Embed Size (px)
Citation preview
Prezentáció címe
Unchain BlockChain
Eva Rez
December 2015
Satoshi Nakamoto
BlockChain – What is it?
A Value Exchange Protocol (Email for Money)
TCP/IP is a COMMUNICATIONS protocol, whilst the BlockChain is a VALUE-EXCHANGE protocol.– IP: the IP address still acts like a unique postal address that enables any
phone, tablet or computer to identify itself on the internet.
– TCP technology: guarantees delivery of the data packets by dividingthem into segments.
– HTTP (Hyper Text Transfer Protocol): became a way for Web browsersto communicate with Web Servers.
– A whole suite of protocols like DNS and ARP, work together to provideus with the network experience.
– Email, Search Engines, Web pages, APIs and other Internet Services(SaaS, PaaS, IaaS) are all products that have evolved on this framework.=> DIGITAL ECONOMY
Source: http://www.wired.com/insights/2015/01/block-chain-2-0/
BlockChain – What is it?
Distributed Ledger
A ledger in accounting is a book that you cannot edit onceyou have written in it.
Instead, if you have made a mistake, the only way to fix itis to add another transaction to the ledger that undoes theerror. -> Fraud (transact without recording; make ex postchanges)
BLOCKCHAIN: It is the bitcoin ledger, which uses the factthat there are many copies of it that are broadlydistributed combined with a fair bit of Math to ensure thatonce a transaction has been recorded in the blockchainthat transaction can not be changed after the fact.
Source: https://www.usv.com/blog/bitcoin-as-protocol
Distributed Ledger
Source: http://santanderinnoventures.com/wp-content/uploads/2015/06/The-Fintech-2-0-Paper.pdf
BlockChain – The Technology Behind
Source: http://www.ft.com/cms/s/2/eb1f8256-7b4b-11e5-a1fe-567b37f80b64.html#axzz3tGNw2MWS
BlockChain: is a P2P networkof computers, all of whichmust approve a transactionhas taken place before it isrecorded, in a “chain” ofcomputer code.
Bitcoin: the first applicationof the technology, applied tomoney.
In the present system acentral ledger is likely to actas the custodian of thatinformation. But on aBlockChain the information istransparently held in a shareddatabase, without a singlebody acting as middleman.
Types of BlockChains
Source: https://blog.ethereum.org/2015/08/07/on-public-and-private-blockchains/
Public BlockChain: fully decentralized; anyone can read it, send transactions, participate inthe consensus process
- Advantages: users are more protected from developers; network effect (e.g. domainname)
Consortium BlockChain (hybrid): partly decentralized; the consensus process is controlledby a pre-selected set of nodes (e.g. financial institutions) -> e.g. 10 out of 15 institutionshave to sign the block in order the block to be valid
Private BlockChain: centralized; write permissions are kept centralized to one organization(e.g. database management, auditing)
- Advantages: revert transactions, modify balances; validators are known – no collusion;cheaper transactions; faster; more privacy
The BlockChain Universe
Source: Goldman Sachs Report
http://www.paymentlawadvisor.com/files/2014/01/GoldmanSachs-Bit-Coin.pdf
creation
miner
block
hash
nonceReward:
25BTC = $16k
21 mBTC
mining
farms
&pools
buy
100 exchanges (Bitstamp,
BTC-e, BTC China, Huobi)
individuals
KYC
AML
ATM (paper receipt)
storage
wallet
software
(PC hard
drive)
proof-of-work
(hashcash)
mobile
web based
pseudonymous
public key
– to receive –
private key
– to spend –
hot wallet
– online –
cold wallet
– offline –
transaction
input (from where)
amount
output (to where)
forward past transaction
spend
specialized e-commerce
online retailers and
services
gamblingtrading
Hash Each Transaction
Source: https://chrispacia.wordpress.com/2013/09/02/bitcoin-mining-explained-like-youre-five-part-2-mechanics/
Original transaction
Once hashed it looks like this
A Block & the Merkle Tree
Source: https://chrispacia.wordpress.com/2013/09/02/bitcoin-mining-explained-like-youre-five-part-2-mechanics/
Nonce
So what if you produced an output that does not start with thecorrect number of zeros?
