells them to new
buyers, today it is usually on top of the Ethereum blockchain.
ICOs
Cryptocurrencies / tokens
Blockchain
Initial Coin Offering on Ethereum
• Avoid having to replicate the
process of creating a whole
new blockchain infrastructure
• Most popular type of smart
contract on Ethereum
41
Be careful of any ICO that doesn’t have an explicit reason
to exist to incentivize network participation / resources
(otherwise it is just another form of crowd funding and
one that is likely to be highly regulated).
Company
42
Distributed applications (DAPPs) get most experienced venture capitalists
excited. But what should a VC own—equity or token?
Users who invest in tokens to fund
development of the service
Token
ownership
Value of
tokens
43
• Illiquid

• Relatively stable, with few
valuation fluctuations
• Governance and shareholder
rights; management lock up due
to stock agreements and
illiquidity
• Liquid (unless new governance
rules)
• Potentially huge daily price
fluctuations
• Potential moral hazard without
governing rules
Equity Tokens
44
Why are alt coins created and what are they?
• We’ve seen the emergence of Bitcoin and Ether. Those currencies
represent > 50% of the value of all currencies.
• There are companies creating new coins (ecosystems), which are
known as “alt coins” (Litecoin, Monero, Ripple)
• Alt coins can be built on top of Ethereum or you can create your own
blockchain.
• Whether any alt coins becomes valuable depends on the value they
provide and how they incentivize network participants to participate.
45
Why do people refer blockchain networks as “Internet 3.0”?
IP
TCP
HTTP
HTML
Open protocols beat proprietary
“closed” networks.
“Walled garden”
The big Internet companies built on top
of open protocols but then made each
of their systems proprietary, making it
hard for new companies to compete.
Internet 1.0 Internet 2.0
Internet Protocols
X
46
Big Company
Protocol
User
identity
User bank
details
Social graph
(who you know, how
well you know them)
Interest graph
(how they serve
relevant ads)
Reputation
(am I a 5 or a 2 when I
work with people?)
Big companies establish a “network effect” and lock you in because through all of
your data they are more efficient at serving you than any other startup could be.
47
• Google & Apple can charge a 30% tax on apps.
• Apple can decide it doesn’t like fart apps.
• Facebook can decide how to promote news & media.
• Google can display shopping competitors, flight
information, hotel booking and stop referring traffic.
Big Company
As a society we’re starting to see the consequences of this, which could
get worse if power concentrates even further.
48
Internet 3.0 is a possibility to return to a decentralized web where the big
companies have less control.
If BigCo services were
blockchain protocols then users
could “port” their information
more easily to new startupsIP
TCP
HTTP
HTML
Identity
Banking
Reputation
Socialgraph
Interestgraph
49
I. What is Bitcoin?
II. What are Ethereum, alt coins, and Internet 3.0
III. Unresolved problems
50
Blockchains are showing signs of not scaling well today.
A whole series of companies are
emerging to perform work not
completed by the core blockchain
Side chains
“Level 2” networks
“Layer 2” networks
Block N-1 Root hash Other info
Block N-2 Root hash Other info
…
Block 1 Root hash Other info
Block 0 Root hash Other info
Root hash Other info
1
51
If hash power becomes centralized, then blockchain loses its
decentralization properties.
• Remember that consensus is achieved when >50% of hash
power achieves consensus.
• So if the nodes are concentrated (owned by a few players)
then the system is less independent.
• For example, what if state actors (Russia? North Korea? US?)
decide to secretly put resources into a given network.
2
52
It’s one thing to have a trustless transaction with a person,
but what happens when I can’t trust the code?
The DAO project had a software wallet with a bug such
that a hacker was able to exploit a bug to the tune of $50
million (later recovered). When dealing with “trusted”
companies, there is at least remediation.
Code
Ethereum
Trustless transaction
3
53
In an unbundled ICO world, how do you stop management
teams from leaving with millions without even delivering value?
ICOs
Cryptocurrencies / tokens
Blockchain
• Need legal governance
• Likely to see SEC oversight
• How to stop pump-and-dump coin
trading if coin owners are anonymous
(especially since there are private
groups now collaborating on
encrypted messaging networks like
Telegram & Signal)?
4
54
We are lacking mechanisms to enforce governance and world order.
If the transactions are partially anonymous, then how do governments:
• Track the flow of money to terrorists, white supremacists, criminal
gangs?
• Track the flow of illegal “money of influence” to state actors?
• Manage large economies and not give up control of money
supply?
5
55
In the end, the boom-and-bust of over-investment that also attracted a lot of innovation will
eventually lead to a future wave of huge future investment off of the back of today’s ashes.
We’ve seen this before:
• Cable
• CLECS/DSL
• Wireless
• Internet 1.0
We are
somewhere here
Time
Euphoria /
value
56
A Guide to
Blockchain and
Cryptocurrency
Mark Suster, @msuster

Recommended

Blockchain: The Next Generation
Blockchain: The Next GenerationBlockchain: The Next Generation
Blockchain: The Next GenerationYann Rouillard
 
Cryptocurrency secrets
Cryptocurrency secretsCryptocurrency secrets
Cryptocurrency secretsMohammed NAZIH
 
Blockchain English
Blockchain EnglishBlockchain English
Blockchain EnglishMing Sun
 
Web3 Infrastructure Thesis
Web3 Infrastructure Thesis Web3 Infrastructure Thesis
Web3 Infrastructure Thesis SeanStuart17
 
Messari Investor Deck
Messari Investor DeckMessari Investor Deck
Messari Investor DeckMessari
 
Web3 summit 2019 Funkas Berlin(Report)
Web3 summit 2019  Funkas Berlin(Report)Web3 summit 2019  Funkas Berlin(Report)
Web3 summit 2019 Funkas Berlin(Report)Masahiro Takeda
 
