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@ computational professor daniel martin katz danielmartinkatz.com BLOCKCHAIN, CRYPTOCURRENCY AND LAW professor nelson rosario THE BUILDING BLOCKS OF THE BLOCKCHAIN — NETWORKS + LEDGERS + CRYPTOGRAPHY nelsonmrosario.com @ nelsonmrosario BLOCKCHAINLAWCLASS.COM

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DANIEL MARTIN KATZ E D U | I L L I N O I S T E C H + S TA N F O R D C O D E X B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M PAG E | DA N I E L M A R T I N K AT Z . C O M C O R P | L E X P R E D I C T. C O M NELSON ROSARIO B LO G | L AWO F C RY P TO C U R R E N C Y. C O M PAG E | N E L S O N M RO S A R I O . C O M F I R M | M A R S H A L L I P. C O M BLOCKCHAINLAWCLASS.COM L A B | T H E L AW L A B . C O M E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW

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BLOCKCHAINLAWCLASS.COM BLOCKCHAIN AND CRYPTOCURRENCY

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BLOCKCHAINLAWCLASS.COM BLOCKCHAIN CRYPTOCURRENCY A CHAIN OF CRYPTOGRAPHICALLY LINKED BLOCKS OF TRANSACTIONS UNIQUE DIGITAL PROPERTY TRANSACTED ON A DECENTRALIZED PEER TO PEER TRANSACTION NETWORK

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THE BUILDING BLOCKS OF BLOCKCHAIN TECHNOLOGY BLOCKCHAINLAWCLASS.COM

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LEDGERS CRYPTOGRAPHY NETWORKS + + CONSENSUS + } BLOCKCHAINLAWCLASS.COM INCENTIVES + {

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LEDGERS CRYPTOGRAPHY NETWORKS + + CONSENSUS + } BLOCKCHAINLAWCLASS.COM BLOCKCHAIN APPLICATIONS = INCENTIVES + {

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LEDGERS CRYPTOGRAPHY NETWORKS + + CONSENSUS + } BLOCKCHAINLAWCLASS.COM BLOCKCHAIN APPLICATIONS = INCENTIVES + {

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THE BUILDING BLOCKS OF BLOCKCHAIN TECHNOLOGY BLOCKCHAINLAWCLASS.COM NETWORKS - ALLOW US INTERACT / COMMUNICATE LEDGERS - LET US TRACK THINGS CRYPTOGRAPHY - HELPS US SECURE THINGS (*NOTE* NOTHING CAN EVER BE PERFECTLY SECURE)

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BLOCKCHAINLAWCLASS.COM LETS TAKE A BIT OF A DEEPER DIVE

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BLOCKCHAINLAWCLASS.COM NETWORKS

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BLOCKCHAINLAWCLASS.COM TODAY MANY PEOPLE THINK OF SOCIAL NETWORKS AS NETWORKS

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BLOCKCHAINLAWCLASS.COM MAPPING FACEBOOK NETWORK HTTPS://WWW.FACEBOOK.COM/NOTES/ FACEBOOK-ENGINEERING/VISUALIZING- FRIENDSHIPS/469716398919

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BLOCKCHAINLAWCLASS.COM

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BLOCKCHAINLAWCLASS.COM BUT NETWORKS ARE ALL AROUND US

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BLOCKCHAINLAWCLASS.COM SOCIAL DYNAMICS OF HIGH SCHOOLS JAMES MOODY, RACE, SCHOOL INTEGRATION, AND FRIENDSHIP SEGREGATION IN AMERICA, AMERICAN JOURNAL OF SOCIOLOGY 107, 679-716 (2001)

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BLOCKCHAINLAWCLASS.COM NICHOLAS A. CHRISTAKIS AND JAMES H. FOWLER, THE COLLECTIVE DYNAMICS OF SMOKING IN A LARGE SOCIAL NETWORK, 358 NEW ENGLAND JOURNAL OF MEDICINE 2249 (2008) SOCIAL DYNAMICS OF SMOKING

