Blockchain 101 - public, tokenized blockchains
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Blockchain 101 provides an overview of blockchain technology. It discusses the two main types of blockchains - public and private. Key events that drove blockchain interest include the 2008 Bitcoin whitepaper and Ethereum's launch in 2015. The technical underpinnings of blockchain, including hashing, Merkle trees, and proof of work are explained. Examples are given of how blockchain is being used or explored in areas like land registry, identity, shipping, and healthcare. The document recommends resources for learning more about blockchain and names several smart experts to follow.
Blockchain 101 - public, tokenized blockchains
- 2. Two main types of Blockchains Public Private or Permissioned Bitcoin Ethereum Hyperledger R3 Corda Gem Health Quorum We will start here…
- 3. Why the recent blockchain interest? 2 fairly recent events • Satoshi Nakamoto’s White Paper - https://bitcoin.org/bitcoin.pdf - published October 31, 2008 • No one knows who Satoshi is • Satoshi Nakamoto is a pseudonym, possibly a name made up from SAmsung, TOSHIba, NAKAmichi, MOTOrola • Bitcoin blockchain was born • Vitalik Buterin launches Ethereum blockchain July 2015 • Improved the programmability of the blockchain • Many startups are being built on top of Ethereum • Dapps = distributed apps • Bitcoin’s blockchain primarily stores financial transactions • Ethereum’s blockchain primarily stores contractual transactions https://youtu.be/nGsPgBJ5tCw
- 4. What exactly is the blockchain? • A decentralized, trusted public ledger of all transactions • Characteristics – Decentralized - nodes on the network manage and maintain the blockchain – Trusted - distributed verification using math - immutable = unchanging over time – Public - anyone can see the block, the transactions and – Pseudononymous - kinda anonymous for the user – Programmable - smart contracts Block x Block x+1 Block x+3Block x+2 transactions transactions transactions transactions
- 5. Decentralized network of nodes that manage and maintain the blockchain https://bitnodes.earn.com/
- 6. Public - Anyone can see all the blocks, how big, when mined, found by, etc. Go to www.blockchain.info Go to www.etherscan.io Bitcoin blockchain Ethereum blockchain
- 7. Public - Anyone can see the transactions in each block Bitcoin Ethereum Bitcoin blockchain Ethereum blockchain
- 8. Technical Underpinnings of Blockchain • Hash - (eg SHA-256) • Nonce • Merkle Tree • Hash chain Understanding the Strengths of Blockchain Requires Understanding the Technical Architecture See section below for all the technical details
- 9. What is a hash? 1. A hash is an algorithm that takes an input and creates an output. 2. Bitcoin uses a hash algorithm called SHA-256 which was developed by the US National Security Agency. The output is always a predetermined length, regardless of the input length. (256-bit key can be expressed as a hexadecimal string with 64 characters) 3. SHA-256 is an algorithm - produces 256 bit hash. Deterministic. Same input = same output. 4. You cannot reverse a hash back to it’s original input. It only goes one-way. It scrambles text and you can never unscramble it. 5. SHA stands for Secure Hash Algorithm. SHA-256 always outputs a string which is 64 characters long. An example looks like the following: (Hello World) 1. a591a6d40bf420404a011733cfb7b190d62c65bf0bcda32b57b277d9ad9f146e 6. You can try SHA-256 out at: http://www.xorbin.com/tools/sha256-hash-calculator 7. Slightly changing the input, dramatically changes the output
- 10. Why do hashes and blockchain matter? Take transaction details and hash them, then hash all of them. Then, I would know specifically whether those transaction details are unchanged… or not. Transaction #1 details (date, amount, etc) Transaction #2 details (date, amount, etc) Transaction #3 details (date, amount, etc) Transaction #4 details (date, amount, etc) Transaction #N details (date, amount, etc) … ada81ec5866838e620c 2b6451e5ef50fef65d99 854ead0a4abcd58b74e 1a2d4d deed94bd87f940b245022ef29134da173afa1e26 ec7ca3d346622b1f9e2a294f 3bd793c148284486f96f0a7cf38f6970e66392e52 7bb8b5ca15038e5a6cad19d 1fd6dc4a485e21df9f0a649a4dbee483c76d3745 e10654482714c400367a7b21 e7ee3a7375e93802bab264936aab544e2f3b3476 bb0f4f847d13e669165f5edb 4d0e7a9abdcb8fa3a4b5773f919342224db31936 945be8cc332c6043b93ca587
- 11. Merkle Tree (aka hash tree) A Merkle Tree has a root hash or merkle hash which is made up of numerous other hashes. All dependent on each other.
