The History of Blockchain - From Bitcoin to Shared Ledgers

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FROM BITCOIN TO BLOCKCHAIN

2008

2008

BofA buys struggling CountrywideJan 11

Fed forces sale of Bear StearnsMar 16

Lehman Brothers files for bankruptcy Sep 15

Fed bails out AIG for $85BSep 16

Washington Mutual failsSep 25

Market crashes; system almost collapsesSep 29

Gov’t authorizes $700B for bank bailoutOct 3

A B

We have been solving for the wrong problem

instead of solving for trust

C

BA C

we should have been solving for integrity


BA

maybe we don’t need trust


“The root problem with conventional currency is all the trust that’s required to make it work…the history of fiat currencies is full of breaches of that trust.”

— Satoshi Nakamoto (creator of Bitcoin)

What if?New financial system built on integrity instead of trust…

What if?New type of database with built-in integrity

What if?Replicate it everywhere so everyone has a copy

What if?All participants validate every change to the database

What if?We created a tamper-proof audit log of all transactions.

Transactions

Transactions

Transactions

Transactions

January 3, 2009

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.

A

A

A

B

B

A

A

C

B

Let’s combine the best of peer-to-peer…

Peer to Peer

No fees

Resilient

No single point of failure

Distributed power

Freedom to innovate

No large attack target

A

A

A

C

And the best of centralization…

C

A

A

A

B

B

B

Central Counterparty

Increased reliability

Reduced reconciliation

Single connection

Universal system of record

Reduced complexity

Transaction safety

A

To create the best of both worlds…

A

A

C

C

A

A

A

B

B

B

Central Counterparty

A

A

B

B

A

A

C

B

Peer to Peer

A

B B A

C

A

A blockchain built on integrity

Blockchain Solution

C

A B

Alice wants to send money to Bob.

How does a blockchain work?

The transaction is posted to a block along with other transactions.

A B C D E F

G H

M N

I J

O P

K L

Q R

The block is sent to all validators in the network

A B C D E F

G H

M N

I J

O P

K L

Q R

Node A

Node B

Node C

Node D

Node E

The network approves the valid transactions.

A B

N

C D E F

G H

M

I J

O P

K L

Q R

Node A

Node B

Node C

Node D

Node E

The block is added to the blockchain

A B

Block 432568

+ 10 Transactions

Block 432567117 Transactions


Block 432568

+ 10 Transactions



As the chain builds, the transaction becomes immutable.

Block 432568

+ 10 Transactions



Block 432569

112 Transactions As the chain builds, the transaction becomes immutable.

Block 432568

+ 10 Transactions

Block 432567

Block 432569

112 Transactions

Block 432570


Block 432568

Block 432569

112 Transactions

Block 432570

38 Transactions

Block 432571


Blockchain is…

..a technical tour-de-force- Bill Gates

…a once in a generation opportunity- PriceWaterhouseCoopers

…the first native digital medium for value, just as the internet was the first native

digital medium for information- Harvard Business Review

Annual Blockchain VC Funding (Millions)

2012 2013 2014 2015 2016

$2.13M

$95.05M

$362.53M

$499.08M

$718.00M

FINANCIAL INDU$TRY

July 2014 Jan 2015 July 2015 Jan 2016

66% of Banks will adopt Blockchain by 2020

2014 2017 2020

0.00%

15.00%

66.00%

source: IBM Institute of Business Value survey

Blockchain is not FinTech

It’s data management

A financial transaction is just a data type…

Bitcoin proved we can move data between

two non-trusting, anonymous parties.

A B

But what if we know the other party?

Factory Truck


Hospital Patient


Client Bank

That changes how we secure this

Client Bank

That changes how we identify these

Client Bank

That changes what we put here…

Client Bank?

and what we see here.

Block 432568

Block 432569

112 Transactions

Block 432570

38 Transactions

Block 432571

96 Transactions

G H

M N

I J

O P

K L

Q R

A

B B A

C

A

So whether the ledger secures currency

Blockchain Solution

C

$ $ $ $

A

B B A

C

A

So whether the ledger secures identities

Blockchain Solution

C

A

B B A

C

A

So whether the ledger secures information

Blockchain Solution

C

A

… it’s just a ledger

Blockchain Solution

A

Blockchain Solution

$ $

… and it’s all just data

A

B B A

C

A C

$ $

The power to unlock its potential rests with us…

finally.

Let’s [email protected]

gem.co

Please limit to internal use.

http://gem.co

Technology

The History of Blockchain - From Bitcoin to Shared Ledgers