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BLOCKCHAINLAWCLASS.COM JOHN KELLY AND BRUCE ETLING, MAPPING IRANʼS ONLINE PUBLIC: POLITICS AND CULTURE IN THE PERSIAN BLOGOSPHERE, BERKMAN CENTER FOR INTERNET AND SOCIETY AND INTERNET & DEMOCRACY PROJECT, HARVARD LAW SCHOOL (2008) MAPPING IRAN’S BLOGOSPHERE

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BLOCKCHAINLAWCLASS.COM SPECIAL ISSUE - COMPLEX SYSTEMS AND NETWORKS, 325 SCIENCE 5939 (2009)

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BLOCKCHAINLAWCLASS.COM MARK NEWMAN, NETWORKS: AN INTRODUCTION. OXFORD UNIVERSITY PRESS (2010) (A VERY GOOD AND FAIRLY COMPREHENSIVE TREATMENT)

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BLOCKCHAINLAWCLASS.COM INDEED NETWORKS ARE EVEN WITHIN US

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BLOCKCHAINLAWCLASS.COM M. K. GANAPATHIRAJU, M. THAHIR, A. HANDEN, S. N. SARKAR, R. A. SWEET, V.L. NIMGAONKAR & S. CHAPARALA, SCHIZOPHRENIA INTERACTOME WITH 504 NOVEL PROTEIN–PROTEIN INTERACTIONS, 2 NPJ SCHIZOPHRENIA16012 (2016)

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BLOCKCHAINLAWCLASS.COM HAGMANN P, CAMMOUN L, GIGANDET X, MEULI R, HONEY CJ, WEDEEN VJ, SPORNS O, MAPPING THE STRUCTURAL CORE OF HUMAN CEREBRAL CORTEX. PLOS BIOLOGY VOL. 6, NO. 7, E159 (2008)

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BLOCKCHAINLAWCLASS.COM AND IN LAW LAW LAND AS WELL

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has spread from its ysical sciences into cial sciences (1). In- cial sciences frame from the financial d system as complex ) and urge policy- olutions with What is often se initiatives also complex st as it seems ory measures AS properties or regulation, o appreciate ystems yield nrealistic as- ng empirical w, there has exity science. cal studies of searchers are ngly evident cientific sup- ch agenda to gap and ad- ons. t what com- y as hallmark e diverse in- res, agencies, due process, actors (e.g., and judges); regulations, are intercon- tic processes s, and rule- mechanisms ourts and ju- n). These are all em- and nonhierarchical e.g., cross-references ns and judicial opin- ies of federal, state, stitutions) that fre- ganizing properties exercise bounded rationality, have only par- tial information, and are able to exercise only varying degrees of control on overall system behavior (2). Efforts to integrate CAS approaches to regulated systems may flounder if complex adaptive characteristics of the legal system it- self are not taken into account. For example, although natural-resources policy theorists have advocated for a new field of adaptive management based on an understanding that ecosystems are CAS, agencies, courts, and other components of the legal system have reacted in unexpected ways that can frustrate adaptive management (3). Legal systems are locked in perpetual co- evolution with their regulatory targets. Co- adaptive dynamics have driven growth in structure and size, punctuated with stages of nonlinear expansion of the U.S. statutory was a factor in the 2008 financial crisis (5) and the Deepwater Horizon oil spill (6). THEORY, ANALYSIS, APPLICATION Application of informatics and big-data– styled research to law offers many potential benefits for conventional empirical legal studies. The CAS framework is neither an extension of nor a replacement for that ap- proach but a different way of envisioning systems in which agent strategies and sys- tem structures evolve, with outcomes stan- dard game theory and equilibrium analyses would not predict (7). Although well behind CAS research in other social sciences, re- searchers have begun to map CAS concepts onto the legal system (2). Researchers are applying empirical tools of complexity sci- ence to understand how to measure, moni- tor, and manage the legal system as a CAS. U.S. Supreme Court term Percentage of cases contained within giant component Giant component (%) 60 1805 1810 1810 1815 1820 1820 1825 1830 1830 1835 50 40 30 20 10 0 United States Supreme Court citation network (1805–1835) Cases are represented as nodes, citations between cases as edges. Emergence of a giant [connected] component after 1815, a hallmark phenomenon in complex systems, represents a transition from jurisprudential reliance on foreign to domestic law following the War of 1812 (4). We include all cases that had been cited at least once over the Court’s history (1791–2015). For figure code and data, see https://github.com/mjbommar/legal-complexity-science. Nashville, TN 37203, USA. cago-Kent College of Law, he Stanford Center for 05, USA. Email: jb.ruhl@ 31 MARCH 2017 • VOL 355 ISSUE 6332 1377 3/29/17 11:31 AM Published by AAAS on March 30, 2017 http://science.sciencemag.org/ Downloaded from J.B. Ruhl, Daniel Martin Katz & Michael Bommarito, Harnessing Legal Complexity, 355 Science 1377 (2017) Michael Bommarito, Daniel Martin Katz, Jonathan Zelner & James Fowler, Distance Measures for Dynamic Citation Networks 389 Physica A 4201 (2010) BLOCKCHAINLAWCLASS.COM