ISTA 2017 - Blockchain, beyond Bitcoin
ISTA 2017 - Blockchain, beyond BitcoinISTA 2017 - Blockchain, beyond Bitcoin
ISTA 2017 - Blockchain, beyond BitcoinVladimir Savchenko
 

More Related Content

What's hot

Blockchain applications in payments and fintech
Blockchain applications in payments and fintechBlockchain applications in payments and fintech
Blockchain applications in payments and fintechPenser
 
Ovum blockchain for beginners
Ovum blockchain for beginnersOvum blockchain for beginners
Ovum blockchain for beginnersHelen Child
 
From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd
From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT LtdFrom Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd
From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT LtdOLMA Capital Management
 
Hot new defi trends to stay an eye fixed on in 2022
Hot new defi trends to stay an eye fixed on in 2022Hot new defi trends to stay an eye fixed on in 2022
Hot new defi trends to stay an eye fixed on in 2022AmniAugustine
 
Ethereum Sentiment Research Spotlight Study
Ethereum Sentiment Research Spotlight StudyEthereum Sentiment Research Spotlight Study
Ethereum Sentiment Research Spotlight StudyCoinDesk
 
Existing systems, new languages: prototyping blockchain models for the book p...
Existing systems, new languages: prototyping blockchain models for the book p...Existing systems, new languages: prototyping blockchain models for the book p...
Existing systems, new languages: prototyping blockchain models for the book p...Mark David Ryan
 
Jp morgan blockchain bitcoin
Jp morgan blockchain bitcoinJp morgan blockchain bitcoin
Jp morgan blockchain bitcoinRein Mahatma
 
Digital Asset Transfer Authority Bit license comment letter (21 10-14)
Digital Asset Transfer Authority  Bit license comment letter (21 10-14)Digital Asset Transfer Authority  Bit license comment letter (21 10-14)
Digital Asset Transfer Authority Bit license comment letter (21 10-14)DataSecretariat
 
Bitcoin & Blockchain
Bitcoin & Blockchain Bitcoin & Blockchain
Bitcoin & Blockchain Len Mei
 
W24717 economic limit of bitcoin dan blockhain
W24717 economic limit of bitcoin dan blockhainW24717 economic limit of bitcoin dan blockhain
W24717 economic limit of bitcoin dan blockhainRein Mahatma
 
The future of Fintech and Blockchain
The future of Fintech and BlockchainThe future of Fintech and Blockchain
The future of Fintech and BlockchainWanfeng Chen
 
Unchain Blockchain by Eva Rez
Unchain Blockchain by Eva RezUnchain Blockchain by Eva Rez
Unchain Blockchain by Eva Rezrezeva
 
Introduction to blockchain & cryptocurrencies
Introduction to blockchain & cryptocurrenciesIntroduction to blockchain & cryptocurrencies
Introduction to blockchain & cryptocurrenciesAurobindo Nayak
 
Blockchain powering the internet of value
Blockchain powering the internet of value  Blockchain powering the internet of value
Blockchain powering the internet of value Diego Alberto Tamayo
 
Legal compliance & taxation outlook of the middle east
Legal compliance & taxation outlook of the middle eastLegal compliance & taxation outlook of the middle east
Legal compliance & taxation outlook of the middle eastExchange Development Company
 

What's hot (20)

Blockchain applications in payments and fintech
Blockchain applications in payments and fintechBlockchain applications in payments and fintech
Blockchain applications in payments and fintech
 
Ovum blockchain for beginners
Ovum blockchain for beginnersOvum blockchain for beginners
Ovum blockchain for beginners
 
From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd
From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT LtdFrom Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd
From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd
 
Hot new defi trends to stay an eye fixed on in 2022
Hot new defi trends to stay an eye fixed on in 2022Hot new defi trends to stay an eye fixed on in 2022
Hot new defi trends to stay an eye fixed on in 2022
 
Ethereum Sentiment Research Spotlight Study
Ethereum Sentiment Research Spotlight StudyEthereum Sentiment Research Spotlight Study
Ethereum Sentiment Research Spotlight Study
 
Existing systems, new languages: prototyping blockchain models for the book p...
Existing systems, new languages: prototyping blockchain models for the book p...Existing systems, new languages: prototyping blockchain models for the book p...
Existing systems, new languages: prototyping blockchain models for the book p...
 
Blockchain technology a primer
Blockchain technology   a primerBlockchain technology   a primer
Blockchain technology a primer
 
Jp morgan blockchain bitcoin
Jp morgan blockchain bitcoinJp morgan blockchain bitcoin
Jp morgan blockchain bitcoin
 
Coft Token
Coft TokenCoft Token
Coft Token
 
Digital Asset Transfer Authority Bit license comment letter (21 10-14)
Digital Asset Transfer Authority  Bit license comment letter (21 10-14)Digital Asset Transfer Authority  Bit license comment letter (21 10-14)
Digital Asset Transfer Authority Bit license comment letter (21 10-14)
 
Bitcoin & Blockchain
Bitcoin & Blockchain Bitcoin & Blockchain
Bitcoin & Blockchain
 
Decentralized finance research
Decentralized finance researchDecentralized finance research
Decentralized finance research
 
W24717 economic limit of bitcoin dan blockhain
W24717 economic limit of bitcoin dan blockhainW24717 economic limit of bitcoin dan blockhain
W24717 economic limit of bitcoin dan blockhain
 
The future of Fintech and Blockchain
The future of Fintech and BlockchainThe future of Fintech and Blockchain
The future of Fintech and Blockchain
 
Unchain Blockchain by Eva Rez
Unchain Blockchain by Eva RezUnchain Blockchain by Eva Rez
Unchain Blockchain by Eva Rez
 
Smart contracts
Smart contractsSmart contracts
Smart contracts
 
Blockchain research paper
Blockchain   research paperBlockchain   research paper
Blockchain research paper
 
Introduction to blockchain & cryptocurrencies
Introduction to blockchain & cryptocurrenciesIntroduction to blockchain & cryptocurrencies
Introduction to blockchain & cryptocurrencies
 
