This slide was prepared by Praseed Pai for his session at FAYA:80 (Read as FAYA Port 80) on topic "Mining Opportunities of Block Chain and BitCoin"

1. “Mining” the opportunities of Block Chain & Bit Coin
By
Praseed Pai K.T.

2. Functions of Money
- Medium of Xchng (purchase Goods/Services)
- Unit of Accounts (Goods and Services are
quoted in terms of money value)
- Store of Value (Can be used to transfer
purchasing power to a future date)

3. A Lookback at Modern FIAT Currencies
- Money printed based on Govt. Decree (FIAT)
- All Currencies are Inflationary (Value depletion)
- Most often Value is arbitrary
- decided by currency supply/demand
- market sentiment
- Hedging ( China and India in $ )

4. What is Bit-Coin?
- A Crypto Currency
- A Technology ( an Open distributed Ledger)
- A Political Tool

5. What is Block Chain?
- The Technology behind Bit-Coin
- A Tamper proof Decentralized Open Ledger
- A Protocol which ensures Transaction
- Confidentiality,Integrity,Availability
- Has a Network Consensus Algorithm in it
- Every node stores all transactions since the
Genesis Block
- A Triple Entry Accounting System

6. Block Chain 1.0
- The Bit-Coin Crypto Currency
- Alt-Coins
- Market Caps (https://coinmarketcap.com/)

7. Block Chain 2.0 (Not Only Currency)
- Smart Contracts
- Decentralized Autonomous Apps (Dapps)
- Decentralized Autonomous Organizations (DAO)
- Decentralized Autonomous Corporations (DAC)
- Decentralized Autonomous Societies (DAS)
- Ethereum Turing Complete Smart Contract
Platform

8. BlockChain Platforms URL Uses
Ethereum http://ethereum.org/ Smart Contracts
Ripple https://ripple.com/ Remittance Network
MasterCoin http://www.mastercoin.org/ Financial Derivatives
NXT http://www.nxtcommunity.org
/
Alt-Coin (Proof of Stake)
Bit Shares http://bitshares.org/ Crpypto-Equity Share Exchange
Block Chain Platforms

9. DAPPS URL Centralized Equivalent
Lazooz http://lazooz.org/ Uber
OpenBazar https://openbazaar.org/ Craigslist
StorJ http://storj.io/ DropBox (File Storage)
Twister http://twister.net.co/ Twitter (Peer to Peer
Microblogging)
Some DApps

10. Block Chain 3.0 (Beyond Smart Contracts)
- An Effective way to organize Activities
- Censorship-Resistant Organizational Models
- Example of a Distributed DNS ( NameCoin)
- Alexandria (Combining Tweet/BC)
- Ostel (Encrypted VOIP/survilence proof)
- Digital Identity ( OneName, BitID)
- Virtual notary (http://virtual-notary.org/)
- Digital Rights Management (DRM)
- Decentralized Govt. Services

11. Currency,Private equities,Public equities,
Bonds,Derivatives (futures, forwards, swaps,
options, and more complex variations),Voting rights associated with any of the
preceding,Commodities,Spending records,Trading records,Mortgage/loan
records,Servicing records,Crowdfunding,Microfinance
Microcharity
Legra Capital – Finance Record Keeping using Block
Chain

12. Land titles,Vehicle registries,Business license,Business incorporation/dissolution
records,Business ownership records,Regulatory records,Criminal
records,Passports,Birth certificates,Death certificates,Voter IDs,Voting,Health/safety
inspections,Building permits,Gun permits,Forensic evidence,Court records,Voting
records,Nonprofit records,Government/nonprofit accounting/transparency
Legra Capital – Public Records

13. Contracts,Signatures,Wills,Trusts,Escrows,GPS trails (personal)
Degree,Certifications,Learning outcomes,Grades,HR records
(salary, performance reviews, accomplishment),Medical records,
Accounting records,Business transaction records,Genome data,
GPS trails (institutional),Delivery records, Arbitration
Legra Capital – Private Records/Semi Private Records

14. Home/apartment keys,Vacation home/timeshare keys,Hotel room keys
Car keys,Rental car keys,Leased cars keys,Locker keys,Safety deposit box keys,
Package delivery (split key between delivery firm and receiver),Betting records,
Fantasy sports records,Intangibles,Coupons,Vouchers,Reservations (restaurants,
hotels, queues, etc.),Movie tickets,Patents,Copyrights,Trademarks,Software
licenses,Videogame licenses,Music/movie/book licenses (DRM),Domain
names,Online identities,Proof of authorship/proof of prior art
Legra Capital – Physical Asset Keys

15. Documentary records (photos, audio, video),Data records (sports scores,
temperature, etc.),Sim cards,GPS network identity,Gun unlock codes,Weapons
unlock codes,Nuclear launch codes,Spam control (micropayments for posting)
Legra Capital – Others

16. BlockChain Revolution – An important book
http://blockchain-revolution.com/

17. BitCoin/BlockChain Internals
“There are no bitcoins, only records of bitcoin
transactions in a Block Chain (Transaction based
accounting). Another funny fact is that, there is no
Encryption. A distributed Ledger which can get open as
it can ” – something worth remembering!

