Blockchain concepts

1. OFF COURSE I’LL USE
BLOCKCHAIN IN MY
NEXT APPLICATION
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Roy Wasse / Twitter @roywasse

2. Encantado
◦ Roy Wasse
◦ Co-Founder OpenValue
◦ NLJUG Board member
◦ Blockchain consultant
◦ Cryptocurrency fan J
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3. TRUST IS OBSOLETE
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4. Evolution of digital cash
80’s 1st wave
• Digital Tokens
• Digicash
90’s 2nd wave
• E-gold
• Paypal
00’s 3rd wave
• Bitcoin &
Blockchain
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6. Payment w/o bank
How to
guarantee
messages arrive
at destination
How to do
prevent
manipulation
How to make
sure a coin is
only spend
once!
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7. Two generals problem
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8. Don’t use a messenger
◦ Image generals consult a nearby village
◦ 5% chance peasant from village gives wrong info
◦ Asks any 6 peasants, chance 4 giving incorrect information is
0,05 * 0.05 * 0.05 * 0.05 = 0,00000625%
◦ A malicious peasant will not be able to manipulate transaction
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9. 4 key
innovations
◦ Peer 2 Peer network
◦ Distributed ledger
◦ Consensus mechanism
◦ Incentives
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10. Blockchain structure
◦ Every node records all transactions
◦ Transactions are collected in a block
◦ Every block links to the previous block
◦ New block should be accepted by the
majority of the nodes
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11. Size blockchain
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https://blockchain.info/nl/charts/blocks-size

12. Blockchain deep
dive: Hash
◦ Take sentence “Hashing is not
complicated”
◦ For each letter, take the position in the
alphabet and add:
8+1+19+8+9+14+7+0+9+19+0+14+15+20+0+
3+15+13+16+12+9+3+1+20+5+4 = 244
◦ Divide by Julian date (28 juni 2017 =
2457932.922454)
◦ Multiply with 1 million
◦ Outcome = 9,92704 = Hash
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Input Hash

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14. 14
Transaction pool
Julian --->Bob (0,25 BTC)
Roy --->John (0,5 BTC)
Tina --->Ann (0,1 BTC)
Mark --->Anton (0,02 BTC)
X --->Y (xxx BTC)
…. --->……..
…… --->…..
12,5
BTC +
TX fee

15. Reach consenus: Proof of work
◦ “Hashing is not complicated”
◦ For each letter, take position in alphabet and add:
8+1+19+8+9+14+7+0+9+19+0+14+15+20+0+3+15+13+16+12+9+3+1+20+5+4 = 244
◦ Multiply with one million
◦ Divide outcome by a missing number causing the result to start with 97 and end with 02:
◦ 240 * 1.000.000 / ? = 9,…04
◦ Now find ?
◦ If ? = Julian date 28 juni 2017 = 2457932.922454 a correct result is found: 9,92704
◦ Checking the outcome is easy, finding the missing parameter is hard
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16. 16
50% attack
Roy --->Lambo dealer (15 BTC)
RoyLambo
dealer

17. Mining & Consensus
◦ Nodes in network are incentivized to process next blocks = mining
◦ Miner solves crypto puzzle to process block = Proof of Work
◦ Other miners check if puzzle is solved correctly
◦ Blockchain is eventually consistent
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0
1 2 3

