The End of Data Silos: Interoperability via Cryptocurrencies

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The End of Data Silos: Interoperability via Cryptocurrencies Neha Narula Digital Currency Initiative

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interoperability

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DB (EMRs) Application Application

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DB (EMRs) Application Doctor DB (EMRs) Application Hospital APIs

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Problems: Back office reconciliation Hard to share – need to have n2 APIs Compromises still happen!

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DB (EMRs) Application Doctor DB (EMRs) Application Hospital APIs

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DB Hospital Pharmacist Doctor

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A new (again) database: The blockchain

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distributed consensus public key cryptography common data formats and protocols

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Distributed consensus Problem of multiple computers agreeing on a value Used to build a log of operations with state machine replication Works as a distributed database

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Distributed consensus log

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Byzantine fault tolerant distributed consensus log

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Consensus: a very old problem 1982 Byzantine Generals Problem formulated 1999 Practical Byzantine Fault Tolerance paper published 2009 Bitcoin introduces Nakamoto Consensus 1990 Leslie Lamport writes about Paxos 2014 1980 1985 1990 1995 2000 2005 2010 2015 Raft paper published 2006 Google publishes Chubby paper

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Public key cryptography Hash functions Digital signatures Sharing data selectively

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Public key cryptography Hash functions Digital signatures Sharing data selectively

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Common data formats Rules for what can go in the log records Agreement on valid operations and states

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Components of blockchains distributed consensus public key cryptography common data formats + +

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using a log to build a decentralized digital currency Alice Bob 1MHepPtrqAxZ

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Potential problems with digital token transfer 1.  Intercept transfer and steal funds 2.  Spend money without authorization 3.  Replay attack 4.  Double spend

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“I, Alice, would like to send Bob one coin” Alice! “I, Alice, would like to send Bob 1MHepPtrqAxZ” Alice! Alice Bob Eve 1.  Intercept transaction and steal funds 2.  Spend money without authorization 3.  Replay attack 4.  Double spend Eve Alice!

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“I, Alice, would like to send Bob 1MHepPtrqAxZ” Alice! “I, Alice, would like to send Carol 1MHepPtrqAxZ” Alice! Bob Carol 1.  Intercept transaction and steal funds 2.  Spend money without authorization 3.  Replay attack 4.  Double spend Alice! Uniqueness and ordering Alice

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Don’t trust, verify.

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Blocks merkle root hash of prev block timestamp # txns txns

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Merkle tree H(HA HB ) H(B) H(C) H(D) H(A) H(HC HD ) H(HAB HCD ) A B C D merkle root

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Merkle tree H(HA HB ) H(B) H(C) H(D) H(A) H(HC HD ) H(HAB HCD ) A B C D C in MY merkle root? merkle root

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log Participation based on identity Sybil attack

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Proof of work: Bitcoin mining Nakamoto Consensus

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Blocks created by solving a computational puzzle merkle root hash of prev block timestamp nonce difficulty # txns txns

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Why do people solve this puzzle and follow the rules?

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$$$

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distributed consensus public key cryptography common data formats and protocol

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distributed consensus public key cryptography common data formats and protocol mechanism design

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Rational behavior in Bitcoin Try to solve the puzzle for bitcoins Build on the longest valid chain The one the other rational ones are building on All valid transactions Why are bitcoins worth anything??

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log

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log ? ? ? ?

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Downsides of Bitcoin Energy usage for proof of work Performance Concentration of mining power Difficulty of use Uncertainty of new currency

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What we can learn from Bitcoin Open-admissions, rationality-based protocols work at large scale! Simple transaction formats are useful Giving users the power to audit their own transactions is powerful More open systems with less trust → -  Choice -  Interoperability

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Savings and credit practices in the developing world Mobile money Real time gross financial settlement Credentialing Property titling and asset transfer Global rights management for music Medical records Decentralized publishing Many real world applications

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A vicious cycle: •  High fees •  Unproven creditworthiness •  Fraud, mistrust in documentation •  Unenforceable contracts •  Communities without access to basic infrastructure Our current financial system is not serving everyone

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Blockchain The power of peer-to-peer and open systems Payments Smart contracts Privacy

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Thank you! MIT Digital Currency Initiative dci.mit.edu ted.com/talks/neha_narula_the_future_of_money narula@media.mit.edu @neha