Ask the Expert Ep.8: Blockchain 101
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The document highlights the expertise and contributions of David Morris and Peter Partyka in cybersecurity and blockchain, detailing their professional roles and achievements. It covers the concepts of blockchain as a decentralized ledger technology and its implications for various industries, including finance, governance, and supply chain. Ultimately, it emphasizes the transformative potential of blockchain technology and the necessity for strategic planning to leverage its benefits.
Ask the Expert Ep.8: Blockchain 101
- 2. DAVID MORRIS EARLY PIONEER IN THE CYBERSECURITY MARKET. EXPERTISE IN LARGE ENTERPRISE SECURITY SYSTEMS WITH A DEEP SECURITY SKILL SET THAT INCLUDES: CYBER THREAT INTELLIGENCE, ENCRYPTION/CRYPTOGRAPHY, PENETRATION TESTING, VULNERABILITY ASSESSMENTS, MULTI- FACTOR AUTHENTICATION, THIRD PARTY VENDOR RISK MANAGEMENT MALWARE DETECTION AND REMEDIATION, RANSOMWARE, OWASP, PCI, AND HIPPA. TRAINED BODY LANGUAGE READER PROFILED IN “THE HUMAN SIDE OF HIGH-TECH” 2
- 3. CONFIDENTIAL ๏ Director of Information Security at Flashpoint ๏ Adjunct Professor NYU: Advanced Hacking, Defending Cyber Assets ๏ Experienced in penetration testing, red teaming, and exploit development ๏ 7+ Years in Fintech and Private Finance ๏ Blockchain enthusiast and #forevern00b 3 BLOCKCHAIN AND BITCOIN whoami? PETER PARTYKA
- 4. Ulf Mattsson, Head of Innovation at TokenEx Inventor of more than 50 Issued US Patents 30+ Years of experience as CTO of Cybersecurity at IBM, Protegrity and other companies Industry Involvement: • PCI DDS - PCI Security Standards Council Encryption & Tokenization Task Forces, Cloud & Virtualization SIGs • IFIP - International Federation for Information Processing • CSA - Cloud Security Alliance • ANSI - American National Standards Institute ANSI X9 Tokenization Work Group • NIST - National Institute of Standards and Technology NIST Big Data Working Group • User Groups Security: ISACA & ISSA, Databases: IBM & Oracle ulf.mattsson@atlanticbt.com 4
- 5. BLOCKCHAIN AND BITCOIN PETER PARTYKA DIRECTOR OF INFORMATION SECURITY
- 6. ๏ Director of Information Security at Flashpoint ๏ Adjunct Professor NYU: Advanced Hacking, Defending Cyber Assets ๏ Experienced in penetration testing, red teaming, and exploit development ๏ 7+ Years in Fintech and Private Finance ๏ Blockchain enthusiast and #forevern00b 6 BLOCKCHAIN AND BITCOIN whoami? PETER PARTYKA
- 7. ๏ Ownership and value ๏ Weaknesses central authorities ๏ Historical reference ๏ Blockchain technical details ๏ Consensus and fault tolerance 7 https://goo.gl/M8QDpA BLOCKCHAIN AND BITCOIN What are we talking about? OVERVIEW
- 8. ๏ A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved ๏ If you are willing to sell me something for a price, and I am willing to buy it for a price, we agree on the value of the thing for that price ๏ No Humans = No Value 8 BLOCKCHAIN AND BITCOIN Store of Value NOTES ON VALUE
- 9. ๏ If I, an individual, give you, an individual, an item we agree that I have given you ownership of that item. Is possession of an item, sufficient to demonstrate ownership? ๏ What about bigger items: Car (Title), House (Deed)? ๏ Where does the ownership record of these items get agreed upon? Ledgers A book or other collection of financial accounts of a particular type 9 BLOCKCHAIN AND BITCOIN Ownership HOW DO WE AGREE ON OWNERSHIP?
