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Blockchain Future & Investments 2018 - Women in Product
Aarthi Srinivasan presented information on blockchain investment trends and the future of blockchain technology. Some key points included: - Over $4 billion was raised for blockchain startups in 2017 through ICOs and VC funding, with the blockchain industry expected to grow to $20 billion by 2024. - The top blockchain platforms receiving funding were EOS, Bitcoin2Gen, and Tezos, while the top funded applications were in payments, identity protection, and regulatory compliance. - Barriers to blockchain adoption include cryptocurrency volatility, lack of standardization, and uncertainty around return on investment. However, blockchain is poised to grow in areas like decentralized computing, supply chain management, identity solutions, and
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Blockchain Future & Investments 2018 - Women in Product
- 1. Aarthi Srinivasan 1 Blockchaininvestment trends & its future Aarthi Srinivasan
- 2. Two truths anda lie Aarthi Srinivasan 2 1. 32 MM raised in 60 seconds 2. Tinder on blockchain 3. 700+ MM raised without an office and no ownership for investors
- 3. Hello Aarthi Srinivasan 3 •Leads Personalization at Target • 15+ years of experience in Managing products, Engineering & Consulting • Academic Background: MBA from Wharton, MS in Computer Science from Stony Brook University and BS from Madras University
- 4. What to expecttoday? 4 • Why do we need Blockchain? • What is Blockchain? • Types of Blockchain • Problems with Adoption • Investment trends and the future Goal: Provide sufficient information for your opinion on blockchain Aarthi Srinivasan
- 5. Trust the chain? AarthiSrinivasan 5 Store my identity on the database with backups Validation nodes confirms the data and maintains copies of the record Backup Store my identity on the blockchain
- 6. What is aBlockchain? • A blockchain is a growing list of digital records or blocks that are secured and linked. Each block contains • Link to the previous block (Hash value) • Timestamp and • Data • Genesis block by Satoshi Nakamoto (Bitcoin paper) – 3rd Jan 2009 “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks“ • Eliminate the intermediaries • Creates a decentralized system
- 7. What is ablockchain? Aarthi Srinivasan 7 A digital ledger in which transactions are validated by a decentralized network of nodes (computers), chain linked and recorded chronologically Each block contains the previous block’s hash key, nonce (random number that is incremented), timestamp and transactions. Concept of validated proof-of-work for each transaction Source - Bitcoin-paper
- 8. 8 Data 1 NAME OFBLOCK / HASH Data 2 & more new Txs Nonce – Random # Prev block reference / Previous hash Timestamp Example Bitcoin Blocks Data or Tx 3 NAME OF BLOCK / HASH Data or Tx 4 & more new Txs Nonce – Random # Prev block reference / Previous hash Timestamp …...
- 9. Types of Blockchain PERMISSIONLESS PERMISSIONED •Anyone can participate and validate a block • Common validation method proof of work • Ethereum fork using proof of stake (TBD state) • Restricted actors can validate a block • Various methods of consensus are used e.g. Byzanthine fault tolerance
- 10. 10 Example Blockchain Platforms BITCOINETHEREUM HYPERLEDGER R3 CORDA Ref – McKinse.comy, https://halobi.com/blog/descriptive-predictive-and-prescriptive-analytics-explained/ Permission State Permissionless with basic contracts Permissionless with smart contracts (e.g. solidity) Permissioned with smart contracts (e.g. Golang, Java) Permissioned with Smart contracts (Kotlin, Java) Smart Legal prose Distributed nodes Distributed system with all accounts equal access Distributed system with all accounts equal access Distributed system with role-based restricted access Microledgers semi- distributed systems with restricted access Block creators External account External Account, Contract account Multiple roles such as Validator or Transactor Multiple roles including Notary Cryptocurrency Bitcoin currency Ether or other tokens via smart contract No currency (chaincode tokens if required) No currency Verification Proof of work Data format: Merkle tree (20 txs per sec) Proof of work Data format: Patricia tree Consensus based – Modular & Extensible Consensus with Financial sector as focus area
- 11. Adoption Barriers Aarthi Srinivasan11 • Cryptocurrency is muddying the waters of Blockchain technology • Overvalued - Too many ICOs without a real product • Lack of platform standardization and changing protocols using forks • Lack of regulation & unproven value (ROI) • Learning curve / Migration efforts
- 12. ICOs growing rapidly AarthiSrinivasan 12
- 13. 13Hackernoon, Techrecaps medium Followthe Money Blockchain Start ups ~$4B Funding (ICOs or VC) Blockchain industry expected to grow to $20B by 2024* Market cap for Crypto crossed $700B Platforms for Blochain 1 EOS 900M Bitcoin2gen 233M Tezos 232M Platforms for Currency Trading & Cryptocoins 2 Coinbase 235M Basis 133M Blockchain 70M Payments Platforms 3 Circle 136MM Ripple 93M Colu 55M
