Blockchain.currentState() and How Will it Impact Your Industry? V 1

Blockchain.currentState() & How Will it Impact Your Industry? Ahmad Gohar
Solution Architect IBM WTC @ansgohar

Dec 8, 2017 Ahmad Gohar # Code Europe 2017 2
Who am I ? Solution Architect at IBM WTC IBM Certified Expert IT Specialist OpenGroup Certified Master IT Specialist M.Sc. In IS MIBA OCEJPA, OCPWCD, OCP SQL/PL Java Duke Award Winner 2016 @ansgohar

What is Blockchain ? ? ?

Blockchain Concept in Different Levels of Difficulty • Child. • University Graduate. • Expert.

Blockchain for Child • You can trade any thing you want without need the store of know the other person • Tool that you can trade directly without need intermediaries like company ebay using technology and set technological trust • It’s is network of computers that have the same history of transactions, So that instead of having single software and database. You can have it in your computer. It’s constantly updated • Secured using Cryptography, & It’s not owned by one company

Blockchain for University Graduate • In smaller society we can trade one-to-one easily. • As the distance increases we need digital marketplaces like Amazon, Uber, … That helps us facilitate exchange of value. • But today we have a technology that allow us to trade, but instead of having a company you can do that with software with a bunch of software code that running over all the computer in this network

Blockchain for Expert • Whenever you make a transaction you did it’s logged and any update to that transaction it’s appended in that record. • It’s a system transparent public that you can append record only without affecting or changing the history of the previous records. • Parties not need to trust each other, but need to trust the mechanism of the consistent between them.

Trade Finance

Smart Contracts

Online Transactions • Physical cash – Non-traceable (well, mostly!) – Secure (mostly) – Low inflation • Can’t be used online directly Electronic credit or debit transactions Bank sees all transactions Merchants can track/profile customers

E-Cash • Secure – Single use – Reliable • Low inflation • Privacy-preserving

Bitcoin • A distributed, decentralized digital currency system • Released by Satoshi Nakamoto 2008 • Effectively a bank run by an ad hoc network – Digital checks – A distributed transaction log

Bitcoin Transactions Public key 0xa8fc93875a972ea Signature 0xa87g14632d452cd Public key 0xc7b2f68...

How does Bitcoin work? Bitcoin The protocol / technology bitcoins The currency / coin / unit of account Transaction Transfer of a coin from one owner to the next, signed cryptographically Public/Private key The receiver’s public key is his Bitcoin address The sender’s private key is used to digitally sign the transaction Block Validated collection of transactions over 10 minutes, created through mining Mining Generates a block and validates transactions through proof-of-work, creating new bitcoins in the process Blockchain Timestamped sequence of linked blocks The public ledger

Spending a Bitcoin A transaction is of the form “send these Bitcoins from address Y to address Z” Specific Bitcoins are described as outputs of previous transactions. The transaction is signed with the private key of address Y and broadcast, along with the public key of Y, to the payment network A transaction might also include a transaction fee bmm

How is a new block created? A Bitcoin miner creates a block by (1) Gathering a set of pending transactions, prioritizing those with transaction fees (2) Verifying the transactions (3) Solving a hashing problem

How is a transaction verified? “send these Bitcoins from address Y to address Z” The miner first checks the signature using the public key for address Y. • compute hash of public key for Y, which should be Y • check signature of transaction using public key for Y Then the miner checks the public ledger to verify that Y hasn’t already sent these Bitcoins to someone else. bmm

The Hashing Problem To extend the blockchain, a miner creates a new block, containing: (1) hash of previous block (2) new transactions to include in the blockchain (3) creation of reward bitcoins (e.g., 25 new BTC) (4) nonce Block is valid if hash of (1)-(4) ends in enough zeroes, as determined by current difficulty. Miner has to find the right nonce by trial and error! Difficulty chosen so that the time until the first miner wins is about ten minutes, on average.

Hashes • A hash function (like SHA-256) takes a block
of data in, and produces an effectively random fixed size number. • Any change to the input randomizes it SHA-256 “The quick brown fox did some crypto” 410312395834291203… SHA-256 “The quick brown Fox did some crypto” 983249120432492340…

Use of Cryptographic Hashes  Proof-of-work  Block contains transactions to be validated and previous hash value.  Pick a nouce such that H(prev hash, nounce, Tx) < E. E is a variable that the system specifies. Basically, this amounts to finding a hash value who’s leading bits are zero. The work required is exponential in the number of zero bits required.  Verification is easy. But proof-of-work is hard.

