Overview of concepts underlying blockchain technology, introduction to ethereum and samples of blockchain applications

1. Better
software,
faster
MEETUP 31 AUGUST

2. BLOCKCHAIN
IN ACTION
Disruptive technology under the loop
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Roy Wasse / Twitter @roywasse

3. Encantado
◦ Roy Wasse
◦ Co-Founder OpenValue
◦ NLJUG Board member
◦ Blockchain & cryptocurrency fan 
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4. Trust is obsolete
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5. 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. 6

7. Two generals problem
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8. Issues payment system 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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9. Basic idea: don’t use 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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10. 4 key
innovations
◦ Peer 2 Peer network
◦ Distributed Ledger
◦ Consensus mechanism
◦ Incentive to process
transactions through ‘proof
of work’
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11. Blockchain structure
◦ Every node records all transactions / holds
copy
◦ 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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12. Size blockchain
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https://blockchain.info/nl/charts/blocks-size

13. Blockchain deep
dive: Hash
◦ Input “Hashing is niet ingewikkeld”
◦ Take position in alphabet for each letter,
add it all together. :
8+1+19+8+9+14+7+0+9+19+0+14+9+5
+20+0+9+14+7+5+23+9+11+11+5+4 =
240
◦ Multiply by 1 million
◦ Divide it by Julian date 28 june 2017 =
2457932.922454)
◦ Uitkomst = 97,64302 = Hash
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Original Hash

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15. 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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17. 17

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19. 19

20. Public/Private key encryption
◦ Encryption: Hello -> position + 1 -> Ifmmp
◦ Asymmetric encryption
◦ Key to read information not the same as one used to decrypt
◦ Elliptic Curve Multiplication used to derive Public key
◦ Lot safer than RSA, which is pretty safe
◦ y2 = x3 + ax + b
◦ Bitcoin address is SHA-256 hash from public key
◦ Base 58 encoded to make it (a bit) more readable
◦ Relatively safe for quantum computing
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21. Simplified
Bitcoin
Transaction
◦ 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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23. 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

24. Concept of Proof of work
◦ “Hashing is niet ingewikkeld”
◦ For each letter, take position in alphabet and add:
8+1+19+8+9+14+7+0+9+19+0+14+9+5+20+0+9+14+7+5+23+9+11+11+5+4 = 240
◦ 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 / ? = 97,…02
◦ Now find ?
◦ If ? = Julian date 28 juni 2017 = 2457932.922454 a correct result is found: 97,64302
◦ Checking the outcome is easy, finding the missing parameter is hard
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25. Proof of work for bitcoin
◦ Nodes are all trying to process the next block by solving crypto puzzle
= Finding correct proof of work hash = mining
◦ The solution must be set in Block Header Field Nonce
◦ This nonce is a SHA-256 hash
◦ Bitcoin protocol dictates required number of leading zero’s for this hash => sets difficulty
◦ Correct hash is based on transactions in the block and other info in the block
◦ Every node checks if proposed block has correct nonce
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26. Exponential growth of Hashing power
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28. Ethereum
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29. 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 transaction per second doesn’t cut it
◦ Blockchain has more potential
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30. Blockchain as platform
◦ Blockchain as distributed computer
◦ Founded in 2014, 30 juli 2015 operational
◦ Ether (ETH) instead of Bitcoin
◦ Then: 2000 ETH per BTC. Or $0,30 per ETH.
◦ Now: +/- 10 ETH per BTC. Or +/- $250 per ETH
◦ 12 seconds per block instead of 10 minutes
It’s all about smart contracts
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31. Smart contracts
◦ Loop constructs
◦ Turing complete, Gas for transactions
◦ Every node in can execute a contract with the EVM
◦ Code your own (solidity)
◦ Still maturing
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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. Chain reaction
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37. Multiple parties
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38. Multiple contracts
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39. Distributed Anonymous Organization
◦ 100% autonomous organization on the Ethereum blockchain
◦ Goal: Funding commercial & non profit organizations
How it works:
1. Anybody can exchange Ether for DAO token and become an investor
2. Everybody can do a business proposal
3. Investors vote for ideas with DAO token
4. Winning proposals get funding
5. Investors become shareholders and recieves share of profit
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40. DAO (2)
◦ Written down in Smart Contracts
◦ In May 2016 $150 million was collected
◦ Unintended use of code in contract…$50 M was stolen
◦ Hard fork applied by Vitalik and core ethereum team
◦ 85% nodes joined.
◦ 15% did not. Went on and became Ethereum classic. Currently +/-
10% of Ether marketcap
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41. Some Ethereum blockchain tokens
◦ TenX, Tokencard & Monacocard: Wallet with
cryptocurrency linked with VISA card
◦ Steem. Get paid for publishing content
◦ Trutheum. Marketplace for ‘truth requests’
◦ EthLance. Freelance opdrachten bemiddelen
◦ Augur. Factoring through blockchain
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42. Altcoins
◦ LiteCoin. Based on BTC code, improved
performance
◦ Dash. BTC like. Instant payments, levels of
anonimity. Wallet accepted by Apple
◦ IOTA. No blockchain. No fees. Ideally
suited for IOT applications such as Drone
delivery
◦ RIPPLE. Centrally managed. Optimized for
financial institutions. No mining. Verify
transaction before its settled
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44. 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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45. Example use cases
◦ Unilever, Nestle, Walmart, Tracking & tracing of food in logistic chain
◦ Bitnation. Record laws, regulations & jurisdictions and provide dispute resolution
◦ Swarm City. Peer2Peer sharing platform
◦ Guts tickets. Prevent theater tickets from being sold in black market.
◦ Land registry. Georgia records land ownership in blockchain.
◦ Rent out your house. In Singapore renting a house is possible though P2P blockchain
◦ Digital ownership. Who owns what music rights
◦ And digital currency. Senegal is considdering a national blockchain currency
◦ ….
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46. “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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47. When to use blockchain
◦ Cut out the middle man or regulator
◦ If central authority is missing, eg. free market trading
◦ Transactions that require audit trails: eg. supply chains
◦ Triggering of events without anyone being responsible.
◦ Guarantee anonimity (e.g. auction)
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48. 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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49. BLOCKCHAIN in
your next
application?
And ready to invest in cryptocoins?
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