- 12. Merkle Tree Applied to Blockchain - Proof of Work Really important to notice here: 1) Previous hash 2) Nonce 3) Merkle root (of approx 2000 transactions)
- 13. Decentralized Trust • Using math to determine hash of next block • This is called mining • Why would someone spend money on electricity and computers to do this? Reward of 12.5 bitcoin for each block found or ‘mined’
- 14. Decentralized Trust - What is Bitcoin Mining? … Miners are trying to figure out the hash of the next Block. They all start with the same info. Miners repeatedly hash the current block header only changing one parameter each time, until the resulting hash matches a specific target. Why is it hard to figure out the next Block header hash? 1) The hash cannot be determined in advance 2) No pattern can be created to determine the hash Mining is the activity associated with figuring out the next Block! It’s basically a puzzle. Why would someone want to figure out the next Block? Because they get rewarded a certain number of Bitcoins! Currently the reward is 12.5 Bitcoins. ??????
- 15. How mining works… By Ritchie S. King, Sam Williams, & David Yanofsky December 17, 2013 Mining a block is difficult because the SHA-256 hash of a block's header must be lower than or equal to the previous block hash, in order for the block to be accepted by the network.
- 16. bitcoin = verification reward for the blockchain - reward cuts in half approx every 4 years This is referred to as the “halving” Nov 28, 2012
- 17. Wouldn’t the number of blocks found increase as compute power gets stronger? • It would, except Satoshi anticipated this and put in a throttling mechanism, referred to as difficulty. • Throttling the difficulty of finding a block helps keeps block creation to approximately every 10 minutes. • Difficulty is recalculated every 2016 blocks, so approximately every 2 weeks. • If more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down to the goal of a block every 10 minutes.
- 18. Verification of new Blocks A node on the Bitcoin network goes through numerous verification checks when it receives a new Block: • The block data structure is syntactically valid • The block header hash is less than the target difficulty (enforces the proof of work) • The block timestamp is less than two hours in the future (allowing for time errors) • The block size is within acceptable limits • The first transaction (and only the first) is a coinbase generation transaction • All transactions within the block are valid using the transaction checklist discussed in Independent Verification of Transactions
- 19. http://fortune.com/2017/11/25/lost-bitcoins/ “Just as gold bars are lost at sea or $100 bills can burn, bitcoins can disappear from the Internet forever. When all 21 million bitcoins are mined by the year 2040, the actual amount available to trade or spend will be significantly lower.”
- 20. Ethereum • A crypto-currency which includes a “smart contract” platform. • The unit of currency is called the ether. • Unlimited supply of currency unlike Bitcoin. • Open source • Microsoft’s Blockchain-as-a-Service is based on Ethereum
- 21. Brilliance of Blockchain • Auto-throttling aka difficult - Satoshi anticipated that chips would run faster clock speed (and ASICs) and built-in a throttling mechanism • Security/Trust is decentralized into the network vs a central company or group like RSA, McAfee, Symantec, etc. • Reward mechanism is bitcoin or ether - the reason why miners mine • Limited number of bitcoin makes it precious like gold • Reward decreases every 4 years - Satoshi anticipated the increase in value of bitcoin • …
- 22. Credit: BTCS Blockchain will affect every industry Why Revolutionary? Simply put: Blockchain takes away the middleman in transactions. No middleman = cheaper, faster and safer.
- 23. What’s going on with blockchain? Blockchain as a Service - Microsoft BaaS 2015 - SAP BaaS 2017 - Oracle BaaS 2017 - IBM Blockchain - AWS Blockchain 2016 Alliances - Enterprise Ethereum Alliance - BankChain (20 Indian banks) - Digital Trade Chain (7 of EU’s largest banks) - … Pilots - Sweden is leveraging blockchain to track land registries called the Lantmäteriet. - The second largest port in Europe, Belgium-based Port of Antwerp, announces a blockchain pilot to automate and streamline the port’s container logistics operations. - Visa has a blockchain effort called “Visa B2B Connect” partnering with Chain to analyze the possibility of optimizing near real-time funds transfer system for high value bank-to-bank and corporate payments. - Maersk is investigating blockchain to track global trade and shipments. - Jan Brecht, Daimler’s CIO said, "We see blockchain as a promising technology, not fully mature yet, but continuously growing. Now is the right time to get into it, build up knowledge and form a network of like-minded people to share experiences.” - …
- 24. Blockchain - Examples of Usage • Land Use - Ownership and history of property currently requires the investigation of many different document sources such as Grantor-Grantee index, Land Records or Deed Records. The goal is to find any records related to property liens, easements, covenants, conditions and restrictions(CC&Rs), agreements, resolutions and ordinances. This a time consuming and laborious process in which it is easy to miss important information. Sweden is leveraging blockchain to track land registries called the Lantmäteriet. They estimate a taxpayer savings of $106M per year based on reduction of fraud, eliminating paperwork and accelerating the process. • Identity - Across the globe we use passports to identify people, which are fundamentally paper-based identity cards similar to your driver’s license. ISIS is reported to have the ability to manufacture fake passports. In 2013, almost 40 million "travel" documents were reported as lost or stolen since 2002, according to Interpol. Dubai is working on a digital passport based on blockchain. Efforts to reduce child trafficking are being built on the blockchain.
