Half Moon Seminer presentation for CLE credits. Goes through the technologies that underly blockchain systems, smart contracts, tokens and their applications across a number of industry verticals.

1. Bitcoin, Blockchain and the
Technology behind
Cryptocurrencies
Daniel Dewar
@danielkdewar

2. 2
- Founder , Paperchain
- Sound engineer / sound designer
- Big data & media analytics (Datalicious)
About me

3. 3
- Why blockchain?
- Distributed networks
- Cryptography
- Protocols & consensus mechanisms
- Cryptocurrencies vs tokens
- Examples
Agenda

4. “Blockchain is a technology that allows
natively digital transfer of value.”
Karl Kreder, co-founder of Grid+

5. 5
- Can't verify any data
- Doesn't allow instant transactions
- Isn't immutable
- Isn't encrypted
- Can't replace your servers
Blockchain myths

6. 6
- Voting
- Public registries
- Supply chains
- Decentralized trading
- Reconciliation
What is it good for?

7. Why blockchain?
Participants want to interact without trusted operator
between them
- censorship resistance
- pseudonymous; capable of anonymity
- resilient to failure, collusion points
- audit log against a single hash

8. 8
- Distributed network
- Cryptography
- Protocol (incentive mechanism)
Core technologies

9. DISTRIBUTED NETWORKS

10. 10
Centralized vs Distributed

11. 11
- Large network where validators (nodes) reach a
consensus that they witnessed the same thing at
the same time
- Use mathematical verification
- Size of the network is important to secure network
Distributed networks

12. 12
Distributed networks
coindesk.com

13. CRYPTOGRAPHY

14. 14
Private key cryptography
coindesk.com

15. 15
Private key cryptography
Private Key:
b13a1d831cd311673c4a2c04932b96d09326ec29dc8b885c5deb266c4f623656
Corresponding Public Key:
0x0FD20Bdce5F2072b89FD2099070BB4cD8cA18Aa3

16. 16
- Goal of a digital signature is for anyone who
receives a transaction/message to be able to
confirm the person who wrote the message knew
the corresponding private key
Private key cryptography

17. myblockchainblog.com 17
Private key cryptography

18. myblockchainblog.com 18
Private key cryptography

19. myblockchainblog.com 19
Private key cryptography

20. 20
- To have a 1% chance of guessing a digital
signature on the entire Bitcoin network would have
to work together for:
~5,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 years
Private key cryptography

21. 21
- Returns a string of characters of a fixed size from a
dataset of an arbitrary size;
- They are deterministic;
- Small changes in the input changes the output;
- Quick to compute, “one-way functions”.
Cryptography > hash functions

22. 22
- SHA (Secure Hash Algorithm) published by US
National Institute of Standards and Technology;
- Most blockchains use either SHA or similar
cryptographic hash functions;
- Bitcoin uses SHA-256.
Cryptography > SHA

23. 23
Cryptography > SHA example
“This is my password for this website.”
=
5CC98B74EEC5440694DCB70C55AE60BDB227D3DC81A4A65193660DDED7E60A43

24. 24
Cryptography > SHA example
“This is my password for this website”
=
75ED430F31FADC17699A513A95FA3D21F413704AF08221657FD525DCE9C91483

25. 25
Cryptography > SHA example
75ED430F31FADC17699A513A95FA3D21F413704AF08221657FD525DCE9C91483
5CC98B74EEC5440694DCB70C55AE60BDB227D3DC81A4A65193660DDED7E60A43

26. 26
- Allows to compare and validate passwords or
private information without revealing the
information to network.
Cryptography > hash functions

27. 27
- Each transaction has a number (hash of input
variables);
- Transactions are rolled up into blocks;
- Hash generated for blocks;
- Block input includes, previous block hash,
transactions, miner address & random number.
Cryptography > hash functions

28. coindesk.com 28
Transactions

29. TRANSACTIONS
coindesk.com 29
Txns sent to network

30. TRANSACTIONS
coindesk.com 30
Chain of blocks

31. 31
Hash functions on accounts

32. 32
Hash pointing > Merkle Trees

33. 33
1cd08afb9c196bec
347a4183668dd987
d1822af8a10167
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
55987e57bd010081
77f7377036664e73
3606fff6e6e5de
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
296bad123bcde8c8
89101cf3986df66da
b81b578343332
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
14f71613fc675d00c
bf20006c3b2328fb4
c8426720e665
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
5a7c9d18b7b97a12
0f3d4d3040260da5
4e074a5abbd6db
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
33b9d989d759c991
db657ac6356bd825
1942fd724bd241
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
259108061b9cc5
b0e36cdbcc28fa
75e60ae6fce7ea
4314ade8d292ac
e805da43c001f4
cd81d42777456d
3052c5e2c185fa
655ae5f67a378c
6193f4b6ab1ea9
33
Hash pointing on blockchains

