Tudu acaba em blockchain: Productivity gains: Capital investment in technology, Provide data centers with Blockchain as a Service Skilled work force development: Train 1000 software developers: Hyperledger, Ethereum, Corda Focus on global markets beyond the internal economy: Scale efficiencies Natural resources, regional strength, large companies Low-hanging fruit: secure information transfer

1. Disruptive Future of Blockchain
Melanie Swan
Philosophy, Purdue University
melanie@BlockchainStudies.org
Porto Alegre, Brasil, 24 May, 2018
Slides: http://slideshare.net/LaBlogga
Boa Tarde~!

2. 1
Melanie Swan, Technology Theorist
 Founder, Institute for Blockchain Studies
 Philosophy Department, Purdue University,
Indiana, USA
 Singularity University Instructor; Institute for Ethics and
Emerging Technology Affiliate Scholar; EDGE invited
contributor; FQXi Advisor
Traditional Markets Background
Economics and Financial
Theory Leadership
New Economies research group
Source: http://www.melanieswan.com, http://blockchainstudies.org
https://www.facebook.com/groups/NewEconomies

3. Blockchain
2
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
 To inspire us to build
this world

4. basics.
3

5. internet content.
4
information.
email.
voice.
video.
money.

6. 5
Conceptual Definition:
Blockchain is a software protocol;
just as SMTP is a protocol for
sending email, blockchain is a
protocol for sending money
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
What is Blockchain/Distributed Ledger Tech?

7. Blockchain Technology: What is it?
6
 Blockchain technology is the secure distributed ledger
software that underlies cryptocurrencies like Bitcoin
 “Internet of Money” leapfrog technology; Skype is an app allowing
phone calls via Internet without POTS; Bitcoin is an app allowing
money transfer via Internet without banks; ‘decentralized Paypal’
Internet
(decentralized network)
Blockchain
Bitcoin
Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
Application
Layer
Protocol
Layer
Infrastructure
Layer
SMTP
Email
VoIP
Phone
calls
OSI Protocol Stack:

8. Context of the Blockchain Revolution
7
Source: Expanded from Mark Sigal, http://radar.oreilly.com/2011/10/post-pc-revolution.html
I. Transfer Information II. Transfer Value
6 7
2020s 2030s
Simple networks Smart networks
 Blockchain is fundamentally the next phase of the
Internet, not just a FinTech, could impact every industry
 Two fundamental eras of network computing

9. blockchain.
8
software.
secure cryptographic transfer.
internet.

10. killer apps.
9
secure transfer of value, of…
money & securities.
property.
contracts.
identity credentials.

11. 10
public chains. private chains.
trustless. mined.
p2p software.
trusted. not-mined.
enterprise software.

12. How does Bitcoin work?
Use eWallet app to submit transaction
11
Source: https://www.youtube.com/watch?v=t5JGQXCTe3c
Scan recipient’s address
and submit transaction
$ appears in recipient’s eWallet
Wallet has keys not money
Creates PKI Signature address pairs A new PKI signature for each transaction

13. P2P network confirms & records transaction
12
Source: https://www.youtube.com/watch?v=t5JGQXCTe3c
Transaction computationally confirmed
Ledger account balances updated
Peer nodes maintain distributed ledger
Transactions submitted to a pool and miners assemble
new batch (block) of transactions each 10 min
Each block includes a cryptographic hash of the last
block, chaining the blocks, hence “Blockchain”

14. mining.
Source: https://www.illumina.com/science/technology/next-generation-sequencing.html
13
Proof of Work: secure but expensive.

15. What is Bitcoin mining?
14
 Mining is the accounting function to record
transactions, fee-based (CAD 160,000)
 Mining ASICs “find new blocks” (proof of work)
 Network regularly issues random 32-bit nonces
(numbers) per specified cryptographic parameters
 Mining software constantly makes nonce guesses
 At the rate of 2^32 (4 billion) hashes (guesses)/second
 One machine at random guesses the 32-bit nonce
 Winning machine confirms and records the
transactions, and collects the rewards
 All nodes confirm the transactions and append the
new block to their copy of the distributed ledger
 “Wasteful” effort deters malicious players
Sample
code:
Run the software yourself:
Fast because ASICs
represent the hashing
algorithm as hardware

16. 15
$2.1 billion 2018 global spend (IDC).
($9.2 billion in 2021)
$3.86 trillion IT spend 2018 (Gartner)
(digital transformation, blockchain, IoT, ML, and AI)
57% global corporations (Juniper).
$325 billion USD asset class.
1551 cryptocurrencies.
1206 token projects.
Sources: https://www.cnbc.com/2017/07/31/blockchain-technology-considered-by-57-percent-of-big-corporations-study.html,
https://coinmarketcap.com/all/views/all/, https://www.stateofthedapps.com/,
https://www.blockchaintechnology-news.com/2018/01/26/idc-global-blockchain-hit-9-2-billion-2021/
adoption: hype vs. value-creation.