Blockchain powering the internet of value
Blockchain powering the internet of value  Blockchain powering the internet of value
Blockchain powering the internet of value
 
Legal compliance & taxation outlook of the middle east
Legal compliance & taxation outlook of the middle eastLegal compliance & taxation outlook of the middle east
Legal compliance & taxation outlook of the middle east
 

Similar to Upfront Ventures blockchain and crypto deck

Tutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ssTutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ssHoward Anglin
 
Bitcoin, Banking and the Blockchain
Bitcoin, Banking and the BlockchainBitcoin, Banking and the Blockchain
Bitcoin, Banking and the Blockchainseancarmody
 
2019 blockchain economy
2019 blockchain economy2019 blockchain economy
2019 blockchain economyHeung-No Lee
 
BCHGraz - Meetup #8 - Intro & Ethereum
 BCHGraz - Meetup #8 - Intro & Ethereum BCHGraz - Meetup #8 - Intro & Ethereum
BCHGraz - Meetup #8 - Intro & EthereumBlockchainHub Graz
 
Blockchain and Bitcoin
Blockchain and BitcoinBlockchain and Bitcoin
Blockchain and BitcoinHugo Rodrigues
 
Blockchain as a new cyber strategy for your business
Blockchain as a new cyber strategy for your businessBlockchain as a new cyber strategy for your business
Blockchain as a new cyber strategy for your businessDavid Joao Vieira Carvalho
 
Blockchain. A Guide For Beginners
Blockchain. A Guide For BeginnersBlockchain. A Guide For Beginners
Blockchain. A Guide For BeginnersElifTech
 
AI & Blockchain: An Introduction
AI & Blockchain: An IntroductionAI & Blockchain: An Introduction
AI & Blockchain: An IntroductionMatt Turck
 
14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang
14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang
14 Jan17- Nullmeets -Blockchain concept decoded by Ninad SarangNinad Sarang
 
BLOCKCHAIN PPT.pptx
BLOCKCHAIN PPT.pptxBLOCKCHAIN PPT.pptx
BLOCKCHAIN PPT.pptxSohanaAmreen
 
Bitcoin... and beyond
Bitcoin... and beyondBitcoin... and beyond
Bitcoin... and beyondJeff Garzik
 
Blockchain an introduction_n_li
Blockchain an introduction_n_liBlockchain an introduction_n_li
Blockchain an introduction_n_linikinew1
 
Blockchain and Cryptocurrencies
Blockchain and CryptocurrenciesBlockchain and Cryptocurrencies
Blockchain and CryptocurrenciesnimeshQ
 
Idea To IPO Blockchain Slides
Idea To IPO Blockchain SlidesIdea To IPO Blockchain Slides
Idea To IPO Blockchain SlidesRoger Royse
 
Bitcoin - Introduction, Technical Aspects and Ongoing Developments
Bitcoin - Introduction, Technical Aspects and Ongoing DevelopmentsBitcoin - Introduction, Technical Aspects and Ongoing Developments
Bitcoin - Introduction, Technical Aspects and Ongoing DevelopmentsBernhard Haslhofer
 

Similar to Upfront Ventures blockchain and crypto deck (20)

Tutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ssTutorial blockchain technical overview-ss
Tutorial blockchain technical overview-ss
 
Bitcoin, Banking and the Blockchain
Bitcoin, Banking and the BlockchainBitcoin, Banking and the Blockchain
Bitcoin, Banking and the Blockchain
 
Blockchain Cryptocurrency
Blockchain CryptocurrencyBlockchain Cryptocurrency
Blockchain Cryptocurrency
 
2019 blockchain economy
2019 blockchain economy2019 blockchain economy
2019 blockchain economy
 
BCHGraz - Meetup #8 - Intro & Ethereum
 BCHGraz - Meetup #8 - Intro & Ethereum BCHGraz - Meetup #8 - Intro & Ethereum
BCHGraz - Meetup #8 - Intro & Ethereum
 
Blockchain and Bitcoin
Blockchain and BitcoinBlockchain and Bitcoin
Blockchain and Bitcoin
 
Blockchain as a new cyber strategy for your business
Blockchain as a new cyber strategy for your businessBlockchain as a new cyber strategy for your business
Blockchain as a new cyber strategy for your business
 
Blockchain. A Guide For Beginners
Blockchain. A Guide For BeginnersBlockchain. A Guide For Beginners
Blockchain. A Guide For Beginners
 
BITCOIN GLOSSARY
BITCOIN GLOSSARYBITCOIN GLOSSARY
BITCOIN GLOSSARY
 
AI & Blockchain: An Introduction
AI & Blockchain: An IntroductionAI & Blockchain: An Introduction
AI & Blockchain: An Introduction
 
14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang
14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang
14 Jan17- Nullmeets -Blockchain concept decoded by Ninad Sarang
 
BLOCKCHAIN PPT.pptx
BLOCKCHAIN PPT.pptxBLOCKCHAIN PPT.pptx
BLOCKCHAIN PPT.pptx
 
Bitcoin... and beyond
Bitcoin... and beyondBitcoin... and beyond
Bitcoin... and beyond
 
Blockchain an introduction_n_li
Blockchain an introduction_n_liBlockchain an introduction_n_li
Blockchain an introduction_n_li
 
An Introduction to Blockchains
An Introduction to BlockchainsAn Introduction to Blockchains
An Introduction to Blockchains
 
Blockchain and Cryptocurrencies
Blockchain and CryptocurrenciesBlockchain and Cryptocurrencies
Blockchain and Cryptocurrencies
 
BlockChain.pptx
BlockChain.pptxBlockChain.pptx
BlockChain.pptx
 
Introduction to Blockchain and Ethereum
Introduction to Blockchain and EthereumIntroduction to Blockchain and Ethereum
Introduction to Blockchain and Ethereum
 
Idea To IPO Blockchain Slides
Idea To IPO Blockchain SlidesIdea To IPO Blockchain Slides
Idea To IPO Blockchain Slides
 