34. Tx … m32al7 Tx … m32al7
1cd08afb9c196bec
347a4183668dd987
d1822af8a10167
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
55987e57bd010081
77f7377036664e73
3606fff6e6e5de
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
296bad123bcde8c8
89101cf3986df66da
b81b578343332
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
14f71613fc675d00c
bf20006c3b2328fb4
c8426720e665
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
5a7c9d18b7b97a12
0f3d4d3412350975
54e074a5abbd6db
Tx …. 00823b3
Tx … 390d1234t6
Tx … 4231400
Tx … 63432al7
33b9d989d759c991
db657ac6356bd825
1942fd724bd241
Tx …. 008ab3
Tx … 390dt6
Tx … 4fbs00
Tx … m32al7
259108061b9cc5
b0e36cdbcc28fa
75e60ae6fce7ea
4314ade8d292ac
e805da43c001f4
cd81d42777456d
3052c5e2c185fa
655ae5f67a378c
6193f4b6ab1ea9
34
Hash pointing on blockchains

35. PROTOCOLS & CONSENSUS

36. - Agreement on the order of transactions
36
Consensus
Different ordering can lead to
double spending
Problem
No one trusts anyone else
Solution
Accept proposals for transaction order and reward
winning proposals

37. 37
- Network mining solves the incentivization problem
- By offering your computer processing power to
service the network, there is a reward available for
one of the computers.
- Self-interest is being used to help service the public
need
Protocol

38. 38
- Protocol eliminates double-spend
- Nodes serving network create and maintain a
history of transactions
- When majority of miners arrive at same solution,
new block is added. Block is timestamped.
Bitcoin consensus models

39. 39
- Miners collect transactions into blocks
- Then submit a proposal for a block after solving a
cryptographic puzzle
Bitcoin mining

40. 40
- Started at 50 BTC and halves every 210,000 blocks
- ~every 3-4 years
- Currently at 12.5 BTC
Coinbase mining reward

41. 41

42. 42

43. Proof of Work
- Based on computing power
- Competition on who can solve first each
block’s problem
Proof of Stake
- Creator of new block determined by
wealth, or “stake” in network
43
- Fundamental chain structures are similar or
derivative
- Differences in how network is mined (incentivized)
Blockchain consensus models

44. Proof of Work
- Based on computing power
- Competition on who can solve first each
block’s problem
Proof of Stake
- Creator of new block determined by
wealth, or “stake” in network
44
- Fundamental chain structures are similar or
derivative
- Differences in how network is mined (incentivized)
Blockchain consensus models
Goal is to make it cost-prohibitive
to attack the network

45. 45

46. 46

47. 47

48. CRYPTOCURRENCIES & TOKENS

49. Cryptocurrencies
- Digitized currencies, encrypted
through cryptography
- Run on their own blockchains
Tokens
- Assets or utilities (represent coins,
loyalty points, in-game assets)
- Issued on blockchains (Ethereum,
Waves, etc)
49
Cryptocurrencies vs Tokens

50. 50
Cryptocurrencies

51. 51
Tokens

52. 52
- Decouple from underlying cryptocurrency
- Configure for behaviour and economic outcomes
Why tokens?

53. 53
- Decentralization or disintermediation is a process
targeted at entities not responsibilities
- Network actors must assume responsibility
Token engineering

54. 54
"A highly structured computer-assisted interpersonal
interactive protocol whose social contract has a
well-known and sufficiently high difficulty of attack."
Aleksandr Bulkin, Coinfund [link]
Decentralized Applications (dApps)

55. WALLETS

56. 56
- Cryptocurrency networks allow you to manage the
your own private keys
- Services like Coinbase manage a wallet on your
behalf
- If you can’t own the private keys to the wallet, it’s
not a cryptocurrency
Owned vs Managed