- 25. Blockchain - Examples of Usage Healthcare - Where are your health records for the last 5 years? What were the results of your most recent blood tests? Where are you most recent xrays? Where are your parent’s medical records? Your kid’s medical records? What if your medical records were saved on the blockchain and ONLY you could allow people access to those medical records? Prescription medication - Do you take medications? Worldwide sales of counterfeit medicines could top US$ 75 billion this year, a 90% rise in five years, according to an estimate published by the Center for Medicine in the Public Interest in the United States of America (USA). The FDA’s Drug Supply Chain Security Act, signed into effect in November 2013, creates a requirement to ‘develop an electronic, inter-operable system to identify and trace certain prescription drugs as they are distributed in the United States.’ A San Francisco- based startup called Chronicled has launched a ‘track and trace’ pilot using blockchain to build an electronic, inter-operable system to identify and track prescription drugs as they are distributed in the United States.
- 26. Blockchain - Examples of Usage •Land Use - Ownership and history of property currently requires the investigation of many different document sources such as Grantor-Grantee index, Land Records or Deed Records. The goal is to find any records related to property liens, easements, covenants, conditions and restrictions(CC&Rs), agreements, resolutions and ordinances. This a time consuming and laborious process in which it is easy to miss important information. Sweden is leveraging blockchain to track land registries called the Lantmäteriet. They estimate a taxpayer savings of $106 million per year based on reduction of fraud, eliminating paperwork and accelerating the process. •Identity - Across the globe we use passports to identify people, which are paper-based identity cards similar to your driver’s license and therefore counterfeitable. ISIS is reported to have the ability to manufacture fake passports. In 2013, almost 40 million “travel” documents were reported as lost or stolen since 2002, according to Interpol. Dubai is working on a digital passport with a London-based company called ObjectTech. The digital passport is based on Blockchain. “This is an identity that is fit for the digital age,” said Paul Ferris, co-founder and chief executive of ObjectTech. “Not only will it make international travel quicker and safer, but it also gives people back control of their personal digital data.”
- 27. Blockchain - Examples of Usage • Global Logistics and Shipping - The second largest port in Europe, Belgium- based Port of Antwerp, announced a blockchain pilot to automate and streamline the port’s container logistics operations. “According to the terminal authority, moving containers from point to point often involves more than 30 different parties, including carriers, terminals, forwarders, haulers, drivers, shippers and more. This process results in hundreds of interactions between those parties, conducted through a mix of e-mail, phone and fax.” Maersk is investigating blockchain to track global trade and shipments (see video below). • Etherisc is creating Ethereum smart contracts to build decentralized insurance applications to make the purchase and sale of insurance more cost effective and provide greater transparency into the insurance industry. Investors are able to buy and trade a decentralized insurance portfolio. Imagine a completely decentralized insurance agency.
- 28. Blockchain - Examples of Usage • Ujo is a music platform built on Ethereum. It leverages uPort for Identity and provides licensing and payments through Ethereum smart contracts. • Retail - Counterfeit goods. Tracking legitimate product on the blockchain.
- 29. The Bitcoin vs Gold Comparison
- 30. What are the four possible activities of a bitcoin network node? From Mastering Bitcoin by Andreas M. Antonopoulos Excellent book. I highly recommend reading it if you are interested in learning the details of how bitcoin and blockchain work.
- 31. How many Bitcoin nodes exist? As of Dec, 2015 As of Jan, 2017 As of Nov, 2017 https://bitnodes.earn.com/
- 34. How do I learn more? I want to learn more • Huffington post articles • https://www.huffingtonpost.com/entry/blockchain-will-disrupt-every- industry_us_5963868ce4b08f5c97d06b55 • https://www.huffingtonpost.com/entry/blockchain-innovation-in-healthcare- and-life-sciences_us_59c91296e4b0b7022a646c4b • @brett_colbert - twitter blockchain list • Download the Bitcoin Core • Download Ethereum • Take a course on Coursera
- 35. Excellent technical video on hashing and the bitcoin blockchain https://youtu.be/fw3WkySh_Ho Consensus Algorithms, Blockchain Technology and Bitcoin UCL - by Andreas M. Antonopoulos
- 36. Upcoming capabilities to watch for • Upcoming capabilities – Cross-chain atomic swaps (very cool!) – Lightning Network
- 37. Smart, trusted experts in this space (you can follow them on twitter and youtube) • Andreas Antonopolous - the bitcoin and currency genius • Tone Vays - deep TA • James Lopp - core developer • Jimmy Song - bitcoin commentator • Adam Back • Peter Todd • Elizabeth Stark - Lightning • Eric Lombrozo • Phil Komarny • ... • You can track them all on my “blockchain” twitter list which is public
- 38. Brett’s Favorite Bitcoin/BlockchainTools • www.blockchain.info • www.bitcoinwisdom.com • https://tradeblock.com/bitcoin • http://bitcointicker.co/#