Bitcoin - Introduction, Technical Aspects and Ongoing Developments
Bitcoin - Introduction, Technical Aspects and Ongoing DevelopmentsBitcoin - Introduction, Technical Aspects and Ongoing Developments
Bitcoin - Introduction, Technical Aspects and Ongoing Developments
 

More from Mark Suster

Funding in the time of Corona Virus
Funding in the time of Corona VirusFunding in the time of Corona Virus
Funding in the time of Corona VirusMark Suster
 
Managing Your Startup Board
Managing Your Startup BoardManaging Your Startup Board
Managing Your Startup BoardMark Suster
 
Seed stage 2019 final
Seed stage 2019   finalSeed stage 2019   final
Seed stage 2019 finalMark Suster
 
Is vc still a thing final
Is vc still a thing   finalIs vc still a thing   final
Is vc still a thing finalMark Suster
 
Staff at vc firms
Staff at vc firmsStaff at vc firms
Staff at vc firmsMark Suster
 
ICO 2.0 Summit - Keynote Presetnation
ICO 2.0 Summit - Keynote PresetnationICO 2.0 Summit - Keynote Presetnation
ICO 2.0 Summit - Keynote PresetnationMark Suster
 
Upfront Ventures Bitcoin & Blockchain VC Survey
Upfront Ventures Bitcoin & Blockchain VC SurveyUpfront Ventures Bitcoin & Blockchain VC Survey
Upfront Ventures Bitcoin & Blockchain VC SurveyMark Suster
 
Fundstrat Bitcoin & Blockchain presentation for Upfront Summit
Fundstrat Bitcoin & Blockchain presentation for Upfront SummitFundstrat Bitcoin & Blockchain presentation for Upfront Summit
Fundstrat Bitcoin & Blockchain presentation for Upfront SummitMark Suster
 
Upfront Ventures VC Survey 2017
Upfront Ventures VC Survey 2017Upfront Ventures VC Survey 2017
Upfront Ventures VC Survey 2017Mark Suster
 
Upfront LP Survey of the Venture Capital & Startup Industry
Upfront LP Survey of the Venture Capital & Startup IndustryUpfront LP Survey of the Venture Capital & Startup Industry
Upfront LP Survey of the Venture Capital & Startup IndustryMark Suster
 
Upfront State of the VC & Tech Industry 2017
Upfront State of the VC & Tech Industry 2017Upfront State of the VC & Tech Industry 2017
Upfront State of the VC & Tech Industry 2017Mark Suster
 
Final LA tech and venture landscape
Final LA tech and venture landscapeFinal LA tech and venture landscape
Final LA tech and venture landscapeMark Suster
 
Final san diego venture group keynote 2016
Final san diego venture group keynote   2016Final san diego venture group keynote   2016
Final san diego venture group keynote 2016Mark Suster
 
Final upfront lp survey data 2016
Final upfront lp survey data 2016Final upfront lp survey data 2016
Final upfront lp survey data 2016Mark Suster
 
VC survey data 2016
VC survey data 2016VC survey data 2016
VC survey data 2016Mark Suster
 
Upfront vc analysis 2016
Upfront vc analysis 2016Upfront vc analysis 2016
Upfront vc analysis 2016Mark Suster
 
Final venture outlook 2016
Final venture outlook 2016Final venture outlook 2016
Final venture outlook 2016Mark Suster
 
There is Something Going on in the LA Tech Market by Upfront Ventures
There is Something Going on in the LA Tech Market by Upfront VenturesThere is Something Going on in the LA Tech Market by Upfront Ventures
There is Something Going on in the LA Tech Market by Upfront VenturesMark Suster
 
The Changing Structure of the Venture Capital Industry
The Changing Structure of the Venture Capital IndustryThe Changing Structure of the Venture Capital Industry
The Changing Structure of the Venture Capital IndustryMark Suster
 
Why It's Morning in Venture Capital
Why It's Morning in Venture CapitalWhy It's Morning in Venture Capital
Why It's Morning in Venture CapitalMark Suster
 

More from Mark Suster (20)

Funding in the time of Corona Virus
Funding in the time of Corona VirusFunding in the time of Corona Virus
Funding in the time of Corona Virus
 
Managing Your Startup Board
Managing Your Startup BoardManaging Your Startup Board
Managing Your Startup Board
 
Seed stage 2019 final
Seed stage 2019   finalSeed stage 2019   final
Seed stage 2019 final
 
Is vc still a thing final
Is vc still a thing   finalIs vc still a thing   final
Is vc still a thing final
 
Staff at vc firms
Staff at vc firmsStaff at vc firms
Staff at vc firms
 
ICO 2.0 Summit - Keynote Presetnation
ICO 2.0 Summit - Keynote PresetnationICO 2.0 Summit - Keynote Presetnation
ICO 2.0 Summit - Keynote Presetnation
 
Upfront Ventures Bitcoin & Blockchain VC Survey
Upfront Ventures Bitcoin & Blockchain VC SurveyUpfront Ventures Bitcoin & Blockchain VC Survey
Upfront Ventures Bitcoin & Blockchain VC Survey
 
Fundstrat Bitcoin & Blockchain presentation for Upfront Summit
Fundstrat Bitcoin & Blockchain presentation for Upfront SummitFundstrat Bitcoin & Blockchain presentation for Upfront Summit
Fundstrat Bitcoin & Blockchain presentation for Upfront Summit
 
Upfront Ventures VC Survey 2017
Upfront Ventures VC Survey 2017Upfront Ventures VC Survey 2017
Upfront Ventures VC Survey 2017
 
Upfront LP Survey of the Venture Capital & Startup Industry
Upfront LP Survey of the Venture Capital & Startup IndustryUpfront LP Survey of the Venture Capital & Startup Industry
Upfront LP Survey of the Venture Capital & Startup Industry
 
