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Blockchain & Virtual CurrenciesTechnology, Opportunities and Threats
Rohas NagpalShinam Arora
7thMay,2016atMumbai
WhatisMoney?Fiatcurrency:DesignatedaslegaltenderbytheGovernment.Backedbycommodi8es?
Ipromisetopaythebearerthesumofonethousandrupees.
e-Money:Digitaltransfermechanismforfiatcurrency.Mobilewallets?Creditcards?VirtualCurrency:Notdesignatedaslegaltender.
þ amediumofexchangeþ aunitofaccountþ astoreofvalue
Crypto-currenciesþ Distributedþ open-sourceþ math-basedþ peer-to-peerþ de-centralizedþ conver8ble
Morethan700tradedcrypto-currencies
Source:hFps://coinmarketcap.com/all/views/all/
The jargon
A look at some of the key concepts in blockchain & crypto-currencies.
Thejargonþ Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addresso Wallets
SymmetricCryptography
Imagesource:AnIntroduc8ontoCryptography–PGPCorpora8on
Thejargonþ Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addresso Wallets
AsymmetricCryptography
Imagesource:AnIntroduc8ontoCryptography–PGPCorpora8on
Thejargono Cryptographyþ Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addresso Wallets
One-wayHashFuncIons
Input Hash
sanya c75491c89395de9fa4ed29affda0e4d29cbad290
SANYA 33fef490220a0e6dee2f16c5a8f78ce491741adc
Sanya 4c391643f247937bee14c0bcca9Z985fc0d0ba
Thejargono Cryptographyo Hashfunc8onsþ DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addresso Wallets
DigitalSignatures
Imagesource:AnIntroduc8ontoCryptography–PGPCorpora8on
Thejargono Cryptographyo Hashfunc8onso DigitalSignaturesþ Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addresso Wallets
Hashbeginswith5zeros
[email protected]:[email protected]:18032016:xxxx
input [email protected]:[email protected]:18032016:1
hash 288721860bec3a490811981c831702d4f41e54c3f8c183c5650ac73ff231659c
input [email protected]:[email protected]:18032016:2
hash 11caf434535c35cdc843e801382f0a8643a03500649a9bfa41c8e6a4be65a413
input [email protected]:[email protected]:18032016:1580661
hash 0000080602f705257e74a4e847e9ed23ab61be5b2ba4263\acc90bd7c7c7ab4
...increasenonceIll….
CompuInghashisnottrivial,verificaIonis.
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworkþ Double-spendingo Blockchaino Merkletreeo Minerso Addresso Wallets
Canyoudouble-spendphysicalcurrency?Incaseofphysicalcurrencynotes,youcannotdouble-spendanotebecauseonceyouhandthenoteovertosomeone,youdon’thavethenoteanymoretospendagain.Canyoudouble-spendvirtualcurrency?Sinceelectronicrecordsareeasilyduplicated,a“digitalcoin”canbespentmul8ple8mes.
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingþ Blockchaino Merkletreeo Minerso Addresso Wallets
Imagesource:hFps://upload.wikimedia.org/wikipedia/commons/7/7a/Bitcoin_Block_Data.png
Blockchainisapublicledgercontaininganorderedand8me-stampedrecordoftransac8ons.Itpreventsdouble-spendingaswellasthemodifica8onofprevioustransac8onrecords.
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchainþ Merkletreeo Minerso Addresso Wallets
Imagesource:hFps://en.wikipedia.org/wiki/Merkle_tree#/media/File:Hash_Tree.svg
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeþ Minerso Addresso Wallets
• Whileagoldminerdigsintotheearthtodiscovergold,abitcoinminerusescomputa8onalpowertocalculatehashes.
• Toaddanen8reblocktotheblockchain,aBitcoinminermustsuccessfullyhashablockheadertoavaluebelowthetargetthreshold.
• MinersspendoncomputaIonalpowerandelectricityandarecompensatedbywayofarewardforeachblocktheymineandtransacIonfees.
• Minersusuallyoperateaspartofalargepoolinsteadofasindividuals.
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeþ Minerso Addresso Wallets
Imagesource:Wikipedia
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeþ Minerso Addresso Wallets
Imagesource:Wikipedia
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeþ Minerso Addresso Wallets
Imagesource:bitcoin.com
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minersþ Addresso Wallets
Therearecurrentlytwoaddressformatsincommonuse:CommonP2PKHwhichbeginwiththenumber11BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2NewerP2SHtypestar8ngwiththenumber33J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minersþ Addresso Wallets
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addressþ Wallets
• Collec8onofprivatekeys.
• Thesecollec8onsarestoreddigitallyinafile,orcanevenbephysicallystoredonpiecesofpaper.
• Althoughit’scalledawallet,aBitcoinwalletdoesnotstorebitcoins.Thewalletisacollec8onofpublic-privatekey-pairs.
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addressþ Wallets
ThesimplestBitcoinwalletisaprogram,whichperformsthesefunc8ons:
• itgeneratesprivatekeys,
• derivesthecorrespondingpublickeys,
• helpsdistributethosepublickeysasnecessary,
• monitorsforoutputsspenttothosepublickeys,
• createsandsignstransac8onsspendingthoseoutputs,
• broadcaststhesignedtransac8ons.
Thejargono Cryptographyo Hashfunc8onso DigitalSignatureso Proofofworko Double-spendingo Blockchaino Merkletreeo Minerso Addressþ Wallets
Source:hFps://bitcoin.org/en/choose-your-wallet
Bitcoin in the real world
A look at how Bitcoin, the most popular crypto-currency is being used in the real world.
BitcoinATMTheworld’sfirstbitcoinATMwassetupinWavescoffeeshopinVancouver,CanadainOctober2013
Imagecourtesy:GeFy
UsingtheBitcoinATMAuserscansaQRcodeonhissmartphonetotransferbitcoins
Imagecourtesy:GeFy
BitcoinATMmap
Source:hFp://www.coindesk.com/bitcoin-atm-map/
BrazilianUniversityAcceptsBitcoin,InstallsCampusATM
Source:hFp://www.coindesk.com/
Imagecourtesy:www.bitcoinatm.com
BitcoinATMs
Imagecourtesy:www.bitcoinatm.com
Bitcoins&captchaBitcoinscanbeearnedbyfillingoutcaptcha.Thisisprobablyfundedbyspammerswhoneedhumanstofilloutcaptchaforms.
Bitcoins&loeery
Whatcanyoubuyusingbitcoin?
Source:hFp://bitcoin-realestate.com/
Whatcanyoubuyusingbitcoin?þ Autos&Motorcyclesþ Jewelry&Watchesþ RealEstateþ Travel&VIPEventsþ FineArt&An8quesþ Collec8blesþ Handbags&Accessoriesþ Yachts&Subsþ PremiumDomains
Source:hFps://www.bitpremier.com/
BitcoinLaunderingQuickLaunder“Wescrambleyourbitcoinswiththecoinsofotherusers….(it)willonlyslowdown-notstop-amo8vatedinves8gatorfrombacktracingyourbitcoin”.SecureLaunder..“rendersyourbitcoinscompletelyuntraceable,eventothemostpersistentforensicinves8gator”…
Source:hFps://bitlaunder.com/launder-bitcoin
Blockchain & Virtual CurrenciesTechnology, Opportunities and Threats
Rohas Nagpal ([email protected])Shinam Arora ([email protected])
