Blockchain - The Future of Everything (from 2015!)
The deck is originally from 2015. I "re-did" the session in 2018 to prove the assumptions were not so wrong. Nevertheless, the session got denied in 2015 by SXSW - back then the only talk about the topic for the conference.
UNDERLYING TECHNOLOGY BEHIND BITCOIN. SPECIFICALLY IT IS DISTRIBUTED, CRYPTOGRAPHIC TECHNOLOGY. TO BEST UNDERSTAND WHAT BLOCKCHAIN IS, HOW IT WORKS, AND WHAT IT MAKES POSSIBLE, WE SHOULD FIRST START WITH BITCOIN AS A VEHICLE FOR EXPLORING THE CONCEPTS OF CURRENCY AND TRUST. BLOCKCHAIN FROGU
OF CURRENCY, LAUNCHED IN 2009, THAT ONLY EXISTS ONLINE AND IS NOT CONTROLLED BY ANY KIND OF CENTRAL AUTHORITY, LIKE THE US FEDERAL RESERVE. YOU HOLD ON TO BITCOINS BY SETTING UP A VIRTUAL WALLET, EITHER THROUGH A THIRD-PARTY WEBSITE, OR BY STORING IT ON SOFTWARE RUN ON YOUR COMPUTER. AS SOON AS YOU HAVE YOUR WALLET, YOU'RE PART OF THE BIG BITCOIN NETWORK. IF YOU WANT TO BUY SOMETHING FROM YOUR NEIGHBOUR, YOU SIMPLY NEED TO OBTAIN THEIR ANONYMOUS IDENTIFICATION NUMBER AND SEND THEM SOME BITCOINS. BLOCKCHAIN FROGU
IN A PROCESS CALLED "MINING," WHICH INVOLVES BITCOIN USERS ATTEMPTING TO FIGURE OUT A COMPLEX MATHEMATICAL SOLUTION RELATED TO THE CURRENT NUMBER OF BITCOINS. YOU CAN COMPARE IT TO FINDING THE MISSING PIECE OF A PUZZLE. WHOMEVER FINDS THE PUZZLE PIECE WINS A CERTAIN NUMBER OF BITCOINS, AND THE PROCESS STARTS ALL OVER AGAIN. FINDING THE BITCOIN SOLUTION INVOLVES AN INCREDIBLE AMOUNT OF PROCESSING POWER, AND SO USERS OFTEN BAND TOGETHER IN "POOLS" IN ORDER TO FIND THE SOLUTION AND TO EARN BITCOINS MORE REGULARLY. BLOCKCHAIN FROGU
AND FAR REACHING TOPIC SO LET’S START WITH LAYING DOWN FOUNDATIONAL KNOWLEDGE AS THE FIRST STEP IN YOUR JOURNEY. TO CONTINUE YOUR JOURNEY ON THE BLOCK CHAIN WE WILL TALK ABOUT POSSIBLE DESIGN OPPORTUNITIES, INTRODUCE CORE CONCEPTS AT THE HEART OF THIS NEW TECHNOLOGY AND POTENTIAL USE CASES. BLOCKCHAIN FROGU
form of a direct trade of goods and services - I will give you a stone axe if you help me kill a mammoth - but such arrangements take time. You have to find someone who thinks an axe is a fair trade for having to face the 12-foot tusks on a beast that does not take kindly to being hunted. If that did not work, you would have to alter the deal until someone agreed to the terms. BARTERING
produced the world’s first official coin. The coins were made from electrum, a combination of silver and gold. Once moulded, each coin was stamped with a picture and these pictures acted as denominations. The currency helped increase internal and external trade. Years later, the last Lydian King, Croesus, minted the world’s first gold coin. COINS
activity. I must trust that the takeaway coffee I buy is not poisoned and the vendor must trust that the five pound note I hand over is not fake. When we order products online, we must trust that the item will arrive, will be of the quality we expected and that our credit card details will not be misused. It is a social agreement we rely on. TRUST (NOT MONEY) MAKES THE WORLD GO ‘ROUND
send and receive money online without the need for a trusted third party, such as PayPal, ensuring that the same digital credit standing in for the amount being exchanged is not being spent twice. In the real world, this problem gets avoided with cash. ELIMINATING THE NEED FOR TRUSTED THIRD PARTIES
debase a currency, make too many regulations, interfere in financial transactions for contraband, and tax to death. His approach cannot be shut down or debased by the government because it is decentralized and there are no tangible assets that governments can seize. STICKING IT TO “THE MAN”
SKYPE 2001 BITTORRENT The Internet – Compared to printed media, books, encyclopaedias and traditional libraries, the World Wide Web has enabled the decentralization of information on a large scale. Skype – Skype used to be the ﬁrst peer-to- peer IP telephony network. In its origin the network has consisted of "supernodes" made up of regular users who had sufficient bandwidth, processing power, and other system requirements to qualify. These supernodes then transferred data with other supernodes in a peer-to-peer fashion. BitTorrent – BitTorrent, took on the concepts of its predecessors breaking ﬁles into multiple chunks (Usenet, Topsites) as well as the decentralized peer-to-peer distribution mechanism (Napster, Gnutella, eDonkey2000, Kazaa). In November 2004, BitTorrent was responsible for 35% of all Internet traffic. The internet has brought us decentralized systems that created disruption.
It said, “Five cents, please.” He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.” “I think otherwise,” the door said. “Look in the purchase contract you signed when you bought this conapt.” … “I’ll sue you,” the door said as the first screw fell out. Joe Chip said, “I’ve never been sued by a door. But I guess I can live through it.”