- 14. Other applications inBlockchain Aarthi Srinivasan 14 1. Unified user identity – Civic 35.8M , Cambridge Blockchain 3M 2. Regulatory compliance – Chainalysis 17.6M, Harbor 38M, 3. Decentralized compute and storage (sharing) – Storj 35M, Open Garden -12.8M, Hypernet, NewNode (decentralize & avoid news censorship) 4. Lending platforms & Cryptocurrencies – Libra credit network 30M, Centrality 95M, Ethlend 16.5M 5. AI & iOT applications – Oben 23.7M, Singularity Net 33M, Faceter 28.6M, Linius tech 16.5M, Filament 22.5M, Sensay chatbot 21M 6. Supply chain – Eximchain 20M, Provenance 1.1M, Farmatrust
- 15. 15 Where do Ithink this is headed? Platforms & Payments • Blockchain platforms • Wallet & trading platforms • Payments • Identity protection • Regulatory compliance Applications • Decentralized compute & Storage • Cybersecurity (AI face recognition) • Supply chain safety / Manufacturing • Phone apps blockchain version • Blockchain phone – HTC, Finney AI application with smart contracts • Finance protection • Document fraud detection • iOT safety & security (Energy efficiency – grid+, AV) • Medical AI contracts • Decentralized Organizations (Refugee crisis –Exsulcoin), Immigration security, Common Education Standards) 5 10 Aarthi Srinivasan
- 16. What to expecttoday? 16 • Why do we need Blockchain? • What is Blockchain? • Types of Blockchain • Problems with Adoption • Investment Themes shaping the future Goal: Provide sufficient information to have a view on the technology Aarthi Srinivasan
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- 19. Bitcoin protocol steps Start:Broadcast new transaction Verification: User Signature & funds Proof-of-work: Prevent double spending Mining: Earn bitcoin rewards Recheck transactions & start new block 1 2 34 5 Search Engine Account e.g. ABC wants consumers to use its search engine and will pay 1 crypto coin (or some fraction of a bitcoin as a reward) in return for every search.
- 20. Key Terms Block /Blockchain A block is a collection of verified new transactions that generally includes a timestamp, link to previous block (prevhash) and pointers (Merkle tree root hash) to transactions in the block ICO – Initial Coin Offering Similar to stock offering it is the method of offering decentralized ownership for a company with crypto coins. E.g. SingularityNet offered ownership stake with ICO “AGI” tokens. Currently there are ~10,000 AGI tokens each valued at $0.4137 @ 0.000530 Eth Smart Contracts Code that gets executed when a message hits the contract account. This code can read and write to internal storage, send messages or create contracts. (computational steps limit specified) UXTO – Unspent Transaction Outputs Unspent transaction outputs (e.g. coins) that have been minted but not yet used or spent. Each UTXO has a denomination (value) and a owner defined by a cryptographic public key e.g. 0x55…A….4EA3cf456700eDBa212531x Mining The computer node which completes the proof-of-work first to generate a block’s hash is the winning node. The node mines (creates) 12.5 bitcoins as reward for its effort. Nonce A nonce is an arbitrary number that can only be used once E.g. You find your hash for the proof-of-work by incrementing this nonce methodically BTC Hash & Hash rate In general, a hash is an index for a huge data set. A bitcoin hash is a algorithmically generated number to identify a particular block. Hash rate is the number of hashes per second Proof-of-work Method to verify that the sender has not double-spent his amount in various transactions by confirming absence of transactions. E.g. User cannot spend all his 100 bitcoins and pay himself the same 100 bitcoins. Aarthi Srinivasan 20
- 21. How do wevalue nothing? Aarthi Srinivasan 21 • There were approximately 300 ICOs (public coin offerings) valued at nearly $4B in 2017 • Bitcoin value is speculative as it is mined from nothing as it does not offer goods or services • Value is based on the underlying data in the chain and the length of the verified blockchain Traditional Stock Valuation using Discounted Cash Flow for companies such as Apple Free Cash Flow = Earnings before Income Taxes EBIT(1-t) + Depreciation & Amortization – Changes WC – Capital Expenditure Value of the Data in chain e.g. Singularity Net AI Length of verified block e.g. 505,000 blocks long (as of Jan 31st, 2018)+ My Bitcoin Estimation = Value driven by demand ASSUMPTION: Regulation of Bitcoin and support by government agencies
- 22. Ethereum & DecentralizedAutonomous Organizations Aarthi Srinivasan 22 • Ethereum accounts can be externally owned accounts (to send / receive messages) or contract accounts (to execute contracts in addition to sending/receiving messages) • Contract accounts can execute code and create contracts. e.g. Use blockchain search engine “ABC” and earn 0.05 BTC for every search • First Class Citizen property in Ethereum exists where contract accounts are equal to the external accounts and can take on many roles based on their contract code • The general concept of a "decentralized organization" is that of a virtual entity that has a certain set of members or shareholders which, perhaps with a 67% majority, have the right to spend the entity's funds and modify its code. • Ethereum platform allows you to create your own new blockchain, modify the existing bitcoin chain with scripts and/or create meta-protocols on top of blockchain protocol • Given the power of Ethereum Contracts, we can create ”smart contracts” that can execute code when it receives a message. E.g. a search engine user gets money for every search on that engine