This is where the nonce comes in.
The nonce is simply a random number that is added to the blockheader for no other reason than to give us something to incrementin an attempt to produce a valid hash.
If your first attempt at hashing the header produces an invalid hash,you just add one to the nonce and rehash the header then check tosee if that hash is valid.
The nonce that is needed to produce a valid block will also bedifferent for each miner.
Source: https://chrispacia.wordpress.com/2013/09/02/bitcoin-mining-explained-like-youre-five-part-2-mechanics/
Proof-of-work (PoW)
Example: Let's say the base string that we are going to do work on is
"Hello, world!". Our target is to find a variation of it that SHA-256hashes to a value beginning with '000'. We vary the string by addingan integer value to the end called a nonce and incrementing it eachtime. Finding a match for "Hello, world!" takes us 4251 tries (buthappens to have zeroes in the first four digits).
Source: https://www.usv.com/blog/bitcoin-as-protocol
Nonce Hash
So How To Buy Bitcoins?
Create a wallet
Coinbase allows you to transfer money to your wallet
Source: http://techcrunch.com/2013/04/08/how-to-mine-bitcoins/
BlockChain – Volume (bitcoin, November 2015)
Source: http://www.ft.com/cms/s/2/eb1f8256-7b4b-11e5-a1fe-567b37f80b64.html#axzz3tGNw2MWS, Goldman Sachs Report
120,000 transactions / day
$75mexchanged / day
380,000 blocks
45 Gbites
Database
Computational output:
more than 1400 times the
combined capacity of the top 500
supercomputers in the world
Coinbase – Facts & Figures (2015 YTD)
Source: https://www.coinbase.com/, Goldman Sachs Report
970,000 consumer wallets
24,000 merchants
In 32 countries
$2.5B exchanged2.9 million customers
served
80% speculation, 20% real payment
1% conversion fee
Pros & Cons
Source: http://www.ft.com/cms/s/2/eb1f8256-7b4b-11e5-a1fe-567b37f80b64.html#axzz3tGNw2MWS, Goldman Sachs Report
Transparency: Provides an unforgeable record of identity,including the history of an individual’s transactions. ->Validated KYC data. /PwC/
Open source, & “permissionless” system -> Decentralisedand open to anyone!
Virtually impossible to counterfeit.; It’s safe. (Private Key); Illegal activity is very low (Silk Road represented less than 1% of all activity).
Is it robust and secure? (theft by hackers, hard drive crash,corruption, spending on bad purposes) -> It has toconvince regulators.
Savings: Cutting out inefficient banking intermediaries(costs reduced by $15bn-$20bn a year from 2022)/Santander/
BTC: A poor substitute for fiat currency, unable toovercome likely government opposition, public distrust. ->High volatility; Speculative bubble?; Rather a commoditythan a currency?; Not a stable store of value; „Much bettershot at influencing payments technology than taking off asa currency.”
The speed of execution is so much faster for securitiessettlement. -> Lower capital requirements for banks./Deutsche Bank/
BTC: Money supply is not controlled by economists ormonetary experts, but technology experts andprogrammers.
New opportunities for business models: micro-transactions, smart contracts, many other futureapplications
Transactions in BlockChain are not reversible.
It is scalable: BTC is divisible down to 8 decimals. A verylarge number of units can be created. Creating more BTCwould require 51% of the computing power of thenetwork.
Scalability?
Pros Cons
The Bitcoin StoryS
ou
rce: G
old
ma
n S
ach
s R
ep
ort
So
urc
e: G
old
ma
n S
ach
s R
ep
ort
Security Issues 1/2
Private key: „Really nothing more than a text file with gibberishinside” -> Risks: theft, loss
Theft
– Malware: Malicious software that gets into the computer through anemail attachment. -> You can only see the public key where yourmoney was transferred, but you don’t know the identity associatedwith it
– Protection: Encrypting the private key with a password, cold storage(you can still receive bitcoins), hard copy in a safe deposit box.