It said, “Five cents, please.” He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.” “I think otherwise,” the door said. “Look in the purchase contract you signed when you bought this conapt.” … “I’ll sue you,” the door said as the first screw fell out. Joe Chip said, “I’ve never been sued by a door. But I guess I can live through it.” – passage from Philip K Dick’s Ubik
way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure. Think about digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds… and digital money. All these are exchanged through a distributed network of trust that does not require or rely upon a central intermediary like a bank or broker. And all in a way where only the owner of an asset can send it, only the intended recipient can receive it, the asset can inherently only exist in one place at a time, and everyone can validate transactions and ownership of all assets anytime they want.
about the ‘last’ will and testament? When someone dies and the coroner verifies death and cause of death to their Block Chain, then their last will and testament is released publicly, their health records are donated to medical research charities and their life insurance policy pays out automatically. INSURANCE INDUSTRY
can single handedly disrupt the way our healthcare systems works, for good. Patients can hold the private key to their personal health data and the public keys can be used to partially share certain parts of the data, when required. • The health data can be securely stored and transmitted around the globe in seconds. • The medical records can be decentralised. • The data is stored in the nodes, a better structure compared to centralised storage of all the healthcare data — as traditionally the companies use the data to sell it to pharmaceuticals and insurance companies for better inventory management. • Time-stamping of health status updates can notify doctors when fluctuation happens to the person’s health.
ABSTRACT AND FAR REACHING TOPIC SO LET’S START WITH LAYING DOWN FOUNDATIONAL KNOWLEDGE AS THE FIRST STEP OUR JOURNEY. TO CONTINUE YOUR JOURNEY ON THE BLOCK CHAIN WE WILL TALK ABOUT POSSIBLE DESIGN OPPORTUNITIES, INTRODUCE CORE CONCEPTS AT THE HEART OF THIS NEW TECHNOLOGY AND POTENTIAL USE CASES. BLOCKCHAIN FROGU
of centralized consensus — i.e., when one central database used to rule transaction validity. A decentralized scheme, on which the bitcoin protocol is based, transfers authority and trust to a decentralized virtual network and enables its nodes to continuously and sequentially record transactions on a public “block,” creating a unique “chain”: the Block Chain What’s important here is that with this degree of unbundling, the consensus logic is separate from the application itself; therefore, applications can be written to be organically decentralized, and that is the spark for a variety of system-changing innovations in the software architecture of applications, whether they are money or non-money related. CONSENSUS LOGIC PARADIGM SHIFT
to prevent abuse in a system or network. In other words, if you have to pay to play, then this will deter would be abusers of the game. This idea has been proposed as part of service design. If you are a requester of a service, you would received computational puzzle (i.e. proof of work) that requires work be done before using the service. The work is an impediment, but not unreasonable. The service provider in turn can easily WHAT IS “PROOF OF WORK”? DEFINITION check to make sure the requester actually carried out the requisite work. Which brings us to two principles of proof of work: • The work must be moderately hard (but feasible) on the requester side • The work must be easy to check for the service provider This asymmetrical scheme has been proposed as a layer on top of web browsing and email to prevent detail of service attacks and spam. BLOCKCHAIN
of records that is the block chain itself has to be updated with new groups of transactions, all of the bitcoin miners tackle a “proof of work problem” which entails repeatedly trying to solve a cryptographic problem or challenge to get a unique result with a specific set of leading zeros. How unique? It is like wining the lottery. Consider a coin toss where the probability of getting heads or tails is 50/50 where heads is 0 and tails is a 1. No DETAILS SO HOW DOES BLOCK CHAIN DO IT? Let’s say you had to find a string with 40 zeros. That means you would have to try 2^40 attempts to find a valid proof; 1 trillion attempts on average. Not easy, but not impossible. Think of it this way, if I had 40 coins what is the likelihood that I would end up with 40 heads in a row? So, when the block chain needs to be updated all the “miners” or nodes in the bitcoin network tackle a challenge problem to find a proof. The elegance of this system is the combination of cryptographic hash functions with a distributed system to ensure that the proof of work is hard enough to thwart abusers – thus creating trust – while making it easy enough to complete and verify in a reasonable amount of time. While the concepts go back to the 90’s, this type of software has not existed ever before. That is fu**ing cool!
for decentralized applications. A smart contract is equivalent to a little program that you can entrust with a unit of value (as a token or money), and rules around that value. The basic idea behind smart contracts is that a transaction’s contractual governance between two or more parties can be verified programmatically via the Block Chain, instead of via a central arbitrator, rule maker, or gatekeeper. WHAT IS A SMART CONTRACT? One example of a smart contract would be an employment agreement: A wants to pay $500 to B to build a website. The contract would work as follows: A puts $500 into the contract, and the funds are locked up. When B finishes the website, B can send a message to the contract asking to unlock the funds. If A agrees, the funds are released. If B decides not to finish the website, B can quit by sending a message to relinquish the funds. If B claims that EXAMPLE DEFINITION he finished the website, but A does not agree, then after a 7-day waiting period it’s up to judge J to provide a verdict in A or B’s favor. …
takes the same concept of an organization, and decentralizes it. Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the Block Chain. A *DO* may or may not make use of the legal system for some protection of its physical property, but even there such usage is secondary. For example, one can take the WHAT ARE DECENTRALIZED ORGANISATIONS? DEFINITION shareholder-owned corporation above, and transplant it entirely on the Block Chain; a long-running Block Chain-based contract maintains a record of each individual’s holdings of their shares, and on-Block Chain voting would allow the shareholders to select the positions of the board of directors and the employees. *Smart property systems* can also be integrated into the Block Chain directly, potentially allowing DOs to control vehicles, safety deposit boxes and buildings.
simple feature that was never before present in the history of computer science: the ability to declare a truth, globally and without a center of authority regardless of what anyone else does to change this truth. “ ” - CHRIS DEROSE, COUNTER PATH FOUNDATION