2. Why are we here?
Lon Barfield & Andy Baker
(tweeting photos)
We get a chance to find partners
and develop interesting projects
You get an introduction to
blockchain
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3. What am I going to talk about?
Blockchain is cross disciplinary: Consensus, economics, cryptography,
monetary theory, voting models, trust, contract law, organisational structures,
optimisation, markets, distributed systems…
Not going to cover it all!
NO Deep technical detail.
NO How to set-up and use Bitcoin…
NO How to become a crypto-millionaire!
NO How to speculate...
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10. ‘everything you don’t understand
about money combined with
everything you don’t understand
about computers’
- John Oliver
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11. What is Bitcoin?
Digital money
Transfer bitcoins to other people with phone/laptop
Just software
There is no bank - just a trusted list of transactions
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19. No such thing as ‘a Bitcoin’
No such thing as ‘A Bitcoin’!
No such thing as ‘A digital wallet’ full of Bitcoins!
There is only a list of transactions
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20. No such thing as ‘a Bitcoin’
Your ‘Bitcoin wallet’ is just your ID number for transactions
Bitcoin works by recording JUST transactions between these ID numbers
I say ‘Here’s my ID number, transfer 3 Bitcoins to Jon’s ID number’ and that
transaction gets written down
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26. ICO: Initial Coin Offering
Like an IPO, an Initial Public Offering of shares in a company
ICO initial offering of a cryptocurrency that will be part of an ecosystem that
they are going to build…
A bit like crowdfunding - ‘here’s our idea, buy our coins and we’ll use the money
to make it real’
...are they making their ideas real?
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51. Is there any precedent? Have we
ever had alternative currencies
before?
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52. Plenty of alternative currencies
When you want a degree of control:
● Casino chips
● Disney Dollars
When there are problems with existing financial systems:
● Irish cheques - ad-hoc solution to bank strike
● Chinese jiaozi used in Sichuan province 11C - paper!
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53. … alternative currencies
Swiss WIR system - fiscal stability
80 years, 2B CHF pa, 62,000 SMBs
Bristol Pound, German Chiemgauer - keeping money local
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54. Bristol Pound
Uses paper money…
Or smartphone app and ledger
Cryptocurrencies
No paper money, just a ledger...
Just a ledger?
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59. Bitcoin and Blockchain...
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Bitcoin
Blockchain
Comet
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Comet
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
63. Many ways of doing it
Remembering it
IOUs
Keeping a ledger
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64. Ledger - a list
Old style ledger:
● ‘Principal book of account’
● Centralised - there’s only one copy
● Changeable - owner can alter the entries
Modern day digital ledgers are still old-style ledgers really…
Centralised, changeable, (and open to hacking).
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65. Commodity ledgers - gold
German gold repatriation
366 tons of gold shifted from New York And Paris
Owned by Germany but was in other countries
Ownership on a ledger, commodity is based elsewhere
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66. Other sorts of ledgers?
My bank account
● Bank has a ledger
● I have a ledger (my bank statements)
I alter my copy, can I convince the bank?...
Yes, two people have a copy, but only one has the ledger
Trust resides in the institution, not in the ledger
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68. Tally sticks
Recording a debt
Notches on a stick, then
split the stick
Two copies of
ledger/transaction
Embodies trust
Good for over 600 years!
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69. Tally sticks
Stopped in 1826
Leftovers stored in the
old houses of parliament
Burnt in the furnaces in
1834
A workman; Mr Cross
was given the job
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72. A new sort of ledger
Not an old sort of ledger in digital form, it’s a new sort of ledger:
These are actually terms
that we don’t use much!
“Distributed Ledger
Technology is
immutable and
distributed”
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73. Immutable & Distributed
Ledger: It’s a list
Immutable: It is a permanent list, once you add an entry no one can take it off,
or hack it or alter it. It has high data-integrity.
Distributed: There are copies on many different computers. It is in the public
arena. Everyone (on the internet) can access it.
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74. Immutable & Distributed
It is the opposite of the web!
Web is plastic, editable. You can delete things, change things
It’s run off a single server, under one agent’s control
Blockchain is a permanent, trusted record of information,
distributed to the public
Less like the web revolution…
more like the printing press revolution.
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75. Distributed ledgers - no new tech!
iPhone
Not a breakthrough, but a novel amalgam of existing technologies
A beautiful design
Blockchain
A novel amalgam of lots of existing data/cryptographic ideas
A beautiful design
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79. Immutable (do ‘Distributed’ later)
Anything stored digitally can be changed
We can check if it’s been tampered with, check its integrity
Replace it with a good copy if required.