17. When to use Blockchain Technology
16
 Blockchain is enterprise
software
 Solid business use case
 How does a decentralized
solution improve over a
centralized one?
 Ideal use case:
 Many parties in the value
chain
 Intensity of information and
monetary exchange
Use Case Example:
Factom: Health insurance
claims billing
• Automated claims
billing, validation,
payment, and settlement
• Multi-party value chain:
patient, service provider,
billing agent, insurance
company, payor,
government, collections
adoption: hype vs. value-creation.

18. sample apps.
17

19. 18
financial services.
quantified risk: 2.5 yr payback (securities
clearing 3-days to d-days).

20. 19
food supply chain safety monitoring.
chain of custody.

21. 20
vaccine and cold
storage tracking.

22. 21
birth registry, QR code resumes.
MIT Digital Certificates (diplomas); Criminal Records

23. 22
vehicle information chains.

24. 23
supply chain asset tracking.
 Private views and controlled-use credentials issued to
multiple parties in the value chain using single shared
blockchain

25. 24
enterprise platform comparison.
Source: https://medium.com/@philippsandner/comparison-of-ethereum-hyperledger-fabric-and-corda-21c1bb9442f6

26. 25
blockchains in space.
Jan. 13, 2018 - NASA has awarded a grant to the University of Akron for
research into data analysis and other topics related to space exploration.
The allocation will help a team led by associate professor Jin Wei to
pioneer a resilient networking system based in part on the Ethereum
blockchain.

27. network futures.
26

28. peer-hosted.
Source: https://bitnodes.21.co
27
Bitcoin: 10,081 nodes (Jun 2018).

29. peer-hosted.
Source: https://www.ethernodes.org/network/1
28
Ethereum: 15,055 nodes.

30. store money.
29
old model.
networks.
banks.
new model.

31. change.
30
https://www.coindesk.com/jpmorgan-says-it-may-have-to-adapt-to-counter-crypto-adoption
“…financial institutions…face the risk that
payment processing and other services could
be disrupted by technologies, such as
cryptocurrencies, that require no intermediation”
Annual 10K, Mar 2018

32. power of the press.
31
old model.
networks.
newspapers.
new model.

33. power of the wallet.
32
old model.
peer networks.
banks.
new model.

34. blockchain
economics.
33

35. Blockchain Economics
 New economic model’s distinguishing aspects
1. Open platform business model
 vs. proprietary platform (GOOG, FB, NFLX)
2. Initial Coin Offerings as a novel and
official financing method for projects
3. Token-based money supply
34
Source: Swan, M. Forthcoming. Blockchain Economic Networks. Palgrave Macmillan.
Two-way network effects
(Metcalfe’s Law (n2 ))

36. 35
Mar 2018
$8.84 bn total
Source: https://www.coindesk.com/ico-tracker
ICOnomics.
Comissão de Valores Mobiliários (CVM): ICOs
regulated as securities, Howey Test (Oct 2017)

37. 36
participation.
earn money.
access resources.
vote on decisions.
tokens = “money +”.
functions of money.
store of value.
medium of exchange.
unit of account.
+

38. participation.
37
information
internet: static
information
social internet:
engage with
content
token internet:
participate in the
community economy

39. 38
internet money.
enterprise software.
economic problem-solver.
blockchain.

40. 39
economic
challenges.

41. Economic Challenges
40
Source: Swan, M. Forthcoming. Blockchain Economic Networks. Palgrave Macmillan.
Debt
Systemic Risk
Corruption
Healthcare
(Cost-Outcome)

42. 41
Source: http://www.europeanfinancialreview.com/?p=21755
debt.

43. 42
net settlement.
payment channels.
digital credit systems.
Source: http://timreview.ca/article/1109
rethink debt.

44. Payment Channels: the concept
43
 Contractually-obligated relationship
 3-step economic contract executed over time
1. Party A opens a payment channel with Party B and posts a
pre-paid escrow balance, Party B signs a full refund
2. Party A consumes against the escrow credit over the given
time period (activity is tracked)
3. At the end of the period, cumulative activity is booked in one
net transaction to close the contract
 Lightning Network - Bitcoin
 Raiden - Ethereum
Source: https://www.slideshare.net/lablogga/blockchain-economics-payment-channels

45. Unilateral Payment Channel
44
Source: Extended from https://www.investinblockchain.com/lightning-network-bitcoin-scaling
Opening Transaction:
Broadcast to Network
Interim Transactions: Signed
between Wallets (both parties
agree and are obligated; not
Broadcast to Network)
USD $50
Alice opens $50 “Monthly Payment
Channel” with Starbucks
Closing Transaction:
Broadcast to Network
Alice consumes coffee and
Starbucks adjusts the refund
balance from the initial deposit
USD $5
4/1/18
4/30/18
1
2
Close “Monthly Payment Channel”:
Starbucks broadcasts last refund
amount to network
Starbucks
Coffee
USD $50
USD $45
Starbucks acknowledges with
unbroadcast refund of $50
4/2/18
USD $5
3
4/3/18
USD $5
4
4/4/18
USD $40
USD $35
USD $35
30

46. 45
risk.