Counterfeit, double spending: very unlikely
– Mt. Gox case: Exchange sends money to a client -> client changes thehash -> exchange cannot find the transaction -> resends the money(malleability -> protocol now fixed).; Other customer service andgovernance issues.
Source: Goldman Sachs Report
Security Issues 2/2
DDoS attacks (Distributed Denial of Service Attacks): BlockChain isless vulnerable
– More information sent to the network than it can process to disruptthe system. -> Attacks against bitcoin exchanges only slowed down thetransaction speed.
Goldfinger Attack: very unlikely
– Buying up all of the bitcoins and then forcefully losing them or freezingthe private keys. -> Bitcoins are effectively out of the system.
A ROBUST SYSTEM
– There have been many attacks again BlockChain/bitcoin.
– The most vulnerable point is exchanges. -> PROPER GOVERNANCE!
Source: Goldman Sachs Report
Regulation
US
– Regulation on virtual currencies: AML, banking laws, moneytransmission laws, (potentially) commodity & securities laws
– Anti-money-laundering: According to FinCEN (financial crimesenforcement network) bitcoin should be treated like currency for AMLlaws. -> Register with FinCEN, KYC, reporting suspicious transactions.
– On state level: Licensed as money transmitter (costly & time-consuming).
– CFTC (Commodities Futures Trading Commission): For bitcoinderivatives
– SEC: For bitcoin securities (e.g. ETF)
– IRS: If bitcoin is an asset -> capital gains.; If bitcoin is foreign currency-> ordinary income.
Europe
– Hands-off approach: No money transfer license, no AML policy.Source: Goldman Sachs Report
BlockChain in Financial ServicesS
ou
rce
: h
ttp
://s
tart
up
ma
nage
ment.
org
/2015/1
0/2
2/t
he
-glo
bal-la
ndscape-o
f-
blo
ckch
ain
-com
panie
s-in
-fin
ancia
l-serv
ices
Bitcoin as a Payment Solution
Advantages
– Transfer money as easily as sending an email
– Lower transaction costs
– No cross-border fees
Risks
– Regulatory & operating costs are increasing
Savings for consumers could amount to USD 43 billion peryear do to lower transaction costs. (World Bank estimate)
Banks are working on the development of their digitalcurrency strategy.
Source: Goldman Sachs Report
The Bitcoin StoryS
ou
rce: G
old
ma
n S
ach
s R
ep
ort
So
urc
e: G
old
ma
n S
ach
s R
ep
ort
Source: Goldman Sachs Report
Coloured Coins
Colored Coins is a concept that allows attaching metadatato Bitcoin transactions and leveraging the Bitcoininfrastructure for issuing and trading immutable digitalassets that can represent real world value.
Financial assets (securities like shares, commodities likeGold or new currencies), proof of ownership (a digital keyto a house or a car, a concert ticket), storing information(documents, certificates), creating smart contracts
Advantages: transparency, immutability, ease of transferand non-counterfeitability
Source: https://github.com/Colored-Coins/Colored-Coins-Protocol-Specification/wiki/Introduction
Streamlining Settlement (Smart Contracts)
Source: http://santanderinnoventures.com/wp-content/uploads/2015/06/The-Fintech-2-0-Paper.pdf
Why Distributed Ledgers Are Big News?
Source: http://www.keynote2015.com/
Bitcoin ETF
BlockChain – Further Applications
„Almost two dozen of the world’s largest banks (Digital Ledger Group),including JPMorgan, UBS and Barclays, have thrown their weight behind R3CEV, a start-up venture, to set up a private BlockChain open only to invitedparticipants who between them maintain and run the network.”
„A tamper-proof ledger could be used to hold medical records or developtransparent electoral voting systems.”
„One day it would not surprise me if physical locks did not exist; youshould be able to walk through a door because you send a very smallfraction of a bitcoin out from your address to another address, and youcan prove that you own that address by signing that transaction with yourprivate key, which authorizes you to enter the door.”
„Capital Markets is also known as the quadrillion dollar opportunity, and itis where we are seeing a lot of high stakes venture capital bets andstartups that are swinging for the fences wanting to solve the many facetsof the clearing-to-settlement post-trade conundrum.”