18. Privacy Model of the BitCoin/BlockChain

19. God’s Protocol (Network as GOD)

20. Part 1 - Cryptography

21. Cryptographic Internals
Hash Algorithms => A = RIPEMD160(SHA256(K))
Digital Signature – EC DSA
Encryption – None

22. • BitCoin uses Hash functions for
• Identifiers
• Addresses
• Transaction signatures
• Checksums and other validations
• hash256(d) = SHA256(SHA256(d))
• hash160(d) = RIPEMD160(SHA256(d))
• block_id = hash256(block.header)
• transaction_id = hash256(transaction)
• Address => hash160(pk)

23. Hashing (SHA256) demo using OpenSSL
• Create a Text file (temp.txt) using “Hello World..” as the content
• Generate the SHA256 of the temp.txt using OpenSSL
• openssl –dgst sha256 temp.txt
• Output
SHA256(temp.txt)=
bbf242f2054d9c01a623b6d340378f83c2e1e3baa055c04ef31f045f24a11b7c
• Generate SHA256 by changing contents of the temp.txt into
“Hello World…”
• openssl –dgst sha256 temp.txt
• Output
SHA256(temp.txt)=
77e612c2fd40015a1945fc2b20d6ac6febcf57d6cbd8ec8026df317e03a346

24. Hashing (SHA256) demo using Python
• C:OpenSSL>python
• Python 2.7.11
• >>> import hashlib
• >>> print hashlib.sha256("Hello World").hexdigest()
• a591a6d40bf420404a011733cfb7b190d62c65bf0bcda32b57b277d9ad9f14
6e
• >>> print hashlib.sha256("Hello World").hexdigest()
• 60ab9317806dc4d589535de03f782620ae35c7c641c43e99e8823acf10cf11
b3

25. • BitCoin uses Elliptic Curve Cryptography for
• Keypair generation (private key + public key)
• Digital Signing
• Digital Signature verification
SIGN
• digest = H(message)
• signature = ec_sign(EllipticCurve, digest, private_key)
VERIFY
• digest = H(message)
• is_auth = ec_verify(EllipticCurve, digest, signature, public_key)
• EllipticCurve => secp256k1 (OpenSSL)

26. • Some facts about Elliptic Curve Cryptography for BitCoin
• Private keys => 32 bytes long.
• Public keys =>64 bytes (uncompressed form) or 32 bytes (compressed form) long plus a 1-byte prefix.
• The elliptic curve C is the secp256k1 curve.
• EC crypto is based on modular arithmetic
• Generate a ECC Private Key (Output in Base64 format)
openssl ecparam -name secp256k1 -genkey -out ec-priv.pem
• Output in Human Readable format
openssl ec -in ec-priv.pem -text –noout
• Output the public key to a file ( ec-pub.pem)
openssl ec -in ec-priv.pem -pubout -out ec-pub.pem
• Output the file in human readable format
openssl ec -in ec-pub.pem -pubin -text –noout
• Output in the Compressed format
openssl ec -in ec-pub.pem -pubin -text -noout -conv_form compressed

27. EC DSA using OpenSSL
• Take a file and digitally sign its SHA256 digest using EC
• openssl dgst -sha256 -sign ec-priv.pem ex-message.txt >ex-signature.der
• Hex Encoded Signature
• openssl dgst -sha256 -hex -sign ec-priv.pem ex-message.txt
• Verify the Signature
• openssl dgst -sha256 -verify ec-pub.pem -signature ex-signature.der ex-
message.txt

28. Part 2 – Transactions, Block and BlockChain

29. Account vs Transaction based Ledger

30. The BitCoin Transaction

31. The BitCoin Transaction (Output) Script

32. Block Data Structure (Merkle Tree)

33. Easy Membership detection for transactions on a
Merkle Tree. A Sorted Merkle tree can be used for
non membership query as well

34. The Block Chain schema

35. Block Chain – The Big Picture

36. BitCoin Ledger update Algorithm

37. Part 3 – Network, Proof of Work, Mining

38. Hashing and Proof of work
• The Hash value generated is a random one
• hash256(BlockHeader + Nonce) < target (This is infamous Puzzle)
• Target is based on the current difficulty level
• Target is reduced to make it hard to find out the right Nonce (More
computing power)
• Arrived based on the computation happened in the last 2016
• next_difficulty = (previous_difficulty * 2016 * 10 minutes) / (time to
mine last 2016 blocks)

39. The Bitcoin Full Node

43. Mining Evolution

44. Part 4 – Forking,Consensus

45. Block Chain Forking and Resolution

46. Thank You