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BLOCKCHAINLAWCLASS.COM (a) Christian Sternitzke, Adam Bartkowski & Reinhard Schramm, Visualizing Patent Statistics by Means of Social Network Analysis Tools. 30 World Patent Information 115 (2008) (a) (b) (b) Daniel Martin Katz & Michael Bommarito, Measuring the Complexity of the Law: The United States Code, 22 Journal of Artificial Intelligence & Law 1 (2014) (c) Daniel Martin Katz & Derek Stafford, Hustle and Flow: A Social Network Analysis of the American Federal Judiciary, 71 Ohio State Law Journal 457 (2010) (c)

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BLOCKCHAINLAWCLASS.COM NETWORKS ARE AS OLD AS HUMANS

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BLOCKCHAINLAWCLASS.COM A.A. WHITE, THE SOCIAL NETWORKS OF EARLY HUNTER- GATHERERS IN MIDCONTINENTAL NORTH AMERICA. PH.D. DISSERTATION: UNIVERSITY OF MICHIGAN (2012)

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BLOCKCHAINLAWCLASS.COM NETWORKS - A DEFINITION PEOPLE/SOCIAL - AN INTERCONNECTED ASSOCIATION OR GROUP OF PERSONS THOSE INDIVIDUALS MIGHT SHARE INFORMATION AND RESOURCES

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BLOCKCHAINLAWCLASS.COM A FAMILY IS A NETWORK

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BLOCKCHAINLAWCLASS.COM A TRIBE OR VILLAGE IS A NETWORK JAIME IRANZO, JAVIER M. BULDÚ & JACOBO AGUIRRE, COMPETITION AMONG NETWORKS HIGHLIGHTS THE POWER OF THE WEAK, 7 NATURE COMMUNICATIONS 13273 (2016).

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BLOCKCHAINLAWCLASS.COM CITIES AND REGIONS (AS WELL AS COUNTRIES) CAN BE THOUGHT OF AS NETWORKS C. HERRERA-YAGÜE, C. M. SCHNEIDER, T. COURONNÉ, Z. SMOREDA, R. M. BENITO, P. J. ZUFIRIA & M. C. GONZÁLEZ, THE ANATOMY OF URBAN SOCIAL NETWORKS AND ITS IMPLICATIONS IN THE SEARCHABILITY PROBLEM, 5 SCIENTIFIC REPORTS 10265. (2015)

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BLOCKCHAINLAWCLASS.COM AS WE HAVE NOTED IN PRIOR MODULES, MUCH OF HUMAN HISTORY CONCERNS SCALING TRUST AND GROWING NETWORKS

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BLOCKCHAINLAWCLASS.COM THE WAY TRUST HAS BEEN SCALED THROUGH THE USE OF COORDINATION TECHNOLOGY

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COORDINATION TECHNOLOGY BLOCKCHAINLAWCLASS.COM WRITING TELEGRAPH TELEPHONE THE INTERNET BLOCKCHAIN APPLICATIONS?