The Chain Block #0 Winner nobody Parent_hash 0 Nonce 0
Block #1 Winner Player 23 Parent_hash 000D45698 Nonce 3459 SHA-256 Block #2 Winner Player 16 Parent_hash 000F67839 Nonce 974329 SHA-256

What about cheaters? • Make a fake hash • What
happens then? • The algorithm will fail • Other participants will not use your block, making it not part of the chain

Where are the rules? • The laws of Bitcoin (or
any blockchain) are coded in the miner nodes • Decisions are made collectively by the miners • If 51% of the miners agree, the decision is valid • This includes each individual transaction • The source of the node is law • How do you change rules? • We want to add more coins • We want to change the block format

Take over • What happens if you obtain the majority
of mining power? • Ability to approve your own transaction But • The value of Bitcoin will most likely become zero

Physical Bitcoin (a gimmic?) private key is embedded in coin and can be accessed (possibly electronically) only by physically breaking the coin trust creator to destroy any record of private key http://media.coindesk.com/2014/09/casascius-coins.jpg

Public Key Crypto: Encryption • Key pair: public key and private key

2009-2017 https://blockchain.info/charts/blocks-size?timespan=all

2017

It’s early stages yet

Blockchain timeline

Experimental Technically Confirmed Commercialization New Applications/ Ecosystem How Mature?

Back to BitCoin • Validation – Is the coin legit? (proof-of-work)  Use of Cryptographic Hashes – How do you prevent a coin from double- spending?  Broadcast to all nodes • Creation of a virtual coin/note – How is it created in the first place?  Provide incentives for miners – How do you prevent inflation? (What prevents anyone from creating lots of coins?)  Limit the creation rate of the BitCoins

Economy Development National Competitiveness Enterprise Employment Healthcare & Education Public Service • Job creation • enhance labor Productivity. • Improve work efficiency, saving cost. • Data Centralized management, enhance information security. • Reduce carbon emission, Increase business revenue. • Promote GDP growth, • Improve National Competitiveness. • Government efficiency and provide better serve to public • Erase the digital gap, Improve resources Utilization. • Enrich people's life • Enhance people's happiness, Promote social stability. • Improve residents, health reduce the public expend Market Drivers Digital Transformation

Blockchain Internet of Things (IoT) Big Data Social Media / Mobile Apps Cloud  Cloud Host 、 Cloud Storage 、 Cloud Network 、 VDC DR and Backup  Social Networks  Messaging/ chat apps Structured Data Semi-Structured Data Unstructured Data  Decentralized Security  Reliable / Scalable  IoT Connectivity  IoT Sensors  IoT Platform Technology Enablers – Digital Transformation

Banking & Payment Industry

Banking & Payment Industry • Some people saying that Blockchain will do the banking what the Internet did to media • The Blockchain Banks “The Unbanked” • Technologies like Bitcoin allows anyone to send money almost instantly with low fees • Banks are investing in Blockchain

Banking & Payment Industry Example

Cyber-Security Industry

Cyber-Security Industry • Blockchain is public, but the data is verified and secured using Advanced cryptography • Resistant to unauthorized changes and hacks • Blockchain eliminates the need for middlemen which make it more efficient than many other legacy cybersecurity systems

Supply Chain Management Industry

Supply Chain Management Industry • Transactions are documented in a permanent decentralized record, and monitored securely and transparently • Can be used to reduced costs, and monitor time, labour, waste, emissions • Understand the environmental impact of the products • Verify authenticity or fair trade status of the product

Supply Chain Management Industry Example

Forecasting Industry

Forecasting Industry • Blockchain will change how we do research, consulting, analysis and forecasting • Place your bets in decentralized way from sports, stocks, elections

Forecasting Industry Example

Networking and IOT Industry

Networking and IOT Industry • IBM & Samsung are using a Blockchain technology to create a decentralized network of IOT devices • Eliminate the need for central location to handle communications for IOT devices • The Devices could communicate directly, update software, manage bugs, and monitor energy usage

Insurance Industry

Insurance Industry • The global insurance market are based in trust management • Blockchain is a new way of managing trust and can be used to verify many types of data and insurance contract • Oracles integrate real-world data with Blockchain smart contracts • This technology is useful for any type of insurance that relies on real-world data

Insurance Industry Example

Private Transport & Ride Sharing Industry

Private Transport & Ride Sharing Industry • Blockchain can be used to create decentralized peer-to-peer ride sharing apps allowing booth car owners and users to arranges booth terms and conditions without 3rd party providers in secure way • Automatically pay for parking, tolls, and fuel using e-wallets