- 10. ๏ M3 Broad Money (M0 + M1 + M2) ~$75T ๏ M2 Money & Close Substitutes ~$60T ๏ M1 Money ~$11T ๏ M0 Currency in Circulation ~$4T 10 https://goo.gl/Krmufg BLOCKCHAIN AND BITCOIN An Example: The United States of America UNITED STATES TOTAL MONEY SUPPLY, IS ROUGHLY $75 TRILLION
- 11. ๏ 94% ($70.5T) is on Ledgers ๏ 6% ($4.5T) is in Currency 11 BLOCKCHAIN AND BITCOIN Ledgers vs Currency WHERE IS THE MONEY SUPPLY FOR THE UNITED STATES
- 12. ๏ Money ๏ Identity ๏ Voting ๏ Education and Certification ๏ Land and Buildings ๏ Intellectual Property Who stores these valuable ledgers? Why do we trust them? 12 BLOCKCHAIN AND BITCOIN What else is on Ledgers?
- 13. ๏ About 1500 years ago, the people of the island of Yap - now part of Micronesia - starting mining rocks from a nearby island, shaping them into discs and bringing them home to use as a kind of money. The stones were nearly 4 meters in diameter and weighed up to 4 metric tons ๏ These weren't coins you could carry around with you. They were stored where they were left on the island and every adult Yapese would remember which stones belonged to whom ๏ Instead of physically moving the stones, any agreed transfer would be announced to the rest of the community so that everybody knew the current state of ownership 13 BLOCKCHAIN AND BITCOIN Historical References? YAP
- 14. ๏ In October of 2008 Nakamoto published a paper describing the bitcoin digital currency (nine pages) ๏ The paper describes what would later be called a Blockchain (distributed timestamp server), which is essentially a distributed peer-to-peer ledger ๏ The Proof-of-Work Concept ๏ Network ๏ Consensus 14 BLOCKCHAIN AND BITCOIN Enter Bitcoin and Blockchain SATOSHI NAKAMOTO
- 15. ๏ Centralized Networks ๏ One authority ๏ Easy to maintain ๏ Can be unstable, slow ๏ Decentralized ๏ Several authorities ๏ Greater stability ๏ Quick evolution ๏ Medium scalability ๏ Distributed ๏ No central authorities ๏ Quick evolution ๏ Infinite scalability ๏ Difficult to maintain 15 BLOCKCHAIN AND BITCOIN Network Types DISTRIBUTED LEDGER? https://goo.gl/PHFmo8
- 16. ๏ A challenge string is issued (C) ๏ In order to add blocks onto the blockchain, a prover of the work has to come up with a “proof” (P) string such that when these two values are concatenated and hashed they meet a a certain pre-defined criteria. Criteria example: first N bits are zeros ๏ C + P -> SHA256 = 0000… ๏ This implicitly means that coming up with the “P” value is computationally intense ๏ Additionally this also means that verification of the work is simple (combining strings and applying the SHA256 hashing function) ๏ Once a node in the network has discovered the proof that node’s block, like a Yap coin, is propagated to other nodes on the network 16 BLOCKCHAIN AND BITCOIN Proof of Work
- 17. ๏ A block in a blockchain is a timestamped and ordered record of transactions • If a blockchain is a ledger, a block is a page in that ledger • A transaction is one line in the ledger, with an optional “memo” field (OP_Return, bitcoin) ๏ This block is hashed (SHA256) and that hash is inserted into the next block, cryptographically verifying the chain of all previous blocks 17 BLOCKCHAIN AND BITCOIN Distributed Ledger BLOCKS
- 18. 18 BLOCKCHAIN AND BITCOIN Merkle Tree!