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BLOCKCHAINLAWCLASS.COM HOWEVER IT IS THE NETWORKED INFRASTRUCTURE THAT IS OF GREATEST INTEREST HERE

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BLOCKCHAINLAWCLASS.COM FOR OUR PURPOSES WE ARE CONCERNED WITH COMPUTER NETWORKS

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BLOCKCHAINLAWCLASS.COM NETWORKS - A DEFINITION REVISITED AN INTERCONNECTED ASSOCIATION OR GROUP OF PERSONS PEOPLE :

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BLOCKCHAINLAWCLASS.COM NETWORKS - A DEFINITION REVISITED AN INTERCONNECTED CHAIN, GROUP OR SYSTEM TECH :

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BLOCKCHAINLAWCLASS.COM NETWORKS - A DEFINITION REVISITED COMPUTER NETWORK : DIGITAL TELECOMMUNICATIONS NETWORKS THAT ALLOW COMPUTERS TO SHARE RESOURCES/INFORMATION

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BLOCKCHAINLAWCLASS.COM THE MOST WELL KNOWN COMPUTER NETWORK IS THE INTERNET

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BLOCKCHAINLAWCLASS.COM COMPUTER NETWORKS ARE ORGANIZED ACCORDING TO PROTOCOLS

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BLOCKCHAINLAWCLASS.COM PROTOCOLS ARE A SET OF RULES FOR HOW INFORMATION SHOULD BE HANDLED

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BLOCKCHAINLAWCLASS.COM NETWORK PROTOCOLS GOVERN HOW DATA IS TRANSMITTED ON A NETWORK

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BLOCKCHAINLAWCLASS.COM REMEMBER THIS

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REMEMBER THIS

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OKAY LETS GO BACK IN TIME A BIT …

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BLOCKCHAINLAWCLASS.COM ARPANET DECEMBER 1969

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BLOCKCHAINLAWCLASS.COM ARPANET ARPANET, OR ADVANCED RESEARCH PROJECTS NETWORK, WAS AN EARLY PACKET SWITCHING NETWORK

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BLOCKCHAINLAWCLASS.COM ARPANET PACKET SWITCHING IS A WAY OF TRANSMITTING DATA ON A NETWORK BY BREAKING THE DATA INTO TWO PARTS …

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BLOCKCHAINLAWCLASS.COM ARPANET HEADER : THE INTERNET IS A PACKET SWITCHING NETWORK PAYLOAD : THE HEADER IS USED TO ROUTE THE DATA

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BLOCKCHAINLAWCLASS.COM ARPANET APRIL 1984

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BLOCKCHAINLAWCLASS.COM ARPANET - MID 1960’S INTERNET 1990’S LAN/WAN - MID 1980’S TCP/IP - LATE 1970’S BLOCKCHAIN 2010’S IOT 2020’S (AND BEYOND) (AND BEYOND)

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BLOCKCHAINLAWCLASS.COM NETWORKS CAN BE ORGANIZED IN DIFFERENT WAYS INCLUDING HOW THEY ARE CONTROLLED

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BLOCKCHAINLAWCLASS.COM MOST BLOCKCHAIN NETWORKS ARE ORGANIZED AS DECENTRALIZED NETWORKS

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BLOCKCHAINLAWCLASS.COM THE EXTENT OF CENTRALIZATION EXISTS ON SPECTRUM

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BLOCKCHAINLAWCLASS.COM NETWORKS - TYPES NOT FULL DECENTRALIZED BUT LESS THAN THE CENTRALIZED NETWORK

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BLOCKCHAINLAWCLASS.COM MOST CRYPTOCURRENCY BLOCKCHAINS ARE PEER TO PEER NETWORKS

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BLOCKCHAINLAWCLASS.COM PEER-TO-PEER NETWORK

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BLOCKCHAINLAWCLASS.COM PEER-TO-PEER NETWORKS EXAMPLES THE FIRST WAVE OF PEER-TO-PEER APPLICATIONS WERE FOCUSED ON FILE-SHARING NAPSTER BITTORRENT GROKSTER

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BLOCKCHAINLAWCLASS.COM PEER-TO-PEER NETWORKS EXAMPLES THE SECOND WAVE OF PEER-TO-PEER APPLICATIONS ARE FOCUSED ON ALL SORTS OF TOPICS FINANCE COMPUTING FILE STORAGE

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BLOCKCHAINLAWCLASS.COM LEDGERS

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BLOCKCHAINLAWCLASS.COM HOW SHOULD WE ORGANIZE INFORMATION ON THESE NETWORKS?