18. Buying a cup of
coffee with BTC
◦ Julian buys a cop of coffee from Bob the barista and
pays with BTC
◦ Bob has to publish his bitcoin address, Julian then
signs a transaction wit his private key and sends it
over the network and only Bob can redeem the
bitcoins send.
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23. Asymmetric encryption
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24. Elliptic Curve
◦ Asymmetrische encryption
◦ Key for recieving data different from the
one to encrypt.
◦ Elliptic Curve Multiplication for generating
Public key
◦ Safer then RSA, which is pretty safe
◦ y2 = x3 + ax + b
◦ Bitcoin address is SHA-256 hash of public
key
◦ Base 58 encoded to make it more
readable
◦ Relatively safe for quantum computing
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25. Transaction
on
blockchain
Sender should acquire public key hash (bitcoin
address) from recipient
Sender signs the transaction with his private key and
sends it to nodes in the bitcoin network
Network checks if sender is allowed to spent the
bitcoins involved
Recipients wallet detects transaction, runs
unlockingscript with that proofs he has private key
related to public key hash
Transaction is put in a block
Once block is adopted by blockchain, transaction is
settled
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29. Ethereum
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30. Vitalik Buterin
◦ Son of Russian computer scientists
◦ In 2011 as a 15 yrs old started
publishing about bitcoin
◦ Founder of Bitcoin magazine
◦ In 2013 financially secured for life
◦ 7 tx’s per second doesn’t cut it
◦ Blockchain as distributed computer
◦ Go client developed in NL!
◦ 2000 ETH per BTC. +/- $0,30 per ETH
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31. Ethereum
◦ Decentral storage
◦ Issue new tokens
◦ Smart contracts
◦ Proof of Work => Proof of Stake
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32. Smart contracts
◦ If this, then that
◦ Turing complete, Gas for transactions
◦ Every node in can execute a contract with the EVM
◦ Code your own (solidity)
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33. JUST
SEND
ETHER
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34. OR
TRIGGER
ANOTHER
CONTRACT
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35. CONTRACT
RESPONDS
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36. CONTRACT
CALLS
CONTRACT
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37. MULTIPLE
PARTIES
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38. ENTERPRISE
BLOCKCHAIN
When useful?
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39. Typical
examples
Logistics
Social Media
Financial world
Decentral markets
Health care
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40. Textbook
Example
◦ Vending machine that issues refill
orders
◦ Ordering & Paying fully
automatically
◦ Precidictive maintanance
◦ Saves costs, faster & more efficient
◦ Usage data
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41. Health care
◦ Issue earmarked tokens
◦ Store claims in blockchain in Merkle
tree
◦ Smart contract checks if health care
provider agrees
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45. When not to use
◦ If a regular database suffices
◦ Organization wants to have full control over their
services and data
◦ Performance is very important
◦ Continuous updating of software is needed
◦ Regulations require specific means of storage
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46. Possible applications
◦ Record ownership (eg. music, photo’s, property)
◦ Match question and demond (microgrid, service industry)
◦ Store contract information
◦ Tracking & tracing van goederen (audit trail)
◦ Check authenciticity (proof od identity, diploma’s)
◦ Decentral censorship resistant storage
◦ ……
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47. “If there’s no central authority to go to,
after someone denies data recorded in
the blockchain is correct. What are you
going to do?”
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48. When to use
◦ Cut out middle man
◦ Exchange of goods with unreliable trading partners
◦ Irrefutable proof of a deal between multiple parties
◦ Make sure you don’t depend on system of partical party
◦ Anonymous transactions (auction)
◦ Triggering of events without anyone being responsible
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50. BLOCKCHAIN
disruptive?
Any questions?
Twitter @roywasse
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51. Private
blockchain
◦ As part of public blockchain as a Sidechain
(aka Off chain)
◦ Ethereum popular choice, but does this make
sense?
◦ Ether, Gas & mining ‘hardcoded’ in system
◦ Maybe all you need is a distributed ledger
◦ Lots of other options for a private blockchain:
◦ OpenChain
◦ Hyperledger (IBM)
◦ Multichain
◦ Stratis
◦ NEO
◦ Azure BAAS / Coco
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52. Taxonomy
of coins
/tokens
•LiteCoin. More scalable fork of bitcoin
•Bitcoin cash. Alternative bitcoin
•Dash. Instant payments, more privacy options
•Monero. Real good privacy
Bitcoin sourcecode
gebaseerde tokens
(digital currency)
•RIPPLE. Centrally managed. Financial institutions
•IOTA. Ideal for IOT apps such as Drone delivery
Other payment
tokens
•Ethereum. Smart contract / general purpose
•NEO. Alternative for Ethereum
•Cardano. Alternative for Ethereum
•EOS. App store like Ethereum
•Tron. Digitaal asset management (media industrie)
Platform tokens
•TenX, Tokencard & Monacocard: Pay cryptocurrency (CC) with VISA
•Steem. Get paid for writing content
•BAT. Pay with attention
•STREAMR. IOT token
Application tokens
(ERC20 mostly)
•RMC (colored coin). Profit from mining in Russia
•ZenGold. Trade gold
•USDT. Dollar backed coin
Asset backed
tokens (IOU)
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