A list of entries with a ‘tamper alarm’. I can tell if anyone tweaks it and replace
it with my un-tweaked back-up copy.
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80. Tamper alarm - use a Hash code
“It’s a bit like a shadow”...
“A bit like a fingerprint”, “like DNA”, “like…”
A code generated from some information. You always get the same code from
that information. If someone changes the information then you get a different
code.
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83. Hashing - a simple version
2, 4, 6. Total is 12, units part is 2, this is recorded as the hash code (hash=2)
If someone changes the last digit to a 7 then…
2, 4, 7 I check it, total is 13, units part is 3, doesn’t match the recorded hash!
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88. Faking a block deep in the blockchain
You have to
Recalculate the hash for that block
and then recalculate the hash for the next block
And so on.
And there are half a million blocks on the bitcoin blockchain!
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89. Immutable & Distributed
I have a ledger, I can check it for tampering, and correct it with my back-up
I know I can trust the ledger, but everybody else has to trust me! I have the
ledger
Only part of the solution
What about if no single person has the ledger?
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90.
91. Immutable & Distributed
Have loads of copies on different computers.
No one in charge deciding what transactions are in the next blocks.
Each computer is trying to add a different new block of transactions that are
floating around in a pool, trying to finish their own block.
When a block gets finished it is sent off to the other computers.
Then it all starts again!
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92. 92
Sheet 4 - First to complete the next block
Shout ‘YES’ and
put your hand up
when you are
done
93. Immutable & Distributed
All computers will finish at about the same time!
Leads to collisions, ‘chaos’, lots of sorting out which block to use.
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94. Slow it down...
Get a clear winner, give the new block time to be broadcast
Give all the others time to get the winning block so that everyone can start at
about the same time
Ensure a ‘level playing field’
Make it artificially difficult!
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96. Throttle control
That’s the ‘mining’ bit!
As more computers do mining, more likely to get a block done quickly.
System reacts to keep the time-span wide, so it makes it even more difficult!
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100. Alternative solutions to a distributed system
Bitcoin blockchain - it works, but it works by being energy hungry
Other solutions - difficult to devise, difficult to prove that they work since they
depend on participants behaviour
...it is difficult!
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102. It is difficult
Security - what if lots of participants try to alter it?
Motivation of participants - why would the participants bother?
Scope - what if the blockchain is really massive?
Speed - what if it takes half a day to add something AND get it confirmed
Decentralised! - no single participant is in charge of things, no-one is!
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103. Security
Distributed! No central point to hack! (good)
Consensus can still be subverted - ‘51% attack’ (bad)
Who is doing the mining, perhaps it’s being done on 1,000 computers; (good)
But they are all in one company; (bad)
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104. Security
Privacy, all data is very much ‘out there’ (bad?)
Transparent, all data is very much ‘out there’ (good?)
Integrity; Bitcoin is worth $ 160 Billion, never missed a beat! (good)
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105. No agent-in-the-middle
Agent in the middle has to have the trust of both parties
With blockchain the trust lies in the technology of the blockchain
● No corruption
● No high fees for shared trust
● No delays (all good)
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106. Anonymity
Can be totally anonymous (bad, for crime prevention)
Can show all transactions transparently
(good, for crime prevention, if you can identify who owns the wallet ID!)
Even with Bitcoin “investigators can follow the money”
Brett Nigh (FBI Assistant General Counsel)
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107. Bitcoin is totally anonymous...
Philip and Diana Koshy. Graduate students at Penn State in 2014
Built their own version of a Bitcoin node that gathered all data, then analysed
the data
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108. De-anonymising
Distributed systems can be inefficient, can get ‘glitches’
Lots of transaction clusters being broadcast...
Very occasionally a computer running bitcoin at a certain internet address
broadcasts just one transaction - they probably made that transaction!
Philip and Diana mapped IP numbers to wallet IDs!
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109. De-anonymising
Ross Ulbricht: Got life, February 2015
Tomáš Jiříkovský: Assets seized, March 2015
Trendon Shavers: Guilty of Bitcoin securities fraud, September 2015
Mark Karpelès: Charged with fraud and embezzlement
Fake nodes have been observed with government IP addresses probably
hoovering up data packets for surveillance
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113. Contracts
As immutable as possible (difficult to change)
As durable as possible (lifetime longer than the contract terms)
As high a level of integrity as possible (witnesses, authenticity stamps)
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114. Blockchains store data
Transactions are data: ‘I paid John 10 Bitcoins’
A promise/contract is data
‘John and I agree that I will pay John 10 Bitcoins on June 12th 2018’
But executable code is also data!
