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Intro to Blockchain - And, by the way, what the heck is proof-of-work?
- 1. Intro to Blockchain And,by the way, what the heck is proof-of-work? By Jim Flynn
- 3. About Jim Flynn ● Startedbuilt & sold tech companies ● Jobs: – Software engineer – Hardware engineer – Sales executive, CEO, etc. ● More at jamespflynn.com ● www.linkedin.com/in/jamespeterf
- 4. Agenda Blockchain Overview1 Blockchain/bitcoinOverview1 Blockchain Overview1 Understanding Proof of Work2 Blockchain Overview1 Proof of Work Demo3
- 5. In the beginning... ..orrather 2008
- 6. Bitcoin’s Techno-Libertarian Roots ● Skepticalof authority ● Dislike centralized power ● Protective of privacy ● Alarmed about surveillance ● Oh yeah, hates taxes
- 7. Enter Satoshi Nakamoto J ? “Apurely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
- 8. Satoshi’s Crypto-Currency Commandments ThouShalt NOT: Thou Shalt: 1. worship centralized authorities 2. covet they neighbor’s bitcoin (except with the right private key) 3. alter completed transaction 4. inflate 5. double spend 1. govern thyselves by cons 2. rely’th on incentives 3. have faith in cryptograph for the geeks shall inherit th earth
- 9. Blockchain Defined ● Distributed database ● Goodfor time-ordered data ● Not owned or controlled by one entity (bitcoin’s case) ● Each block connected to previous block ● Anyone can validate the ledger, which contains a record of every transaction.
- 10. Traditional Way Our Business Our DB We didpay! Your Business Your DB They didn’t pay! Bank Bank DB Did they pay?
- 11. Blockchain Way Our Business TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block N Blockchain -Distributed Ledger Transaction Block shows if they paid. Your Business
- 12.
- 13. Blockchain = SharedDistributed Truth My database says X. My database says Y.
- 14. Blockchain = SharedDistributed Truth My database says X. My database says Y. The blockchain says Z.
- 15. What does “hash”mean to you? ● Creates a “fingerprint” of data – Ex: Hash(“123”) = c74b6bd9a2f7648a ● SHA256 (used in bitcoin) – Easily-verified from data – Cannot recreate the data
- 16. Hashes Ensure BlockchainIntegrity TX Block 0 hash TX Block 1 hash TX Block 2 hash ... TX Block N hash 2009 2017 hash hash hash
- 17. Hashes Ensure BlockchainIntegrity TX Block 0 hash TX Block 1 hash TX Block 2 hash ... TX Block N hash 2009 2017 hash hash hash
- 18. Hashes Ensure BlockchainIntegrity TX Block 0 hash TX Block 1 hash TX Block 2 hash ... TX Block N hash 2009 2017 hash hash hash
- 19. Bitcoin Identity ● You getpaid to your public key – 02a1633cafcc01ebfb6d78e39f687a1f0995c62fc95f51ead10a02ee0be551b5dc ● You pay with your private key ● No issuing authority
- 20. Is Bitcoin Anonymous? DreadPirate Roberts NobDeath from Above French Maid Flush Number13
- 21. Is Bitcoin Anonymous? DreadPirate Roberts NobDeath from Above French Maid Flush Number13
- 22. Adding Blocks inBitcoin ● Uses “proof-of-work” ● “Miners” compete to add blocks – More hash power = higher probability to win – Reward: 12.5 bitcoins and transaction fees – Puzzle solved (new block) about every 10 minutes – Puzzle difficulty adjusted ever two weeks ● Nodes recognize the longest valid chain
- 23. Mining TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 Miner 1 Miner2 Prop. TX Block 7 Prop. TX Block 7 1. Miners race to solve puzzle. 2. Whoever wins, gets to set the next block & gets a reward. TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6
- 24. Mining TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 Miner 1 Miner2 Prop. TX Block 7 Prop. TX Block 7 TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6
- 25. Mining TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 Miner 1 Miner2 Prop. TX Block 7 TX Block 7 TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 TX Block 0 TX Block 1 TX Block 2 TX Block 3 TX Block 5 TX Block 6 TX Block 7 TX Block 7
- 26. ASIC Application Specific IntegratedCircuit Mining Pools Bitcoin Mining Now
- 27. “On a high-enddesktop...it would take you several hundred thousand years on average at the early-2015 difficulty level (267 ) to find a valid block.” Don’t try this at home. Bitcoin and Cryptocurrency Technologies Princeton University Press, 2016 Page 112
- 28. What the fork? ● Forkshappen when nodes disagree about the longest valid chain. ● Forks can cause havoc. ● Built-in incentives to discourage forks.
- 29. Scripting ● Very basic inbitcoin ● Far more advanced in Ethereum
- 30. Simplified Smart ContractExample parentState = SSA.lookupState(‘055051805’) kidMaried = MA.lookupMarriageLic(‘055051805’) publicKey = ‘02a1633cafcc01ebfb6d78e39f6’ If parentState = “Dead” then If kidMarried = “True” then Pay(kid.publicKey) Marriage Licenses Death Records
- 31. Beyond Cryptocurrency ● Supply chains ● Decentralizedorganizations ● Tracking physical assets ● eVoting ● Sharing economy – IoT & micropayments
- 32. Crypto-coins Galore Bitcoin EtherLitecoin Dogecoin Dash NEMPeercoin Primecoin Gridcoin MoneroRipple
- 33. Ready to divein? Proof of Work (POW) ● Look at some code ● Run some tests
- 34. POW = Solvea Puzzle Find a number that, when combined with the transaction data, hashes to a value that’s less than a given tolerance.
- 35. 1 10 trillion Probabilitythat a hash will be any one number on continuum that is within the tolerance is 50% of 1/10 trillion. 50% change of winning in one try. Tolerance = 5T Losing hashes Winning hashes Half the Time You’re a Winner! Range of possible hash values
- 36. 10% change ofwinning in one try. 10% of the Time You’re a Winner. 1 10 trillion Losing hashes Winning hashes Range of possible hash values Tolerance = 1T
- 37. for ( $nonce= 1; $nonce <= $maxTries; $nonce++ ) { $hash = hash('sha256', $transaction . $nonce); $start = substr($hash, 0, $zeros); if ( $start === $lead ) { echo "<br/>Success! Puzzle solved with nonce = $nonce $end"; echo "Try #" . number_format($nonce) . ": Hash("$transaction.09$nonce")=$hash $end"; break; } elseif ($details == "yes") echo "Try #" . number_format($nonce) . ": Hash("$transaction.$nonce")=$hash $end"; } Solving the Puzzle in Php Code
- 38. Loop through noncevalues from 1 to the max times you want to try End Loop Solving the Puzzle in Pseudo Code Compute hash of transaction text concatenated with the nonce If the hash starts with the minimum number of zeros then Display a success message Stop
- 39.
- 44. POW Alternative: Proofof Stake ● Does not waste as much electricity ● Vulnerable to a “rewriting history” attack ● e.g., Peercoin
- 45. POW Alternative: Proofof Burn ● Prove the you made coins unspendable ● Sometimes used to transfer to new currency
- 46.
- 47. Thanks! Don’t forget tocheck my blog for code and this presentation. http://jamespflynn.com