Upfront State of the VC & Tech Industry 2017
Upfront State of the VC & Tech Industry 2017Upfront State of the VC & Tech Industry 2017
Upfront State of the VC & Tech Industry 2017
 
Final LA tech and venture landscape
Final LA tech and venture landscapeFinal LA tech and venture landscape
Final LA tech and venture landscape
 
Final san diego venture group keynote 2016
Final san diego venture group keynote   2016Final san diego venture group keynote   2016
Final san diego venture group keynote 2016
 
Final upfront lp survey data 2016
Final upfront lp survey data 2016Final upfront lp survey data 2016
Final upfront lp survey data 2016
 
VC survey data 2016
VC survey data 2016VC survey data 2016
VC survey data 2016
 
Upfront vc analysis 2016
Upfront vc analysis 2016Upfront vc analysis 2016
Upfront vc analysis 2016
 
Final venture outlook 2016
Final venture outlook 2016Final venture outlook 2016
Final venture outlook 2016
 
There is Something Going on in the LA Tech Market by Upfront Ventures
There is Something Going on in the LA Tech Market by Upfront VenturesThere is Something Going on in the LA Tech Market by Upfront Ventures
There is Something Going on in the LA Tech Market by Upfront Ventures
 
The Changing Structure of the Venture Capital Industry
The Changing Structure of the Venture Capital IndustryThe Changing Structure of the Venture Capital Industry
The Changing Structure of the Venture Capital Industry
 
Why It's Morning in Venture Capital
Why It's Morning in Venture CapitalWhy It's Morning in Venture Capital
Why It's Morning in Venture Capital
 

Recently uploaded

Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...
Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...
Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...ShapeBlue
 
Achieving Excellence IESVE for HVAC Simulation.pdf
Achieving Excellence IESVE for HVAC Simulation.pdfAchieving Excellence IESVE for HVAC Simulation.pdf
Achieving Excellence IESVE for HVAC Simulation.pdfIES VE
 
Key projects in AI, ML and Generative AI
Key projects in AI, ML and Generative AIKey projects in AI, ML and Generative AI
Key projects in AI, ML and Generative AIVijayananda Mohire
 
New ThousandEyes Product Features and Release Highlights: February 2024
New ThousandEyes Product Features and Release Highlights: February 2024New ThousandEyes Product Features and Release Highlights: February 2024
New ThousandEyes Product Features and Release Highlights: February 2024ThousandEyes
 
Artificial Intelligence - AI For Everyone
Artificial Intelligence - AI For EveryoneArtificial Intelligence - AI For Everyone
Artificial Intelligence - AI For EveryoneSridhar Seshadri
 
AI-Plugins-Planners-Persona-SemanticKernel.pptx
AI-Plugins-Planners-Persona-SemanticKernel.pptxAI-Plugins-Planners-Persona-SemanticKernel.pptx
AI-Plugins-Planners-Persona-SemanticKernel.pptxUdaiappa Ramachandran
 
Centralized TLS Certificates Management Using Vault PKI + Cert-Manager
Centralized TLS Certificates Management Using Vault PKI + Cert-ManagerCentralized TLS Certificates Management Using Vault PKI + Cert-Manager
Centralized TLS Certificates Management Using Vault PKI + Cert-ManagerSaiLinnThu2
 
CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...
CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...
CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...ShapeBlue
 
Low Latency at Extreme Scale: Proven Practices & Pitfalls
Low Latency at Extreme Scale: Proven Practices & PitfallsLow Latency at Extreme Scale: Proven Practices & Pitfalls
Low Latency at Extreme Scale: Proven Practices & PitfallsScyllaDB
 
Communities, networking and developer culture
Communities, networking and developer cultureCommunities, networking and developer culture
Communities, networking and developer cultureRavi Sanghani
 
AGFM - Toyota Coaster 1HZ Install Guide.pdf
AGFM - Toyota Coaster 1HZ Install Guide.pdfAGFM - Toyota Coaster 1HZ Install Guide.pdf
AGFM - Toyota Coaster 1HZ Install Guide.pdfRodneyThomas28
 
Why Disability Justice should be at the core of your digital accessibility jo...
Why Disability Justice should be at the core of your digital accessibility jo...Why Disability Justice should be at the core of your digital accessibility jo...
Why Disability Justice should be at the core of your digital accessibility jo...Modality Co
 
Trading Software Development_ Trends to Watch in 2024.pdf
Trading Software Development_ Trends to Watch in 2024.pdfTrading Software Development_ Trends to Watch in 2024.pdf
Trading Software Development_ Trends to Watch in 2024.pdfLucas Lagone
 
Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)
Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)
Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)Jay Zhao
 
Establishing data sharing standards to promote global industry development
Establishing data sharing standards to promote global industry developmentEstablishing data sharing standards to promote global industry development
Establishing data sharing standards to promote global industry developmentThorsten Huelsmann
 
How We Grew Up with CloudStack and its Journey – Dilip Singh, DataHub
How We Grew Up with CloudStack and its Journey – Dilip Singh, DataHubHow We Grew Up with CloudStack and its Journey – Dilip Singh, DataHub
How We Grew Up with CloudStack and its Journey – Dilip Singh, DataHubShapeBlue
 
MuleSoft Online Meetup Group - B2B Crash Course: PM Insider Lecture
MuleSoft Online Meetup Group - B2B Crash Course: PM Insider LectureMuleSoft Online Meetup Group - B2B Crash Course: PM Insider Lecture
MuleSoft Online Meetup Group - B2B Crash Course: PM Insider LectureManik S Magar
 
software-quality-assurance question paper 2023
software-quality-assurance question paper 2023software-quality-assurance question paper 2023
software-quality-assurance question paper 2023RohanMistry15
 
Mastering Play Store App Listing and Optimization
Mastering Play Store App Listing and OptimizationMastering Play Store App Listing and Optimization
Mastering Play Store App Listing and OptimizationAppsthentic Technology
 
Roundtable_-_API_Research__Testing_Tools.pdf
Roundtable_-_API_Research__Testing_Tools.pdfRoundtable_-_API_Research__Testing_Tools.pdf
Roundtable_-_API_Research__Testing_Tools.pdfMostafa Higazy
 

Recently uploaded (20)

Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...
Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...
Elevating Cloud Infrastructure with Object Storage, DRS, VM Scheduling, and D...
 