57. PUBLIC VS PERMISSIONED BLOCKCHAINS

58. 58
- Anyone can participate, and everyone is
anonymous
- No trust other than the state of the blockchain
- Typically employ a “mined” currency or transaction
fee (gas) to incentivize
- High cost of participation using Byzantine fault
tolerant consensus like Proof-of-Work (POW)
Public blockchains

59. 59
Public blockchains
Go to blockchain.com/explorer
Go to etherscan.io

60. 60
- Operate among known, identified and vetted participants
- Secures interactions among the group with common
goal but may not fully trust each other
- Relies on the identities of the participants
- Does not require mining
- All transactions and participant identities are recorded,
reducing the risk of malicious code injection
Permissioned blockchains

61. 61
Comparing
Public Permissioned
Data is public Privacy, confidentiality
Transactions are public Private channels
Pseudonymous Known participants
Anyone can join Permissioned
Anyone can access Permissioned
Trustless nodes Semi-trusted nodes
Low tx/s High tx/s
GDPR compliance

62. 62
Public, Private & Permissioned

63. 63
- Hyperledger
- Linux Foundation (open-source)
- Fabric
- Sawtooth
- Burrow
- Quorum (JP Morgan Chase)
Permissioned blockchains

64. SMART CONTRACTS

65. 65
- Multi-functional code that is the business logic
of the blockchain application
- Can be deployed dynamically
- Can run concurrently (stored and replicated on a
distributed storage platform)
- Autonomous
- Self-sufficient
Smart contracts

66. 66
- order-execute architecture
- Validates and orders transactions and
propagates to all peers
- Each peer executes the transactions
sequentially
Smart contracts

67. 67
- Declare variables
- Define functions
- Execute
How contracts work

68. 68

69. 69
> transferForm
> mintToken
> freezeAccount
> setPrices
> buy
> sell

70. 70
> CoinName
> sendCoin
> getBalanceinEth
> getBalance

71. 71
> Define the coin name
and issuance amount

72. 72
> sendCoin

73. 73
> getBalanceinEth

74. 74
> getBalance

75. 75
- Can create a token, or tokenized asset
- Asset can be coin or alternative currency
- Can also represent real assets (land title, energy
units, minerals, goods & services, record
keeping)
Smart contracts

76. 76
Paperchain protocol

77. 77
Paperchain protocol
Digital Asset Liquidity Protocol
Marketplace Dapp
TNFT
TPX
C
Ethereum
Proofs of Consumption
Takers Makers
Oracle APIs
SuppliersUsers
Application
Layer
Protocol
Layer
Data / Trust
Layer
Token / Incentive
Layer
Blockchain

78. 78
- Prediction market
- REP tokens used to incentivise knowledge
contribution & outcomes
- 2,000+ spot markets
augur.net
Augur

79. 79
- Prediction market
- REP tokens used to incentivise knowledge
contribution & outcomes
- 2,000+ spot markets
augur.net
Augur

80. 80
- Native Brave browser
- Blockchain based digital advertising
- BAT traded between publishers, advertisers and
users
basicattentiontoken.org
Basic Attention Token (BAT)

81. 81
- adToken used to economically incentivise
publisher domain registry (quality, data proofing)
adtoken.com
AdChain

82. 82
"A highly structured computer-assisted interpersonal
interactive protocol whose social contract has a
well-known and sufficiently high difficulty of attack."
Aleksandr Bulkin, Coinfund [link]
Decentralized Applications (dApps)

83. 83
Adoption challenges

84. 84
Adoption challenges

85. 85
Adoption challenges

86. - Metamask can run decentralized apps in
browser without running full node
86
Metamask
HTML
CSS
JS
WEB3.JS
METAMASK

87. 87

88. GOVERNMENT INITIATIVES

89. 89
- Building code registry
- Interdepartmental reconciliation
- Distributed file storage
New York City

90. 90
- Illinois Blockchain Task Force Final Report
- Land title registry
Illinois

91. 91
- Emirates Blockchain Strategy 2021
- digital transactions
- Digital currency (“emCash”)
UAE

92. 92
- Australian Digital Commerce Association
- Roadmap for Blockchain Standards
Australia

93. 93
- truffleframework.com
- metamask.io
- consensys.net
- consensys.net/academy
- tokenengineering.net
Resources

94. Daniel Dewar
dan@paperchain.io
paperchain.io
@danielkdewar
@pcdkd