- 19. ๏ One can put conflicting transactions on the network ๏ One of the transactions “wins” when it gets written to 51% or more of the nodes on the network ๏ Any blocks containing the “losing” transactions are discarded as “orphaned” or “stale” blocks 19 BLOCKCHAIN AND BITCOIN Consensus PREVENTING DOUBLE SPEND (51%)
- 20. ๏ Bitcoins are created whenever a new block is written onto the blockchain ๏ A block is a timestamped collection of transactions cryptographically linked to the block before it ๏ The blockchain is a sequence of blocks in chronological order that contains every transaction since the genesis block ๏ Miners are nodes on the network that receive and validate transactions, then bundle them into blocks ready to be added to the blockchain ๏ Proof of work is a computationally-intense problem that must be solved to add a block to the blockchain ๏ Consensus is reached by simple majority; whichever version of the blockchain has the most copies on the network is the "real" blockchain 20 BLOCKCHAIN AND BITCOIN Putting it all together! BITCOIN AND THE BLOCKCHAIN
- 21. Blockchain will impact all industries Technology strategic planners seeking to grow business in the blockchain market must understand the implications in each industry and craft a strategy that befits the impact. Source: Mar 2018, Gartner 17
- 22. Why Blockchain Is a Top 10 Trend Blockchain has huge potential. It could: 1. Disintermediate financial institutions in the exchange of value 2. Negate the role of government as official registrar 3. Automate supply chain processes 4. Disintermediate platform businesses 5. Transform industry operating models 22 Source: Mar 2018, Gartner
- 23. Industry Maturity on Gartner's Blockchain Hype Cycle Source: Mar 2018, Gartner 20
- 24. Interest in Blockchain by Vertical Source: Mar 2018, Gartner 21
- 25. Blockchain Use Cases • Energy: Energy Blockchain Labs, Grid Singularity, TransActive Grid by LO3 Energy • Enterprise-grade solutions and development platforms (infrastructure): XNotes Alliance, Tymlez, Symbiont, Sofocle,Pragmatic Coders, OTCXN, Openchain, Nuco, Monax, Libra Enterprise, Interbit, Credits, • Esports: FirstBlood • E-voting: Follow My Vote, Estonia’s e-Residency platform • Gaming and gambling: Etheria, First Blood, Etheramid, FreeMyVunk, CoinPalace, Etheroll, Rollin, Ethereum Jackpot • Government and organizational governance: BITNATION, Advocate, Borderless, Otonomos, BoardRoom, Colony • Internet of Things (IoT): Databroker DAO, Chronicled, Filament, Chimera, Filament, Stock.it • Job market: Verbatm, Appii, Satoshi Talent, Coinality Source: MEDICI 22
- 26. Blockchain Initiatives Grouped by Type 26 Source: Mar 2018, Gartner
- 27. Source: IBM 27
- 28. Blockchain Platform Architecture (Bitcoin Example) 28 Source: Mar 2018, Gartner
- 29. Thank you for attending David Morris david.morris@morriscybersecurity.com 29
Editor's Notes
- #5: Worked mostly in research and sw development I’ll discuss a variety of research reports. Not headlines from media about the latest breach
- #22: Blockchain will impact all industries, and its effect will be felt most in industry-specific processes. Technology strategic planners seeking to grow business in the blockchain market must understand the implications in each industry and craft a strategy that befits the impact.
- #23: Why Blockchain Is a Top 10 Trend Blockchain has huge potential. It could: ■ Disintermediate financial institutions in the exchange of value ■ Negate the role of government as official registrar ■ Automate supply chain processes ■ Disintermediate platform businesses ■ Transform industry operating models Most of the potential business use cases of blockchain are yet to be proven; however, interest in using the technology is growing. The Gartner 2018 CIO Survey indicates that 8% of respondents are in short-term planning or experimenting with blockchain initiatives, and another 14% are in midterm or long-term planning. Only 1% of CIOs indicate that they have already deployed the technology.3 Financial services was the first mover in evaluating blockchain, but government and supply chain have now gained equivalent momentum. Blockchain will affect all industries because all industries require trust for transactions. A blockchain is a type of distributed ledger. A distributed ledger is an expanding chronologically ordered list of cryptographically signed, irrevocable transactional records shared by all participants in a network. Each record contains a time stamp and reference links to the previous transactions. With this information, anyone with access rights can trace a transactional event, at any point in its history, belonging to any participant (see Figure 1).