Achieving Excellence IESVE for HVAC Simulation.pdf
Achieving Excellence IESVE for HVAC Simulation.pdfAchieving Excellence IESVE for HVAC Simulation.pdf
Achieving Excellence IESVE for HVAC Simulation.pdf
 
Key projects in AI, ML and Generative AI
Key projects in AI, ML and Generative AIKey projects in AI, ML and Generative AI
Key projects in AI, ML and Generative AI
 
New ThousandEyes Product Features and Release Highlights: February 2024
New ThousandEyes Product Features and Release Highlights: February 2024New ThousandEyes Product Features and Release Highlights: February 2024
New ThousandEyes Product Features and Release Highlights: February 2024
 
Artificial Intelligence - AI For Everyone
Artificial Intelligence - AI For EveryoneArtificial Intelligence - AI For Everyone
Artificial Intelligence - AI For Everyone
 
AI-Plugins-Planners-Persona-SemanticKernel.pptx
AI-Plugins-Planners-Persona-SemanticKernel.pptxAI-Plugins-Planners-Persona-SemanticKernel.pptx
AI-Plugins-Planners-Persona-SemanticKernel.pptx
 
Centralized TLS Certificates Management Using Vault PKI + Cert-Manager
Centralized TLS Certificates Management Using Vault PKI + Cert-ManagerCentralized TLS Certificates Management Using Vault PKI + Cert-Manager
Centralized TLS Certificates Management Using Vault PKI + Cert-Manager
 
CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...
CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...
CloudStack 101: The Best Way to Build Your Private Cloud – Rohit Yadav, VP Ap...
 
Low Latency at Extreme Scale: Proven Practices & Pitfalls
Low Latency at Extreme Scale: Proven Practices & PitfallsLow Latency at Extreme Scale: Proven Practices & Pitfalls
Low Latency at Extreme Scale: Proven Practices & Pitfalls
 
Communities, networking and developer culture
Communities, networking and developer cultureCommunities, networking and developer culture
Communities, networking and developer culture
 
AGFM - Toyota Coaster 1HZ Install Guide.pdf
AGFM - Toyota Coaster 1HZ Install Guide.pdfAGFM - Toyota Coaster 1HZ Install Guide.pdf
AGFM - Toyota Coaster 1HZ Install Guide.pdf
 
Why Disability Justice should be at the core of your digital accessibility jo...
Why Disability Justice should be at the core of your digital accessibility jo...Why Disability Justice should be at the core of your digital accessibility jo...
Why Disability Justice should be at the core of your digital accessibility jo...
 
Trading Software Development_ Trends to Watch in 2024.pdf
Trading Software Development_ Trends to Watch in 2024.pdfTrading Software Development_ Trends to Watch in 2024.pdf
Trading Software Development_ Trends to Watch in 2024.pdf
 
Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)
Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)
Leonis Insights: The State of AI (7 trends for 2023 and 7 predictions for 2024)
 
Establishing data sharing standards to promote global industry development
Establishing data sharing standards to promote global industry developmentEstablishing data sharing standards to promote global industry development
Establishing data sharing standards to promote global industry development
 
How We Grew Up with CloudStack and its Journey – Dilip Singh, DataHub
How We Grew Up with CloudStack and its Journey – Dilip Singh, DataHubHow We Grew Up with CloudStack and its Journey – Dilip Singh, DataHub
How We Grew Up with CloudStack and its Journey – Dilip Singh, DataHub
 
MuleSoft Online Meetup Group - B2B Crash Course: PM Insider Lecture
MuleSoft Online Meetup Group - B2B Crash Course: PM Insider LectureMuleSoft Online Meetup Group - B2B Crash Course: PM Insider Lecture
MuleSoft Online Meetup Group - B2B Crash Course: PM Insider Lecture
 
software-quality-assurance question paper 2023
software-quality-assurance question paper 2023software-quality-assurance question paper 2023
software-quality-assurance question paper 2023
 
Mastering Play Store App Listing and Optimization
Mastering Play Store App Listing and OptimizationMastering Play Store App Listing and Optimization
Mastering Play Store App Listing and Optimization
 
Roundtable_-_API_Research__Testing_Tools.pdf
Roundtable_-_API_Research__Testing_Tools.pdfRoundtable_-_API_Research__Testing_Tools.pdf
Roundtable_-_API_Research__Testing_Tools.pdf
 

