Set of slides explaining the basics of Blockchain and Bitcoin. This was originally presented to an audience of insurers at Swiss Re in May 2017.

1. Introduction to
Blockchain
Swiss Re
Contract Expert Circle 2017
jacoby@sparkl.com
@sparkl

2. A blockchain is a simple database
✔ You can add data
Data is regularly frozen into blocks. Once frozen:
❌ You can't change the data
❌ You can't delete the data
Freezing a block is more commonly known as "mining" the block

3. The blockchain? No such thing!
Anyone can knock up a blockchain database
BitCoin is a famous public blockchain database, storing cash transactions
Ethereum is a different public blockchain database, general purpose
You can set up your own public blockchain any time you like

4. A famous public blockchain database is . . .
BitCoin (known as BTC or XBT)
The BitCoin database is duplicated by many computers in different places
○ 7000 mining bitcoin nodes globally in Mar 2017
■ 2000 in USA
■ 1300 in DE
○ Around 250K transactions per day
○ About $16bn worth of BTC in circulation

5. A famous public blockchain database is . . .
BitCoin (known as BTC or XBT)
The BitCoin database is duplicated by many computers in different places
○ 7000 mining bitcoin nodes globally in Mar 2017
■ 2000 in USA
■ 1300 in DE
○ Around 250K transactions per day
○ About $16bn worth of BTC in circulation
Takes about 1 hour to "clear"
transactions with confidence
After 1 hour there will be 6 or more
blocks frozen with consensus after
your block

6. Other Blockchain Databases
● 100's of BitCoin alternatives (see altcoins.com)
○ Ethereum ETH
■ Interesting for its programming language (stored procedures, or "Smart Contracts")
■ This was exploited in 2016, leaving behind Ethereum "classic" currency ETC
○ Deutsche eMark DEM
■ Interesting because it is spuriously tied to a nation state
○ Zcash ZEC
■ Interesting because it provides true anonymity unlike BitCoin
■ It also hides transaction amounts and balances
○ Namecoin NMC
■ Interesting because transactions record/transfer domain names
■ e.g. sparkl.bit
○ Ripple XRP
■ Interesting because it's designed for inter-bank cross-border transfers
■ Promises to reduce the cost of clearing by 60%

7. Crypto-currency
Mining BitCoins
Proof of work
Consensus
● Freezing a block of transactions is hard work
○ If you do it, you're called a "miner"
○ Lots of $$$ computer power is required
○ Each frozen block is assigned a fixed BitCoin value
● What is intrinsic value? Consensus is critical
○ Majority of duplicating computers must agree each block
○ Everyone must believe these duplicates are independent
○ Therefore must have 1000's of computers all over the globe
● All this work is paid for...how?
○ A % of the block BitCoin value goes to the miners
○ It's hard to know whether miners operate at a profit
○ You can pay to join miners e.g. genesis-mining.com

8. My Journey into the Light
Start
coinfloor.com
Trading exchange
blockchain.info
Bitcoin wallet
Trades BitCoin only.
kraken.com
Trading exchange
Trades BitCoin, Ethereum, Monero,
Zcash, Ripple and others.
Holds your BitCoin in the cloud or in
local wallet on your mobile. Easy to
buy BitCoin through tame broker.
namecoin.org
DNS name wallet
Provides local DNS server for .bit
domains.
I use this to keep a BitCoin balance I can
spend on stuff using my mobile or browser.
I use this to buy BTC using GBP with
payments from my bank account.
I use this to buy Ripple, Zcash or Eth using
BTC or GBP.
I use this to register sparkl.bit

9. Private Blockchain Databases
● Hyperledger
○ Open-source tech
■ Allows you to knock up any blockchain use case
○ Has stored procedures ("smart contracts")
○ Particularly aimed at trading groups or consortia
○ Makes sense where a group has some kind of collective trust
■ Group trust removes crypto-currency requirement
● No crypto-currency
○ Different consensus protocol
■ Uses centralised notaries, does not require "proof of work"
■ Instant validation of transactions
○ No need to wait for confidence, as you do with BitCoin

10. Private Blockchain Databases
● A private blockchain is a tamper-proof add-only database
○ New tool to use in corporate IT solutions
○ Useful focus of synchronisation between parties
■ With private databases, some trust exists between parties
● Helps deliver the usual benefits of a shared system
○ Reduced Cost
○ Increased Agility
● Convenient catalyst
○ Blockchain is a database with useful new features
○ Encourages shared systems that are perhaps decades overdue
○ New project ideas benefit from pent-up demand

11. Private Blockchain Use Cases
● Finance
○ Jan 17: Deutsche Börse Presents Blockchain Concept for Risk Free Cash Transfer
○ Dec 16: SWIFT launches Blockchain Proof of Concept In Hyperledger
● Supply Chain
○ Provenance of responsibly sourced fish
○ Tracking of aerospace components and lifecycle within completed products
● Healthcare
○ Health provider data and security
○ Patient identity and records transmission

12. "Smart Contracts"
● A blockchain is a database
○ You can add data
○ It's tamper proof
○ Achieves consensus through duplicate nodes
● Let that data include good old-fashioned programming code
○ Just like "Stored Procedures" in normal databases
○ Just as limited, too
○ Execution and consensus by duplicate nodes
○ Give an old dog a fancy new name and we have . . .
● "Smart Contracts"
○ Ta-da!
○ Highly risky in public blockchain
○ Useful tool in private blockchain

13. Oil rig
Insurer
Reinsurer
IoT sensors and systems
Closed loop distributed
intelligence
Realtime reporting
and analytics
Audit trails
tamper-proofed
using BitCoin
public blockchain
Smart Policy document
expresses and processes
policy events including
claims and settlements Policy state held on
private blockchain using
"smart contracts"
Settlements processed
through Ripple public
blockchain
Internal systems and
workflows are integrated
Systems SPARKL
Blockchain
Databases
Parties

14. Thank you!
jacoby@sparkl.com
@sparkl

15. Page down for extra slides
Too detailed to present but interesting...

16. Interesting things about BitCoin #1
You get yourself a bitcoin "address" to receive a BitCoin amount
A transaction is where an amount is signed over from one set of addresses to
another set of addresses (N:M, but most often 1:1)
You can have loads of addresses - often a new one per transaction
Nobody knows all your addresses - that's your little secret
The public, duplicated, tamper-proof database prevents double spending

17. Interesting things about BitCoin #2
Each frozen block, containing e.g. 2500 transactions, has a fixed coin value
The coin value of later blocks is fixed to reduce logarithmically
Total number of BitCoins is just the (inflating) sum of all those coin values
So there's a limit of around 21m BitCoins (reached around 2140 AD)
A transaction can be as small as 1/100,000,000 of a BTC!
Today BTC 0.001 trades at roughly EUR 1.0

18. Interesting things about BitCoin #3
Freezing a new block is really expensive and difficult to do
But amazingly easy for anyone to check!
A block has a bunch of transactions in it, say 2000+
A "miner" gets paid for freezing a block, plus a fee for the transactions in it
You can become a miner anytime you like (try genesis-mining.com)
Payment for freezing a block is going down, down, down
Txn volume means number of txns per block has to go up, up, up