Crypto and blockchain 2015

Note: Not all sheets and details are presented in this public version.

Crypto and blockchain

©Theo van Rossum 2015

Agenda

1. Cryptography

2. Crypto protocols

3. Blockchain: what is it?

4. Bitcoin: what is it?

5. Commercial opportunities

6. The future

Appendices• Blockchain: working in more detail

• Public and private keys

• Hashing / SHA-256

• Ethereum

• Goldman Sachs Global Investment Research report highlights

• Crypto currency market capitalisation & exchanges

• Customer Satisfaction as a driver (e.g. Silk Road, crypto magic)



Crypto (graphy) is everywhere

• Encrypted communication (e.g. WPA, HTTPS)

• Encrypting files (e.g. bitlocker, truecrypt)

• Content protection (e.g. movies on DVD)

• User authentication (e.g. passwords and two-

way authentification)


But … crypto can do much more!

• Digital signatures

• Anonymous communication

• Crypto elections

• Private auctions

• Crypto magic (e.g. search strings Google)

• Smart (crypto) contracts (e.g. Ethereum see next slide)

• Crypto currencies (e.g. Bitcoins, Litecoins)


Ethereum

©Theo van Rossum 2015Source: ethereum.org

Crypto protocols

“Anything that can be done with a trusted

authority can also be done without!”


Trusted authority (e.g.

notary, government body,

bank)

Blockchain

Block Chain: the most widely known application of a block chain is the public ledger of transactions for cryptocurrencies used in bitcoin.

Other implementations of the blockchain:

• Ethereum – Turing-complete smart contracts, 15 second block time

• Namecoin – Ability to store data within a chain

• Mastercoin – Ability to process various transactions

• Peercoin – Additional Proof of stake

• Proof of Existence – document verification


Source: WikipediaNote: Not all sheets and details are presented in this public version.

Crypto currencies: characteristics

What is a crypto currency?• Digital cash

• Cryptography to control creation and transfer of money

What is a peer-to-peer network?• Decentralised & distributed network architecture

• No central steering

• No trusted authority needed


Bitcoin key-concepts

• Origin: Concept published by Satoshi Nakamoto(pseudonym) in 2008, software launched in 2009

• Open source: entire source code is open to reuse and review by anybody

• No owner: no controlling body governing bitcoin

• Stability: changes to protocol only after consensus of group of core developers (a.o. Gavin Andreesen)

• Finite number: 21 million bitcoins to be created until 2140 through mining. Currently 13 million bitcoins available.

• Predictable pace: every x minutes y bitcoins are rewarded.


Bitcoin’s anonymity


Bitcoin Miners


Latest developments: mining farms

Bitcoin Wallets

Bitcoinwallets provide the following functionality:

• storage of Bitcoin addresses and corresponding closed/open keys on users

computer in wallet.dat file,

• conducting transactions of obtaining and transferring Bitcoins (BTC), also without

connection to internet

• providing information about the balance in BTC at all available addresses, prior

transactions, spare keys.

(source: en.bitcoinwiki.org/Bitcoin_wallet)

There are three types of Bitcoinwallets: desktop, online and mobile.

See also appendix-topic: demonstration of a real bitcoin transaction with blockchain-

app on Ipad.


How Bitcoin is changing regulation“Bitcoin could have a number of benefits for our financial system. There

might be a kernel of something here that has a profound impact on the

future of payments technology and the financial system.”

“However the virtual currency industry is currently a Wild West, and a

new robust regulatory regime must be explored, rather than relying on

money transmission rules designed for firms created 150 years ago.”

"The question, then, is what type of licensing, examination, and collateralrequirements for the virtual currency industry will provide appropriate guardrails toprotect consumers and our national security - without stifling beneficial innovation."

Benjamin Lawsky, 31 January 2014

Superintendent of Financial Services, New York State Department


Argentina: Bitcoin Blue


“Bitcoin Blue” is presented in same list as US Dollar and Euro.

Localbitcoins.org


Kenya


Example: Bitpay

Reduce Risk

With Bitpay you can eliminate the risk of

Fraud, Chargebacks, and Identity Theft from

internet payments.

Monetize New Markets

You can now accept a payment from any

country on Earth, with no risk of fraud.

Reduce Hassle

You can eliminate the need for PCI

Compliance and expensive security

measures.

Bank Direct Deposits

You will receive a direct deposit into your

bank account every business day.

Wi-Fi Mobile Payments

You can accept mobile payments over wi-fi

and 3G/4G without the need for NFC

terminals.

All-Inclusive Pricing

Clear, simple pricing, with zero transaction

fees and zero hidden charges.


https://www.youtube.com/watch?feature=player_embedded&v=JP_I9zNRpEo

Example: btcjam for crowd-funding / microfinance


Example: Riskmitigation

• AON (NYSE: AON) provides riskmanagement

and insurance in the bitcoin ecosystem.

• Coinbase has its online wallets insured against

theft and hacking through AON, world’s

largest insurance broker.

• Offerings for “cold” storage for bitcoins

(security feature): www.icevault.ch


Icevault proposition


The future?

Future of crypto and bitcoins …

It’s all about customer satisfaction …

Jamie Bartlett, arstechnica.com:

“The most surprising statistics about the Silk Road 2.0 is not the volumes of available drugs (although that is

truly staggering); it's the satisfaction scores. When I analysed 120,000 customer reviews made on the site, over

95 percent scored 5/5.”

Even western governments are offering possibilities ….

“New York City wants to make it easier for the recipients of its some 8-to-10 million annual parking tickets to

pay their fines. To do so, it's accepting pitches for payment systems that'd take advantage of mobile tech and

things like Apple Pay and bitcoin.”

….



Appendices

• Blockchain: working in more detail

• Public and private keys

• Hashing / SHA-256

• Ethereum

• Goldman Sachs Global Investment Research report highlights

• Crypto currency market capitalisation & exchanges

• Customer Satisfaction as a driver (Crypto magic, Silk Road)



Documents

Crypto and blockchain 2015