Upfront Ventures blockchain and crypto deck

  • 1. 1 A Guide to Blockchain and Cryptocurrency Mark Suster, @msuster
  • 2. The problem with understanding cryptocurrencies and blockchain is that people conflate too many issues. 2 • Will Bitcoin price keep going up? • Will the fed crack down on Bitcoin? • Will cryptocurrencies disrupt governments? • Will ICOs replace venture capital?
  • 3. Anti-Authoritarians • Libertarians • Emerging Market Citizens 3 And to understand anybody making arguments in Crypto you of course have to understand their role / biases in evaluating the potential or risks. Incumbents • Governments • Banks • VCs Disruptors • Technologists • Crypto funds Crypto
  • 4. 4 I. What is Bitcoin II. What are Ethereum, alt coins, and Internet 3.0 III. Unresolved problems
  • 10. 10 I like to think of the topic as three distinct layers that are related but need to be understood in their own rights. ICOs Cryptocurrencies / tokens Blockchain
  • 11. 11 Historically digital assets on the Internet have been freely copied and distributed. This obviously doesn’t work when it’s money. Pictures CDs DVDs • Napster • BitTorrent
  • 12. 12 The goal of blockchains is to: P2P computer nodes • Make each digital asset identifiably unique (through cryptography), • Create a record that is trusted (a ledger), • Without a central issuer (decentralized), • And form consensus among computers of which transactions are valid.
  • 13. 13 The foundational concept that underpins digital property rights is cryptography. Input Output Algorithm 6e812e782R52Bx Long string of transaction data, sender, recipient, quantity, amount, etc… “Hash” of fixed length
  • 14. 14 Algorithm Hash Data Data Data Any computer can run the same data through the algorithm and will always get the same hash. This is critical for verification.
  • 15. 15 Algorithm Hash Algorithm Hash A Hash B Data Data Data Data A Data B If you get different hashes, then you know the input data wasn’t identical.
  • 16. 16 Algorithm Hash Algorithm Hash A Hash B Data Data Data Data A Data B Algorithm Hash ? ? ? ? There is no way to run the hash in reverse to figure out the original data, making anonymity & security possible.
  • 17. 17 Cryptographic hashes are just data and can be combined. Hash AB Bob 0.5 Bitcoin debit, Mary 0.5 Bitcoin credit Steve 2.2 Bitcoin debit, Susan 2.2 Bitcoin credit SHA-256 (Secure hash algorithm) Hash A Hash B SHA-256 This hash is a digital fingerprint that represents both sets of transactions. SHA-256
  • 18. 18 Most importantly you can create a single hash that represents all the transaction data. The “root hash” that represents the entire dataset is still just 256 bits. Root Hash ABCD Hash AB Hash CD Hash A Hash B Hash C Hash D Used to efficiently compare large datasets Transaction A Transaction B Transaction C Transaction DTransaction data “Merkle Tree”
  • 19. 19 A “block” is just a row of data that has a hash calculation from an underlying Merkle Tree, so it ensures that the underlying data haven’t been changed. Transaction Data Block Header Root hash of current transaction data + hash of previous header + nonce + timestamp, etc) Components of a block (simplified)
  • 20. 20 A blockchain is a sequence of blocks that stores every transaction and each links to the previous block, so that anyone can easily confirm that the entire data structure is accurate. Rest of headerRoot Hash Current block Genesis block Data Hash of Prev Header Root Hash Rest of header Data Block Header Hash of Prev Header Root Hash Rest of header Data Hash of Prev Header Root Hash Rest of header Data
  • 21. 21 The next big concept is to understand how a trustless and decentralized P2P network works. Historically we required trusted, central authorities. Store of value Transfer of value KYC 3rd party Bank or You Another person Business Financial intermediary Custody, Remediation
  • 22. 22 In a decentralized system you have peer-to-peer nodes that interact with each other. This is how Napster & Skype worked and how BitTorrent works. Decentralized data transfer: • Each user is a “node” that can use the network for free. • The only catch is that while your client is open, the network uses your computer & bandwidth to transfer video files, music files or complete phone calls.(BitTorrent, Napster, Skype) User’s Computer = Node
  • 23. 23 Bitcoin created a P2P network in which nodes were servers attached to blockchain databases. Every node stores every transaction that has ever happened so that a central authority doesn’t need to.
  • 24. 24 New transactions are constantly broadcasted to the network. Every 10 minutes a new block is added to the blockchain representing the new transactions. All nodes update their databases (ledgers) accordingly. But how do they agree which transactions to include?
  • 25. 25 That is where mining comes into play. Mining is nothing more than the computers in the Bitcoin network validating all of the new transactions and competing to be the first node that gets to add the new block to the database. Input: Transactions in the past 10 minutes Output: Hash of fixed length SHA-256
  • 26. 26 Miners are given an output parameter for which they need to guess the input. The only way to get the right hash is for the computer to try billions of random inputs until it guesses the right answer. SHA-256 Input: Recent transaction data + Arbitrary number (“Nonce”) Hash Goal Must start with a fixed number of zeroes 000006e812e782R52Bx
  • 27. 27 This process is called “proof of work” because by iterating through billions of attempts you prove that you’ve dedicated computing resources to the network. 12345 12346 74623 SHA-256 Output Hash Input: Transaction data + Nonce Hash Goal 6e812e782R52Bx 28yB6zXuo87zS2 Iteratively guess numbers until one randomly produces the right result. 000006e812e782R52Bx
  • 28. 28 When Bitcoin started it was just some cheap computers deployed by college students, techies, etc. out of their homes. Easy to solve for the nonce, financial reward was small.
  • 29. 29 When more money could be made people put more CPUs at work and hosted them in faster hosting centers to solve the “proof of work” before others and win more Bitcoin. Many CPUs, higher power machines , professional hosting
  • 30. 30 With more money at stake, smart technical miners found that GPUs (for computer graphics) were faster than CPUs (for general computing) at the “proof of work” task. GPUs > CPUs
  • 31. 31 Eventually the largest miners built special-purpose ASIC chips that beat GPUs. We now have an arm’s race that favors the large & powerful. ASIC This also favors people in low-cost or subsidized electricity countries like China.
  • 32. 32 This first person to solve for the nonce gets Bitcoin (today 12.5 BTC or ~$150,000). With data + nonce other nodes can easily verify by running it through an algorithm. The one- way function is very easy to check. 00000… 74623 SHA-256 Output Hash Input: Transaction data + Nonce Hash Goal 000006e812e782R52Bx
  • 33. When >50% of Hash power (miners computing power in the network) agree that the nonce is valid, consensus is reached without any authority (decentralized). 33 New block added New block added New block added