- #24: For technology strategic planners seeking to exploit vertical industry market dynamics in the blockchain market: ■ Prioritize industries for deeper investment based on your strategic focus, industry needs and adoption readiness for blockchain. ■ Cover high-interest areas, such as financial services, supply chain and government, but look for outlier opportunities because blockchain impacts all industries. For technology strategic planners seeking to exploit vertical industry market dynamics in the blockchain market: ■ Prioritize industries for deeper investment based on your strategic focus, industry needs and adoption readiness for blockchain. ■ Cover high-interest areas, such as financial services, supply chain and government, but look for outlier opportunities because blockchain impacts all industries.
- #25: For technology strategic planners seeking to exploit vertical industry market dynamics in the blockchain market: ■ Prioritize industries for deeper investment based on your strategic focus, industry needs and adoption readiness for blockchain. ■ Cover high-interest areas, such as financial services, supply chain and government, but look for outlier opportunities because blockchain impacts all industries. For technology strategic planners seeking to exploit vertical industry market dynamics in the blockchain market: ■ Prioritize industries for deeper investment based on your strategic focus, industry needs and adoption readiness for blockchain. ■ Cover high-interest areas, such as financial services, supply chain and government, but look for outlier opportunities because blockchain impacts all industries.
- #26: Authorship and ownership: Bitproof, Blockai, Stampery, Verisart, Monegraph, OriginalMy, Crypto-Copyright, Proof of Existence, Ascribe, Po.et Birth and death certificates: Khanections, LLC Blockchain-as-a-Service (BaaS): Ethereum Blockchain as a Service by Microsoft Azure, Rubix by Deloitte, IBM Blockchain on Bluemix Compliance and security: Chainalysis, Third Key Solutions, Tradle, Vogogo, Elliptic, Coinalytics, Sig3, BlockSee,CryptoCorp, Blockverify Content management/distribution: Brave, Bittunes, PeerTracks, JAAK, Paperchain Data management: Factom Data integrity and security: PeerNova, Guardtime Decentralized social network: Datt, DECENT, Diaspora*, AKASHA, Synereo Diamonds: Everledger Digital identity, identification, and authentication: Keychain, 2WAY.IO, ShoCard, Guardtime, BlockVerify, HYPR,Onename, Civic, UniquID Wallet, Identifi, Evernym, BanQu, AID:Tech, SolidX Energy: Energy Blockchain Labs, Grid Singularity, TransActive Grid by LO3 Energy Enterprise-grade solutions and development platforms (infrastructure): XNotes Alliance, Tymlez, Symbiont, Sofocle,Pragmatic Coders, OTCXN, Openchain, Nuco, Monax, Libra Enterprise, Interbit, Credits, Colu, Ciphrex, ChromaWay,ChainThat, Chain Reactor, Chain, Bloq, BlockCypher, Blockchain Foundry, BigchainDB, Avalanchain, Applied Blockchain, AlphaPoint Distributed Ledger Platform Esports: FirstBlood E-voting: Follow My Vote, Estonia’s e-Residency platform Gaming and gambling: Etheria, First Blood, Etheramid, FreeMyVunk, CoinPalace, Etheroll, Rollin, Ethereum Jackpot Government and organizational governance: BITNATION, Advocate, Borderless, Otonomos, BoardRoom, Colony Internet of Things (IoT): Databroker DAO, Chronicled, Filament, Chimera, Filament, Stock.it Job market: Verbatm, Appii, Satoshi Talent, Coinality Land registry: The Dubai Land Department (DLD) Licensing: license.rocks Media: Publiq Mining: Waves Network infrastructure: Ethereum, ChromaWay Open organization/business-related collaboration: Colony Operating system: BloqEnterprise by Bloq, BOLOS by Ledger, EOS by block.one, DeOS by Razormind, GemOS by Gem, Vault OS by ThoughtMachine Real estate recording: UBITQUITY, Silvertown Reputation verification and ranking: The World Table (Open Reputation), ThanksCoin Ride-share: Arcade City, La ‘Zooz Supply chain management: Skuchain, Factom Traceability of food products and supply chain audit: Provenance A more comprehensive overview of financial and non-financial use cases of blockchain technology can be found in the MEDICI report titled Blockchain Use Cases: Comprehensive Analysis and Startups Involved. Information on over 400 blockchain-focused startups operating around the world can be found in MEDICI, FinTech’s global knowledge network.
