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 ● Started built & 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/bitcoin Overview1 Blockchain Overview1 Understanding Proof of Work2 Blockchain Overview1 Proof of Work Demo3
- 5. In the beginning... ..or rather 2008
- 6. Bitcoin’s Techno-Libertarian Roots ● Skeptical of authority ● Dislike centralized power ● Protective of privacy ● Alarmed about surveillance ● Oh yeah, hates taxes
- 7. Enter Satoshi Nakamoto J ? “A purely 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 Thou Shalt 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 ● Good for 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 did pay! 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
- 13. Blockchain = Shared Distributed Truth My database says X. My database says Y.
- 14. Blockchain = Shared Distributed 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 Blockchain Integrity TX Block 0 hash TX Block 1 hash TX Block 2 hash ... TX Block N hash 2009 2017 hash hash hash
- 17. Hashes Ensure Blockchain Integrity TX Block 0 hash TX Block 1 hash TX Block 2 hash ... TX Block N hash 2009 2017 hash hash hash
- 18. Hashes Ensure Blockchain Integrity 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 get paid to your public key – 02a1633cafcc01ebfb6d78e39f687a1f0995c62fc95f51ead10a02ee0be551b5dc ● You pay with your private key ● No issuing authority
- 20. Is Bitcoin Anonymous? Dread Pirate Roberts NobDeath from Above French Maid Flush Number13
- 21. Is Bitcoin Anonymous? Dread Pirate Roberts NobDeath from Above French Maid Flush Number13
- 22. Adding Blocks in Bitcoin ● 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 Miner 2 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 Miner 2 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 Miner 2 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 Integrated Circuit Mining Pools Bitcoin Mining Now
- 27. “On a high-end desktop...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? ● Forks happen when nodes disagree about the longest valid chain. ● Forks can cause havoc. ● Built-in incentives to discourage forks.
- 29. Scripting ● Very basic in bitcoin ● Far more advanced in Ethereum
- 30. Simplified Smart Contract Example 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 ● Decentralized organizations ● Tracking physical assets ● eVoting ● Sharing economy – IoT & micropayments
- 32. Crypto-coins Galore Bitcoin Ether Litecoin Dogecoin Dash NEMPeercoin Primecoin Gridcoin MoneroRipple
- 33. Ready to dive in? Proof of Work (POW) ● Look at some code ● Run some tests
- 34. POW = Solve a 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 Probability that 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 of winning 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 nonce values 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. Let’s play!
- 44. POW Alternative: Proof of Stake ● Does not waste as much electricity ● Vulnerable to a “rewriting history” attack ● e.g., Peercoin
- 45. POW Alternative: Proof of Burn ● Prove the you made coins unspendable ● Sometimes used to transfer to new currency
- 47. Thanks! Don’t forget to check my blog for code and this presentation. http://jamespflynn.com