The document discusses blockchain technology and its potential to replace traditional infrastructure with a shared data model, emphasizing that blockchains are essentially distributed databases that enable smart contracts for various business processes. It addresses common misconceptions around mining and decentralization, and it outlines how organizations can leverage blockchains without the need for cryptocurrencies. The focus is on the practicality and commercial viability of blockchains in facilitating process automation and data management rather than just financial applications.

1. Private and confidential. Images and text (where applicable) copyright Eris Industries Limited, 2015.
What’s wrong with crypto
IT’S JUST SOFTWARE.
Idealism, pragmatism, and “blockchain 2.0”

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Before we begin

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Most people look at blockchains like this

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We look at blockchains like this

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Our theory: mathematical infrastructure will
replace physical infrastructure
Current platform architecture requires that each market participant
runs all of their own standalone human and machine infrastructure.
This is a nightmare, and extremely expensive, to scale.
BUT
What if we could run shared data infrastructure without the multiple-
redundant, hierarchical, centralised points of failure?

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Our theory: blockchains
Blockchains are distributed databases that house protocols for
distributed data management
Blockchains allow for high verifiability, systemic resiliency, ease of use,
and low operating costs out of the box

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Our theory: smart contracts
Smart contracts are complex coded instructions which almost any
blockchain is able to run and execute
Blockchains aren’t magical internet money machines -
they’re just software and will do exactly what we tell them to do
What Bitcoin does for clearing and settlement, smart contracts can do
for virtually any other business process

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Addressing some common misconceptions
“Mining”
“Decentralisation”
“Network effects”

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MINING
Is not required to validate transactions
Is not (always) required to secure the chain
(depends on chaintype in question & system
design)
- - -
Is one of many possible security strategies
Is designed to incentivise nodes to propose
valid blocks when no-one is in charge

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DECENTRALISATION
Reverses cause and effect
Does not work within existing legal paradigms
Causes more commercial problems than it solves

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NETWORK EFFECT
I’ll get to that in a bit.

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What we do
Eris makes smart contracts easy to use.
You can use a blockchain and explore smart contracts’ potential in your
organisation
Without needing to use a cryptocurrency
Without paying anything to anyone
Without being restricted to any one innovation

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DEFINITIONS:
WHAT IS A BLOCKCHAIN?

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How the internet currently works

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On somebody else’s (central) server

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Blockchains: no servers, simple hardware

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REDEFINING THE BLOCKCHAIN:
JUST ANOTHER DISTRIBUTED DATABASE
1) distributed rulebooks
2) that track changes made to them
3) where write permissions are
controlled by public-private key
cryptography
and
4) as a result, we can be fairly certain
that something which is on a
blockchain belongs there.
(Sort of like French law
actually)

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Blockchains give us verifiable data.
1) Signature rules - tell ‘em what you’re gonna say
Let’s agree on our ability to write to the data set.
2) Network rules - say it
Let’s agree how we communicate with each other.
3) History rules - tell ‘em what you said
Let’s agree on what the world-state of our data is and was, with
the ability to easily check whether tampering has occurred.

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RULE 1: TELL ‘EM WHAT YOU’RE GONNA SAY
Effectively: users’ rules of the game;
pre-defined access permissions
Who can broadcast transactions?
What actions can a user perform?
How do they go about “spending” it?
Can I reference data “offchain?”

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RULE 2: SAY IT
Open standard for common
communication to achieve a common
goal
What can we say?
What do words mean?
Who do we listen to?

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RULE 3: TELL ‘EM WHAT YOU SAID
Also known as the “consensus
protocol”
Agreeing the truth
What has been said?
Who has said it?
Is the record correct?
“The dragon that eats its own tail:”
what has happened (past) determines
what can happen (now and future)

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PUT IT ALL TOGETHER
="
Mais,!c’est!en!français…"

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TRANSLATE IT INTO ENGLISH

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Hey, presto.
That’s a blockchain application.

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What Bitcoin demonstrated about the
blockchain (as compared to other distributed
database types)
Security
Verifiability
Resiliency
SIMPLICITY & EASE OF USE

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Permissioning simply makes these qualities
commercially viable.
Accountability.
Controllability.
Repeatability.
Reversibility.