Private Transport & Ride Sharing Industry Example

On-line Data Storage Industry

On-line Data Storage Industry • Data in centralized servers are vulnerable for hacking, data loss, and human error • Blockchain allow cloud storage to be more secure and robust against attacks

On-line Data Storage Industry Example

Charity Industry

Charity Industry • Common complains in the charity space include inefficiency and corruption which prevent money from reaching to those who need to have it • Blockchain can help donations to get where they are going

Charity Industry Example

Voting Industry

Voting Industry • The Blockchain will disrupt voting • Blockchain can be used for voter registration, identity verification, and vote counting • Immutable, publicly-viewable ledgers of recorded votes would make elections more fair and democratic

Voting Industry Example

Government Industry

Government Industry • Government systems are often slow, opaque, and prone to corruption • Blockchain can reduce bureaucracy and increase security, efficiency, and transparency of the governmental operations

Government Industry Example

Healthcare Industry

Healthcare Industry • Another industry that relies on legacy systems is health-care • Hospitals need a secure platform to store and share sensitive data • Blockchain can help hospitals safely store medical records and share them with authorized doctors or patients

Healthcare Industry Example

Energy Management Industry

Energy Management Industry • Energy management has been a highly centralized industry for a long time • Energy producers and users can’t buy IT directly from each other and must go through the public grids

Energy Management Industry Example

Online Music Industry

Online Music Industry • Blockchain startups are coming up with ways for musicians to get paid directly from their fans • Smart contracts can solve licensing issues and catalog songs with their respective creators

Online Music Industry Example

Retail Industry

Retail Industry • When you shop you trust the retail system of the store or marketplace • Blockchain based retail utilities connect buyers and sellers without a middleman and associated fees • Trust comes from smart contract systems

Retail Industry Example

Real Estate Industry

Real Estate Industry • Issues in buying and selling real state: Bureaucracy, lack of transparency, fraud, and mistakes in public records • Blockchain technology can speed up transactions by reducing the need for paper- based record keeping • Helps tracking, verifying ownership, ensure accuracy of documents,and trasering anf peoperty deeds

Real Estate Industry Example

Crowdfuunding Industry

Crowdfuunding Industry • Crowdfunding platforms create request between creators and supporters, but they also charge high fees • In blockchain- based crowdfunding, trust is created through smart contracts and online reputation systems • New projects can release their own tokens, that can later be exchanged for products, services, or cash • Many blockchain startups have now raised millions of dollars through such token sales • The future is uncertain, but promising

The blockchain space is wide open and the opportunities are many

World’s largest taxi company World’s most valuable retailer Largest accommodation provider Industry Digital Transformation is Happening

The Revolutionary Benefits Of Blockchain Tamper- Proof An encrypted record of events that can never be changed retrospectively 01 02 04 03 05 Smart Contracts A store of code and data to automate business processes between parties via self-executing logical workflows Reconciled Data Perfect copies of a database, distributed across all participants, meaning no data reconciliation No Intermediaries P2P interactions across the network, without the need for intermediaries Innately Secure In-built encryption and consensus mechanisms provide high resistance to network attacks

Recap • Blockchain is one of the most promising new technology for the future. • What is it? Distributed ledger technology that underlies crypto-currencies like Bitcoin. • Transparent, Safe, Auditable, and Resistant to outages. • Blockchain makes tings transparent, Democratic, Decentralized, Efficient, and Secure. • Industries ripe for disruption by Blockchain.

Bitcoin resources • http://bitcoin.org • http://en.wikipedia.org/wiki/Bitcoin • http://blockchain.info • http://www.coindesk.com • http://two-bit-idiot.tumblr.com • http://www.reddit.com/r/Bitcoin/ • Video “How Bitcoin works under the hood”: https://www.youtube.com /watch?v=Lx9zgZCMqXE • http://mitbitcoinexpo.org

Recommendations • Start from first principles: • What needs fixing? • Why hasn’t it been fixed yet? • What does the new process look like, A to Z? • Which pieces of the puzzle are missing? • Start small, and think big in terms of: • Use cases in your industry. • What it means for the development of distributed computing.

Acknowledgement Some of the slides, content, or pictures are borrowed from the several resources, and some pictures are obtained through Google search without being referenced below 119 CS660 - Advanced Information Assurance - UMassAmherst

@ansgohar

Blockchain.currentState() and How Will it Impac...

Blockchain.currentState() and How Will it Impact Your Industry? V 1

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