  • 34. 34 What should you know about Bitcoin? • Bitcoin is a digital fingerprint that can’t be repeated because two people can’t own it at the same time. • Its use case now is mostly gold (“store of value”). • It’s impractical for a $3 for a coffee due to energy use, transaction fees, latency & lack of price stability (not a great “transfer of value” today) • In the future, someone could create a stable coin whose value doesn’t change much—and which can be used more easily for transactions.
  • 35. 35 I. What is Bitcoin II. What are Ethereum, alt coins, and Internet 3.0 III. Unresolved problems
  • 36. 36 Ethereum’s big idea: besides exchanging money, wouldn’t it be helpful to find other trustless ways of doing business? “Smart contracts” were created. Bitcoin Ethereum Money Smart contracts Blockchains
  • 37. What should you know about Ethereum? 37 • Ethereum is the most scaled platform where a large number of developers are competing to build infrastructure. • It differs from the Bitcoin use case (i.e. gold) and is more of a platform for software interactions (called smart contracts). • But it could emerge as a dominant platform for distributed apps (DAPPs) platform (time will tell).
  • 38. 38 As an example, businesses today are typically built by a centralized entity which concentrates power and profits. Example: Dropbox $ for storage $M UsersDropbox • Raise venture capital • Invest $$$ in servers to store your documents • Recoup money by charging users fees
  • 39. 39 Smart contracts allow you to build distributed businesses on top of the blockchain where third-parties provide the resources and are rewarded directly. Example: Decentralized Dropbox $ for storage UsersNetwork • Provide server space, processing power, bandwidth • Collect a currency / token • Pay a currency / token
  • 40. 40 What is an ICO? It is when an entity creates new coins and sells them to new buyers, today it is usually on top of the Ethereum blockchain. ICOs Cryptocurrencies / tokens Blockchain Initial Coin Offering on Ethereum • Avoid having to replicate the process of creating a whole new blockchain infrastructure • Most popular type of smart contract on Ethereum
  • 41. 41 Be careful of any ICO that doesn’t have an explicit reason to exist to incentivize network participation / resources (otherwise it is just another form of crowd funding and one that is likely to be highly regulated).
  • 42. Company 42 Distributed applications (DAPPs) get most experienced venture capitalists excited. But what should a VC own—equity or token? Users who invest in tokens to fund development of the service Token ownership Value of tokens
  • 43. 43 • Illiquid
 • Relatively stable, with few valuation fluctuations • Governance and shareholder rights; management lock up due to stock agreements and illiquidity • Liquid (unless new governance rules) • Potentially huge daily price fluctuations • Potential moral hazard without governing rules Equity Tokens
  • 44. 44 Why are alt coins created and what are they? • We’ve seen the emergence of Bitcoin and Ether. Those currencies represent > 50% of the value of all currencies. • There are companies creating new coins (ecosystems), which are known as “alt coins” (Litecoin, Monero, Ripple) • Alt coins can be built on top of Ethereum or you can create your own blockchain. • Whether any alt coins becomes valuable depends on the value they provide and how they incentivize network participants to participate.
  • 45. 45 Why do people refer blockchain networks as “Internet 3.0”? IP TCP HTTP HTML Open protocols beat proprietary “closed” networks. “Walled garden” The big Internet companies built on top of open protocols but then made each of their systems proprietary, making it hard for new companies to compete. Internet 1.0 Internet 2.0 Internet Protocols X
  • 46. 46 Big Company Protocol User identity User bank details Social graph (who you know, how well you know them) Interest graph (how they serve relevant ads) Reputation (am I a 5 or a 2 when I work with people?) Big companies establish a “network effect” and lock you in because through all of your data they are more efficient at serving you than any other startup could be.
  • 47. 47 • Google & Apple can charge a 30% tax on apps. • Apple can decide it doesn’t like fart apps. • Facebook can decide how to promote news & media. • Google can display shopping competitors, flight information, hotel booking and stop referring traffic. Big Company As a society we’re starting to see the consequences of this, which could get worse if power concentrates even further.
  • 48. 48 Internet 3.0 is a possibility to return to a decentralized web where the big companies have less control. If BigCo services were blockchain protocols then users could “port” their information more easily to new startupsIP TCP HTTP HTML Identity Banking Reputation Socialgraph Interestgraph
  • 49. 49 I. What is Bitcoin? II. What are Ethereum, alt coins, and Internet 3.0 III. Unresolved problems
  • 50. 50 Blockchains are showing signs of not scaling well today. A whole series of companies are emerging to perform work not completed by the core blockchain Side chains “Level 2” networks “Layer 2” networks Block N-1 Root hash Other info Block N-2 Root hash Other info … Block 1 Root hash Other info Block 0 Root hash Other info Root hash Other info 1
  • 51. 51 If hash power becomes centralized, then blockchain loses its decentralization properties. • Remember that consensus is achieved when >50% of hash power achieves consensus. • So if the nodes are concentrated (owned by a few players) then the system is less independent. • For example, what if state actors (Russia? North Korea? US?) decide to secretly put resources into a given network. 2
  • 52. 52 It’s one thing to have a trustless transaction with a person, but what happens when I can’t trust the code? The DAO project had a software wallet with a bug such that a hacker was able to exploit a bug to the tune of $50 million (later recovered). When dealing with “trusted” companies, there is at least remediation. Code Ethereum Trustless transaction 3
  • 53. 53 In an unbundled ICO world, how do you stop management teams from leaving with millions without even delivering value? ICOs Cryptocurrencies / tokens Blockchain • Need legal governance • Likely to see SEC oversight • How to stop pump-and-dump coin trading if coin owners are anonymous (especially since there are private groups now collaborating on encrypted messaging networks like Telegram & Signal)? 4
  • 54. 54 We are lacking mechanisms to enforce governance and world order. If the transactions are partially anonymous, then how do governments: • Track the flow of money to terrorists, white supremacists, criminal gangs? • Track the flow of illegal “money of influence” to state actors? • Manage large economies and not give up control of money supply? 5
  • 55. 55 In the end, the boom-and-bust of over-investment that also attracted a lot of innovation will eventually lead to a future wave of huge future investment off of the back of today’s ashes. We’ve seen this before: • Cable • CLECS/DSL • Wireless • Internet 1.0 We are somewhere here Time Euphoria / value
  • 56. 56 A Guide to Blockchain and Cryptocurrency Mark Suster, @msuster