![TRUST IN PUBLIC BLOCKCHAINS
q=0.3
z=0 P=1.0000000
z=5 P=0.1773523
z=10 P=0.0416605
z=15 P=0.0101008
z=20 P=0.0024804
z=25 P=0.0006132
z=30 P=0.0001522
z=35 P=0.0000379
z=40 P=0.0000095
z=45 P=0.0000024
z=50 P=0.0000006
Solving for P less than 0.1%...
P < 0.001
q=0.10 z=5
q=0.15 z=8
q=0.20 z=11
q=0.25 z=15
q=0.30 z=24
q=0.35 z=41
q=0.40 z=89
q=0.45 z=340
12. Conclusion
We have proposed a system for electronic transactions without relying on trust. We started with
the usual framework of coins made from digital signatures, which provides strong control of
ownership, but is incomplete without a way to prevent double-spending. To solve this, we
proposed a peer-to-peer network using proof-of-work to record a public history of transactions
that quickly becomes computationally impractical for an attacker to change if honest nodes
control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes
work all at once with little coordination. They do not need to be identified, since messages are
not routed to any particular place and only need to be delivered on a best effort basis. Nodes can
leave and rejoin the network at will, accepting the proof-of-work chain as proof of what
happened while they were gone. They vote with their CPU power, expressing their acceptance of
valid blocks by working on extending them and rejecting invalid blocks by refusing to work on
them. Any needed rules and incentives can be enforced with this consensus mechanism.
[Nakamoto 2008]](https://image.slidesharecdn.com/2019-03-26-blockchaintrust2019-03-22-190401070104/85/Can-a-blockchain-solve-the-trust-problem-5-320.jpg)
Can a blockchain solve the trust problem?
- 1. CAN A BLOCKCHAIN SOLVE THE TRUST PROBLEM? NGI Talks 2019-03-26 Dr. Bernhard Haslhofer Senior Scientist Center for Digital Safety & Security
- 3. CAN A BLOCKCHAIN SOLVE THE TRUST PROBLEM? friend of my friend someone else me my friend Trust is relationship between individuals and key in functioning society contract Institutions have rules and laws and can act as trusted third parties Contracts regulate relationships between parties that do not necessarily trust each other Whenever a conflicts arises the trusted third party acts as arbiter Direct trust does not scale in larger groups
- 4. • A type of Distributed Ledger • Data are stored in structures known as blocks • Each block holds a reference to the previous block and thereby forms a chain of blocks • Blockchain is synchronized via a P2P network CAN A BLOCKCHAIN SOLVE THE TRUST PROBLEM?
- 5. TRUST IN PUBLIC BLOCKCHAINS q=0.3 z=0 P=1.0000000 z=5 P=0.1773523 z=10 P=0.0416605 z=15 P=0.0101008 z=20 P=0.0024804 z=25 P=0.0006132 z=30 P=0.0001522 z=35 P=0.0000379 z=40 P=0.0000095 z=45 P=0.0000024 z=50 P=0.0000006 Solving for P less than 0.1%... P < 0.001 q=0.10 z=5 q=0.15 z=8 q=0.20 z=11 q=0.25 z=15 q=0.30 z=24 q=0.35 z=41 q=0.40 z=89 q=0.45 z=340 12. Conclusion We have proposed a system for electronic transactions without relying on trust. We started with the usual framework of coins made from digital signatures, which provides strong control of ownership, but is incomplete without a way to prevent double-spending. To solve this, we proposed a peer-to-peer network using proof-of-work to record a public history of transactions that quickly becomes computationally impractical for an attacker to change if honest nodes control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes work all at once with little coordination. They do not need to be identified, since messages are not routed to any particular place and only need to be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism. [Nakamoto 2008]
- 6. BITCOIN | OBSERVATIONS Anonymity Global Micropayments Decentralization Early Promises and Expectations Trackable Payments Scalability Issues De-facto centralization Status Quo
- 7. BITCOIN | EXCHANGE CENTRALIZATION Source: coinmarketcap.com (2018-10-15)
- 8. BITCOIN | MINER CENTRALIZATION Adapted from: Romiti, M. et al.: A Deep Dive into Bitcoin Mining Pools – An Empirical Analysis of Mining Shares (2019). Forthcoming.
- 9. BITCOIN | MINER & EXCHANGE CENTRALIZATION Fig. 5. Flow of mining rewards from mining pools to their members. The strength of the arcs is scaled by payment volume, while the node size depends on the total amount of received (mined) BTC. In black: wallet services and exchanges, in gray: unknown entities. This plot covers the top 400 clusters from each mining pool sorted by received BTC. Unknown entities (1118) were combined into one node. ExchangesMiners Source: Romiti, M. et al.: A Deep Dive into Bitcoin Mining Pools – An Empirical Analysis of Mining Shares (2019). Forthcoming.