Source: http://www.ft.com/cms/s/2/eb1f8256-7b4b-11e5-a1fe-567b37f80b64.html#axzz3tGNw2MWS
http://startupmanagement.org/2015/10/22/the-global-landscape-of-blockchain-companies-in-financial-services/, Goldman Sachs Report
APPENDIX
Bitcoin – Facts & Figures 1/2
Source: Goldman Sachs Report
Bitcoin – Facts & Figures 2/2
Source: Goldman Sachs Report
Source: Goldman Sachs Report
Release Active Currency Symbol Founder Hash Algorithm Timestamping Notes
2014 Active Auroracoin AURBaldur Odinsson
(pseudonym)Scrypt POW Created as an alternative to fiat currency in Iceland.
2009 Active Bitcoin BTC Satoshi Nakamoto SHA-256d POW First decentralized ledger currency.
2014 Active BlackCoin BC, BLK Rat4 (pseudonym) Scrypt POSBlackCoin secures its network through a process called
minting.
2014 Inactive Coinye KOI, COYE Scrypt POWUsed American hip hop artist Kanye West as its mascot,
abandoned after trademark lawsuit.
2014[9] Active Dash DASHEvan Duffield &
Kyle HaganX11 POW & POS
Adds privacy to transactions through a decentralized coin-
mixing system called Darksend.
2013 Active Dogecoin DOGEJackson Palmer &
Billy MarkusScrypt POW Based on an internet meme.
2014 Active DigitalNote XDNXDN-dev team,
dNoteCryptoNight POW
DigitalNote (XDN) is a new private cryptocurrency with
an instant untraceable crypto messages and first
blockchain banking implementation, use CryptoNote
protocol.
2015 Active Ethereum ETH Vitalik Buterin Dagger Hashimoto POW Turing complete smart contracts.
2011 Active Litecoin LTC Charles Lee Scrypt POW First successful scrypt cryptocurrency.
2013 Active Mastercoin MSC J. R. Willett SHA-256d N/AMastercoin is both digital currency and communications
protocol built on top of the existing bitcoin block chain.
2014 Active MazaCoin MZCBTC Oyate
InitiativeSHA-256d POW
The underlying software for MazaCoin is derived from
that of another cryptocurrency, ZetaCoin.
2014 Active Monero XMR Monero Core Team CryptoNight POWMonero (XMR) is a new privacy-centric coin using the
CryptoNote protocol.
2011 Active Namecoin NMC Vincent Durham SHA-256d POW Also acts as an alternative, decentralized DNS.
2013 Active Nxt NXTBCNext
(pseudonym)SHA-256d POS
Nxt is specifically designed as a flexible platform to
build applications and financial services around its
protocol.
2012 Active Peercoin PPCSunny King
(pseudonym)SHA-256d POW & POS First to use POW and POS functions.
2013 Active Emercoin EMC EvgenijM86 SHA-256 POW & POS
Trusted storage for any small data: acts as an
alternative, decentralized DNS, PKI store, SSL
infrastructire and other.
2014 Active PotCoin POT Scrypt POW Developed to service the legalized cannabis industry
2013 Active Primecoin XPMSunny King
(pseudonym)1CC/2CC/TWN POW
Primecoin uses the finding of prime chains composed of
Cunningham chains and bi-twin chains for proof-of-work,
which can lead to useful byproducts.
2013 Active Ripple XRP Chris Larsen & ECDSA "Consensus"
Based on peer to peer debt transfer. The term Ripple
can refer to both the digital currency or the payment
network.
2014 Active Titcoin TITEdward Mansfield
& Richard AllenSHA-256d POW
First cryptocurrency to be nominated for a major adult
industry award.
Unreleased Inactive Zerocoin
Matthew Green,
Ian Miers and
Christina Garman
Proposed bitcoin extension to add true cryptographic
anonymity.
2014 Active Woodcoin LOGFunkenstein the
DwarfSkein POW
Market Cap of Cryptocurrencies (December 10, 2015)
Source: http://coinmarketcap.com/