47. reduce risk.
46
blockchain-registered digital assets.
instantaneous transactability.
real-time balance sheets.
shared business processes.
single ledger.
Sources: http://www.europeanfinancialreview.com/?p=21755, http://timreview.ca/article/1109

48. Programmable Risk
Black Swan Smart Contracts
 Financial options (put/call) used to
control/manufacture exposure
 Convexity (Fig. 1): control down-side
risk, upside gain, anti-fragile (robust)
 Concavity: undesirable risk profile
 Taleb: map event probabilities as
s-curve (Fig. 2) in medicine, etc.
 Convex-linear-concave profile
 Use programmable risk dropdown
feature of smart contracts to
manage risk in more domains
47
Sources: Swan, M. Submitted. Programmable Risk: Black Swan Smart Contracts, IEEE;
Taleb, Medicine: https://arxiv.org/ftp/arxiv/papers/1208/1208.1189.pdf
Figure 1
Figure 2

49. smart contracts.
48
Launched: Nov 2017
500,000 sold, total: USD$40 million
Source: http://fortune.com/2018/02/13/cryptokitties-ethereum-ios-launch-china-ether
cryptokitties.

50. inclusion.
49
banking & credit.
land registry.
identity.
electricity.
vaccines & medicine.
Source: https://www.unicef.org.au/blog/unicef-in-action/april-2017/photos-vaccines-reach-most-remote-places-earth
Digital health wallet

51. 50
politics.

52. government as service
provider.
51
old model.
eResidency.
Exclusivity: One default
economic and political
sovereign birth regime.
new model.
Source: http://blockchainstudies.org/Blockchain_Economics_CFP.pdf
Plurality: Plug and play
economic and political
services regimes.

53. 52
net neutrality.
anti-corruption.
censorship-resistance.
self-governance.
political.

54. cryptocitizen.
53
“One ought to think autonomously,
free of the dictates of external
authority” - Immanuel Kant
“Multiple private currencies should
compete for customer business”
- Friedrich Hayek

55. future-class tech.
54
blockchain networks are a
new class of global
computational infrastructure.

56. smart networks.
55
 Future of AI: intelligence “baked in” to smart networks
 Blockchains to confirm authenticity and transfer value
 Deep Learning algorithms for predictive identification

57. deep learning
chains. 56
 Autonomous Driving & Drone
Delivery, Social Robotics
 Deep Learning (CNNs): identify
what things are
 Blockchain: secure automation
technology
 Track arbitrarily-many units,
audit, upgrade
 Legal liability, accountability,
remuneration

58. fleet management.
57
secure automated

59. data.
58
big data ≠ smart data.
clean, standardized,
interoperable.
Source: http://www.oyster-ims.com/media/resources/dealing-information-growth-dark-data-six-practical-steps
40 EB 2020e

60. scale.
59
Source: https://www.illumina.com/science/technology/next-generation-sequencing.html
Population:
7.5 bn people worldwide
big health data.

61. 60
technological unemployment.
human-machine collaboration.
automation economy.

62. risks.
tech: scalability.
political: regulation.
social: adoption.
Rapid
Adoption
Unfavorable
Regulation
Favorable
Regulation
Slow
Adoption
Future Scenarios
61

63. 62
Blockchain Opportunities for Brasil
 Productivity gains
 Capital investment in technology
 Provide data centers with
Blockchain as a Service
 Skilled work force development
 Train 1000 software developers:
Hyperledger, Ethereum, Corda
 Focus on global markets beyond
the internal economy
 Scale efficiencies
 Natural resources, regional
strength, large companies
 Low-hanging fruit: secure
information transfer
 Barriers, lack of
 Transparency
 Disclosure
 Standardized
processes
 Best practices
 Trust

64. 63
 First country with an official blockchain technology policy
Brasil leads
Proposed Policy toward Blockchain Technology
It is the policy of Brasil to lead in encouraging the
development and use of blockchain technology
(distributed ledgers) pursuant to the following objectives:
• Promote economic productivity gains,
• and skilled work force development,
• for a cohesive and inclusive society.
Ordem e Progresso

65. Disruptive Future of Blockchain
Melanie Swan
Philosophy, Purdue University
melanie@BlockchainStudies.org
Porto Alegre, Brasil, 24 May, 2018
Slides: http://slideshare.net/LaBlogga
Muita Obrigaga~!

66. Brasil Exports: R$ 669 billion
Suggests blockchain to mg global td sc
65
Source: https://atlas.media.mit.edu/en/profile/country/bra/
Destinations

67. Brasil Imports: R$ 500 billion
66
Source: https://atlas.media.mit.edu/en/profile/country/bra/
Origins