- #27: While these four types try to capture the primary ways of using blockchain technologies, they are not inclusive. Further uses include accepting cryptocurrency payments, integrating with external services that store data on a blockchain, and blockchain-based technology services (such as identity services). Before you implement blockchain solutions, you still need to check if there is a valid business case and if blockchain is best-suited for the job (in comparison to other technologies). It is also critical to consider the maturity of the technology, the business model and the process change required before you embark on it. See "How to Develop a Business Case for Blockchain Projects" for more information. Blockchain will play an increasingly important role in all areas of business. Enterprise architecture and technology innovation leaders need to be highly aware of product developments and evolutions in their markets, and how blockchain can benefit multiple areas of your business. Gartner's model for the four types of blockchain initiatives is the result of research on a subset of publicly announced initiatives. Our objective was to develop a robust model that shows the primary types of blockchain projects based on the actual initiatives being launched. Since blockchain provides value drivers, we decided that it was important to do this analysis against these value drivers. Value drivers are capabilities of blockchain technology that can drive new or additional business value to the organization that employs them. These value drivers (see Table 1) show that business value encompasses both tangible and intangible items, including economic value, customer value, employee value and societal value. They also show that employment of technology does not guarantee extraction of business value. While some value drivers are typically used together, it is not necessary that all are used together in each initiative. See "Hype Cycle of for Blockchain Technologies, 2017" for a deeper treatment of the various blockchain technologies.
- #28: https://public.dhe.ibm.com/common/ssi/ecm/xi/en/xim12354usen/XIM12354USEN.PDF Blockchain 101 Blockchain is a shared immutable ledger for recording the history of transactions. A business blockchain, such as IBM Blockchain and the Linux Foundation’s Hyperledger Project, provides a permissioned network with known identities. And unlike Bitcoin, there is no need for cryptocurrency exchange.
- #29: Why Blockchain Is a Top 10 Trend Blockchain has huge potential. It could: ■ Disintermediate financial institutions in the exchange of value ■ Negate the role of government as official registrar ■ Automate supply chain processes ■ Disintermediate platform businesses ■ Transform industry operating models Most of the potential business use cases of blockchain are yet to be proven; however, interest in using the technology is growing. The Gartner 2018 CIO Survey indicates that 8% of respondents are in short-term planning or experimenting with blockchain initiatives, and another 14% are in midterm or long-term planning. Only 1% of CIOs indicate that they have already deployed the technology.3 Financial services was the first mover in evaluating blockchain, but government and supply chain have now gained equivalent momentum. Blockchain will affect all industries because all industries require trust for transactions. A blockchain is a type of distributed ledger. A distributed ledger is an expanding chronologically ordered list of cryptographically signed, irrevocable transactional records shared by all participants in a network. Each record contains a time stamp and reference links to the previous transactions. With this information, anyone with access rights can trace a transactional event, at any point in its history, belonging to any participant (see Figure 1). A blockchain sequentially groups value-exchange transactions (in bitcoin or another token) into blocks. Each block is chained to the previous block and immutably recorded across a peer-to-peer network, using cryptographic trust and assurance mechanisms. Depending on the implementation, transactions can include programmable behavior (known as smart contracts). Although the term "blockchain" refers to a specific technology stack, it is also used to refer to a loosely combined set of technologies and processes. These span middleware, database, security, analytics/artificial intelligence (AI), and monetary and identity management concepts. Blockchain has become the common shorthand for a diverse collection of distributed ledger products, with more than 70 offerings in the market.