- 10. BITCOIN | A SYSTEM WITHOUT TRUST ? Fiat currency ecosystem Cryptocurrency ecosystem Money Issuance Transaction Processing Deposits Central Banks Payment Services and Processors Banks Exchanges Wallet Providers Miners SHIFT OF TRUST
- 11. BITCOIN | A SYSTEM WITHOUT TRUST ? “We have proposed a system that can agree on a global state of a shared transaction ledger without central nodes” z=35 P=0.0000379 z=40 P=0.0000095 z=45 P=0.0000024 z=50 P=0.0000006 Solving for P less than 0.1%... P < 0.001 q=0.10 z=5 q=0.15 z=8 q=0.20 z=11 q=0.25 z=15 q=0.30 z=24 q=0.35 z=41 q=0.40 z=89 q=0.45 z=340 12. Conclusion We have proposed a system for electronic transactions without relying on trust. We started with the usual framework of coins made from digital signatures, which provides strong control of ownership, but is incomplete without a way to prevent double-spending. To solve this, we proposed a peer-to-peer network using proof-of-work to record a public history of transactions that quickly becomes computationally impractical for an attacker to change if honest nodes control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes work all at once with little coordination. They do not need to be identified, since messages are not routed to any particular place and only need to be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.
- 12. TRUST IN PRIVATE BLOCKCHAINS
- 13. PRIVATE BLOCKCHAIN | MOTIVATION me Public blockchains don’t work for my use case. I want to know who else participates in the network. (because I do not trust the others) my friend OK, let’s use a private, permissioned blockchain that includes only our friends! me my friend my friendmy friend
- 14. PRIVATE BLOCKCHAIN | KEY QUESTIONS Who is trustworthy enough to build and run our private blockchain? Do we really trust each other? How can we scale trust to a larger group? Company A Company B Company C Company D
- 15. PRIVATE BLOCKCHAIN | POSSIBLE SOLUTION Company A Company B Company C Company D Blockchain Service Provider Off-the shelve Blockchain Solution contract Trust relationship with a (new) third party
- 16. TRUST IN SMART CONTRACTS Blockchain Evangelist Smart Contracts eliminate the need for trust They are trustless Nobody has to trust a central party
- 17. SMART CONTRACT | WHAT IS IT? Adapted from: Fröwis: Tracking Payment Flows in Ethereum, Symposium on Post-Bitcoin Cryptocurrencies, 2018 me My account Balance: 3 – 1 ETH An organization Organization account Balance: 6 + 1 ETH State: Rules: IF data = ’donate’ THEN add 1 to Donations Transaction From: me To: the organization Value: 1 ETH Data: donate!!! Sign: my digital signature Donations: 1 A computer program that encodes agreement between parties
- 18. SMART CONTRACTS | TRUST ISSUES An organization Gambling account Balance: 6 ETH State: Rules: IF outcome = ’heads up’ THEN add send 1 ETH to me This is still just a program! How can a program know the outcome of coin toss? Oracle SHIFT OF TRUST
- 19. “Two out of five smart contracts deployed on Ethereum do require trust in at least one third party, who, in principle, can alter the control flow of the program that enforces an agreement after it is committed to the blockchain” “In simple terms, there remains a gap between vision and practice.” SMART CONTRACTS | MEASURING TRUST In other words, two out of five smart contracts deployed on Ethereum do require trust in at least one third party who, in principle, can alter the control flow of the program that enforces an agreement after it is committed to the blockchain. This is not necessarily concerning, but a remarkable observation against the backdrop of trustlessness being framed as the key benefit of smart contracts and blockchain-based systems in general over conventional (centralized) infrastructures. In simple terms, there remains a gap between vision and practice. Oct Jan Apr Jul Oct Jan Apr k k k k k (a) before cleanup Oct Jan Apr Jul Oct Jan Apr k k k k k total trustless (b) after cleanup Fig. : Active smart contracts compared to active trustless smart contracts Source: Fröwis and Böhme (2017): In Code We Trust? Measuring the Control Flow Immutability of All Smart Contracts Deployed on Ethereum
- 20. • A blockchain is a technology (system, algorithms, protocols) • Trust is more…it is about social relationships • Technology alone can hardly solve the trust problem • A false trust in blockchains can be a security risk (e.g., exchange hacks, sabotage) CAN A BLOCKCHAIN SOLVE THE TRUST PROBLEM? me my friend
- 21. • There is no off-the-shelve technology that can solve the trust problem • Trust relationships are established among people and within society • Trusted third parties are somehow natural and not necessarily a bad thing! • Cryptographic techniques can help us to enforce confidentiality, authenticity, and integrity of those trust relationships (in decentralized settings) HOW CAN THE TRUST PROBLEM BE SOLVED?
- 22. • Thanks to Blockchains a number of well-known techniques have become mainstream • Hashing beyond MD5 • Asymmetric encryption (public and private keys) • Ring signatures • Elliptic curve cryptography • … • Those techniques won’t solve the trust problem … but they can help us securing trust relationships HOW CAN THE TRUST PROBLEM BE SOLVED?