- 23. How is datastored in the block? Aarthi Srinivasan 23 In order to save space in the verified blocks, the transaction data is stored in a Merkle tree with the root hash of the data
- 24. Verification – Bitcoinpaper Aarthi Srinivasan 24
- 25. Ripple vs Ethereumvs Bitcoin Aarthi Srinivasan 25 Technical differences Ethereum can be considered slightly different to the other two currencies, being geared towards complicated interactions between several parties rather than consumer payments. CNBC has noted that it provides numerous potential uses, such as reconciliation, enabling smart contracts to be distributed on the Ethereum network. While Ripple is only the fourth largest cryptocurrency in terms of market capitalization, being worth $36 billion currently, it has advantages over both Bitcoin and Ethereum which could provide an explosion in is value in the foreseeable future. Ripple is pre-mined, with one hundred billion units in existence, twenty billion of which are retained by the creators of the currency. This differs from Bitcoin in particular, which is entirely based on the mining of its network to a fixed rate of 21 million potential Bitcoin units. The distributed platform provided by Ripple is particularly highly regarded, as it is tailored towards the financial service sector. “The ability to transfer from one currency to another instantly becomes possible with the XRP as the intermediary currency. Clearly, there’s a lot of excitement surrounding Ripple,” The Motley Fool noted. Max number of coins, Speed, Smart Contract capability are all differentiators
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Editor's Notes
- #4 I am Aarthi Srinivasan, a product enthusiast who loves utilizing technology to solve world problems. I lead the personalization team at Target which includes the backend data science as well as the front end customer journey. I am thrilled by new technology and love to share it broadly so more folks can utilize these insights.
- #6 Why do we need the chain? Blockchain? Assume your identity is stored on a secure database with backups in the cloud. Now if a hacker wants to create malware and edit your data they can do it and that change will also be backed up unless someone notices this terrible change. However with the blockchain you can prevent this type of malware edits because the identity is stored in multiple other nodes that have validated the data. All these additional nodes have to be hacked in order to edit your original data. This difference will be spotted pretty soon when the next transaction arrives for validation.
- #8 Bitcoin block chain is approximately 505,000 blocks long (as of Jan 31st, 2018)
- #13 ~268 ICOs in 2018 (28% growth over last year in just first quarter) Over 80% increase in funding over 2017 just in the first quarter
- #16 FLP inconsitency – Reliability, Consistency and Latency will not be possible together. Compromises exist.
- #21 UTXO – Ethereum paper: unspent transaction outputs" or UTXO) that have been minted and not yet spent, with each UTXO having a denomination and an owner (defined by a 20-byte address which is essentially a cryptographic public key[1]). Once step (1) has taken place, after a few minutes some miner will include the transaction in a block, say block number 270000. After about one hour, five more blocks will have been added to the chain after that block, with each of those blocks indirectly pointing to the transaction and thus "confirming" it. At this point, the merchant will accept the payment as finalized and deliver the product; since we are assuming this is a digital good, delivery is instant. Now, the attacker creates another transaction sending the 100 BTC to himself. If the attacker simply releases it into the wild, the transaction will not be processed; miners will attempt to run APPLY(S,TX) and notice that TX consumes a UTXO which is no longer in the state. So instead, the attacker creates a "fork" of the blockchain, starting by mining another version of block 270000 pointing to the same block 269999 as a parent but with the new transaction in place of the old one. Because the block data is different, this requires redoing the proof of work. Furthermore, the attacker's new version of block 270000 has a different hash, so the original blocks 270001 to 270005 do not "point" to it; thus, the original chain and the attacker's new chain are completely separate. The rule is that in a fork the longest blockchain (i.e.. the one backed by the largest quantity of proof of work) is taken to be the truth, and so legitimate miners will work on the 270005 chain while the attacker alone is working on the 270000 chain. In order for the attacker to make his blockchain the longest, he would need to have more computational power than the rest of the network combined in order to catch up (hence, "51% attack"). Page 8 ethereum.