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Permissioning means that blockchain solutions can be
engineered…
to do exactly what you want them to do

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DEFINITIONS:
WHAT IS A SMART CONTRACT?

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Nick Szabo, 1994
Quote courtesy of Tim Swanson’s presentation entitled “Defining Smart Contracts.”

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Richard Gendal Brown, 2015
Quote courtesy of Tim Swanson’s presentation entitled “Defining Smart Contracts.”

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Casey Kuhlman, 2015
“A smart contract is a script which allows for the
cryptographically verifiable execution of code over
cryptographically verifiable data.”

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Why this definition makes sense
Blockchains aren’t ledgers, they’re data stores
Blockchains = verifiable data (state)
Smart contracts = verifiable execution of code (write)
HP: “The contract is the transaction”
“The marmot is the contract”

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What do all these definitions have in common?
Characteristics:
Scripts with state
Almost any blockchain capable of running them
Benefits:
Can describe more complex data driven-processes
Signature schemes apply to arbitrary data
Limitations:
Do not “self-enforce” (or “self-execute”)
Work best when value is extrinsic to the data structure

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HOW DO I USE SMART CONTRACTS?

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Example: distributed Reddit (June 2014)

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Example: People’s Republic of DOUG (June 2014)

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Example: distributed YouTube (March 2015)

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Examples: live pilots with MFIs
Watch this space.

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WHO’S INTERESTED?

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Basically everyone

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Integrators, developers, consultants, think tanks
With the exception of marmcorp.com, no actual marmots are building with the Eris platform presently.

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Other startups using similar technology

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NETWORK EFFECT
(I was saving this for later, remember?)
Market ≠ Network
Like running the Facebook playbook for Enterprise
Linux.

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HOW SHOULD WE CHANGE OUR THINKING?

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To begin with
Blockchains are not a scarce resource

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Consequences
Dramatic expansion in feasible, application-specific
blockchain use-cases
Shift of emphasis away from money, payments and
“assets”, and towards process automation and data
management

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Cryptocurrency is only one application of blockchain technology.
CRYPTOCURRENCY RULE 1
Open to all
Evades government controls
CRYPTOCURRENCY RULE 2
Distributed architecture = resilient to interference/
destruction
CRYPTOCURRENCY RULE 3
Relies on competitive “mining” and awards “Bitcoins” etc
Process is automatic, no central third party required
Fraud difficult (but not impossible)

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Getting away from the protocol and into the
application: a how-to guide.
MyChain Rule 1:
Must be controllable in every respect
All write permissions must be accessible through P/P key crypto
In 99.99% of cases in finance, cannot be open/fully public
Can talk to my other databases
MyChain Rule 2:
Cryptocurrency got this mostly right
MyChain Rule 3:
Change any aspect of the system on command
Commercial standards of data security/certainty needed

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HOW TO AVOID “PUT IT ON A BLOCKCHAIN”
SYNDROME

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STEP 1:
DEFINE THE PROBLEM
Does a blockchain solve a problem I
have?
YES:
Coordinating actions of independent actors
Simplifying multiple processes into single process
Timely verification is paramount (e.g. settlement)
Reducing supervision and oversight cost
Need to scale without (much) hardware

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DOES THIS SOLVE A PROBLEM I HAVE?
NO:
Requires speed (blockchains are comparatively slow)
Requires heavy computation (blockchains are passive)
Is fully automatic anyway (order of magnitude improvement
harder to achieve; though blockchains could still be useful qua
secure open standard)

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STEP 2:
DESIGN YOUR APPLICATION
Source: “Solidity, Part 1: an Introduction to Smart Systems of Smart Contracts.” https://eng.erisindustries.com/tutorials/2015/03/11/solidity-1/

53. STEP 3:
BUILD

54. STEP 4:
ITERATE
Because the circumstances change
Because business changes
Because you’ll screw up
Because you’ll improve

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TO RECAP:
Public blockchains = neat
Permissioned blockchains = neat for commerce
Smart contracts FTW in either case
Eris helps you manage your smart contract
applications, no matter the chain

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THE UPSHOT:
If you can write it in code,
you can run it on a blockchain.

57. Happy to
answer
questions!