‘John and I agree that I will pay John 10 Bitcoins on June 12th 2018’ and the
blockchain will actually do it for us on that date!
A ‘smart contract’
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115. Smart contracts
Code that manipulates digital money and digital assets based on conditions
and time. And because it is in the blockchain it is fixed, visible and trusted
Software licensing, media licensing, digital assets
Will need lawyers and coders working together
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116. Long way to go...
Very early stages
Clumsy, restricted language, easy to make mistakes
Can’t correct mistakes once they are on the blockchain
“I’ll just debug it… oh, I can’t!”
Recipe for disaster… and disasters have happened!
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119. Disaster
November 2017
Novice looking at the multi-signature contract to learn from it
Contract had not been initialised, they tried initialising it and discovered that the
result was that they had become the owner of the contract!
Unable to believe this they tried issuing the kill command
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121. Disaster
A newcomer poking around had permanently locked over 500 accounts
Totalling over 100 Million pounds
You can’t ring up the bank and get them to help sort it out… there is no bank!
There was nothing anyone could do.
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125. Provenance
deBeers, Diamond tracking
Public blockchain, deBeers are... “progressing development”
Each diamond has a unique signature in terms of its properties (cut, colour,
clarity, carat). Record of provenance will be public and immutable and follow
the diamond around.
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126. Internet of Things, provenance/tracking
Charity/aid donations
Pharmaceutical authenticity
Provenance (UK based company), using blockchain and smart tagging to track
sustainably fished tuna from fishing line to dining plate
Usually companies have ledgers, but things don’t
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127. Proof of Concept
MIT MedRec project, a private blockchain, demonstration only
Medical records on a blockchain
Researchers do the processing/mining in exchange for aggregate medical
information from the records
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128. First steps
CREDIT SUISSE AND ING EXECUTE FIRST LIVE TRANSACTION USING HQLAX
SECURITIES LENDING APP ON R3’S CORDA BLOCKCHAIN PLATFORM
Credit Suisse and ING swapped baskets of securities of value EUR 25 million
using the HQLAx Corda-based collateral lending application.
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129. Government interest
Estonia (population 1.3 M, tech-friendly laws)
Advanced digital government infrastructure
Only ever fill in your details once
Uses blockchains for some of its government data
Dubai, South Korea, Lichtenstein also talking about national blockchains
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130. GovCoin trials
In the UK! In 2016!
Department of Work and Pensions trialed a cryptocurrency for benefit
payments.
Fast transfer of benefits and help with targeted saving. “Three days going
through the banking system may mean using a payday lender, or being thrown
out of your house.”
Objections raised on the idea of opening up the data to commercial enterprises
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131. First steps again
Sweden’s land-ownership authority is soon expected to conduct their first
Blockchain technology property transaction after two years of testing…
Sierra Leone national elections 7 March 2018. Blockchain used in part of the
counting process...
“A private, permissioned blockchain to oversee the results of a national election
in real time. It then relayed the data to individuals entrusted to oversee and
verify the nation's democratic process.”
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132. UN World Food Program
CoinDesk article - June 13, 2017
“As revealed exclusively to CoinDesk, the platform was successfully used to
record and authenticate transfers for about 10,000 individuals”
Wfp.org press release - May 30, 2017
“In Jordan’s Azraq camp, 10,000 refugees are now able to pay for their food by
means of entitlements recorded on a blockchain-based computing platform.”
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133. Banks using blockchain!
Santander using blockchain technology: OnePay FX
Madrid, 12 April 2018 – PRESS RELEASE Banco Santander today announced
the launch of a new international payments service using blockchain-based
technology [...] With the launch of the service, Santander will become the first
bank to roll out a blockchain-based international payments service to retail
customers in multiple countries simultaneously.
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134. Banks using blockchain!
Using Ripple technology, a blockchain company Santander invested in
Part of Ripple suite being used is xCurrent
xCurrent is built around Interledger Protocol (ILP), an open, neutral protocol,
that enables interoperation between different ledgers
Blockchain technology… YES… but NOT a blockchain
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136. Blockchain is A solution, not THE solution
Blockchain bandwagon
Blockchain is a solution
Other technologies are available...
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137. Blockchain is revolutionary
It is a new concept, with many possibilities
It incorporates elements of behaviour in the technology (like economics)
It enables new services
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138. Where should we be looking?
Companies do not yet trust the idea of setting core data free
Grass-root individuals do not yet have the scale/resources
NGOs and the disenfranchised, scarcity of tech and dedicated budget
Supply chains, but who sets them up?
Governments; admin savings, transparency
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