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BLOCKCHAINLAWCLASS.COM ONE OPTION IS TO USE A LEDGER

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BLOCKCHAINLAWCLASS.COM LEDGERS MAY BE USED TO TRACK TRANSACTIONS

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BLOCKCHAINLAWCLASS.COM ALL PARTICIPANTS IN A LEDGER HAVE AN ACCOUNT WHERE THEY RECEIVE CREDITS OR DEBITS

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BLOCKCHAINLAWCLASS.COM AS NOTED, LEDGERS HAVE BEEN AROUND FOR MORE THAN 5000 YEARS …

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BLOCKCHAINLAWCLASS.COM https://www.coindesk.com/information/what-is-a-distributed-ledger/

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BLOCKCHAINLAWCLASS.COM DOUBLE-ENTRY BOOKKEEPING LUCA PACIOLI - INVENTOR EVERY CREDIT HAS A DEBIT AND VICE VERSA REVOLUTIONIZED FINANCE/ BANKING/TRADE

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BLOCKCHAINLAWCLASS.COM LEDGERS - ISSUES LEDGERS CAN BE MAINTAINED BY A CENTRAL PARTY LEDGERS CAN BE MAINTAINED BY MULTIPLE PARTIES THAT THEN NEED TO RECONCILE THEIR LEDGERS

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BLOCKCHAINLAWCLASS.COM LEDGERS - AN EXAMPLE FROM BANKING

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BLOCKCHAINLAWCLASS.COM LEDGERS ARE THE BASIS OF BANKING

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BLOCKCHAINLAWCLASS.COM LEDGERS MUST BE RECONCILED BY PARTIES TO VERIFY TRANSACTIONS

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BLOCKCHAINLAWCLASS.COM THIS RECONCILIATION PROCESS IS TIME CONSUMING AND COSTLY

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BLOCKCHAINLAWCLASS.COM FOR OUR PURPOSES, LEDGERS ARE A WAY TO TRACK THE FLOW OF FUNDS BETWEEN PARTIES

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BLOCKCHAINLAWCLASS.COM LEDGERS ALLOW PARTIES TO COME TO A CONSENSUS ON WHO OWNS WHAT

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BLOCKCHAINLAWCLASS.COM A WAY TO ORGANIZE INFORMATION MAY BE MANAGED BY A CENTRAL PARTY, OR EACH PARTY MAY MAINTAIN THEIR OWN LEDGER THAT IS LATER RECONCILED TO MAINTAIN CONSENSUS ON TRANSACTIONS LEDGERS - A REVIEW

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BLOCKCHAINLAWCLASS.COM

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BLOCKCHAINLAWCLASS.COM NOT ALL LEDGERS NEED BE CENTRALIZED OR RECONCILED

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BLOCKCHAINLAWCLASS.COM DISTRIBUTED LEDGERS ARE SHARED/ REPLICATED LEDGERS

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BLOCKCHAINLAWCLASS.COM DISTRIBUTED LEDGERS TYPICALLY LEVERAGE PEER-TO-PEER NETWORKS

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BLOCKCHAINLAWCLASS.COM THE DIFFICULTY WITH DISTRIBUTED LEDGERS IS …

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BLOCKCHAINLAWCLASS.COM HOW DOES INFORMATION GET ORDERED CORRECTLY ?

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BLOCKCHAINLAWCLASS.COM WHAT ABOUT KEEPING THINGS SECRET?

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BLOCKCHAINLAWCLASS.COM CRYPTOGRAPHY

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BLOCKCHAINLAWCLASS.COM CRYPTOGRAPHY IS ALL ABOUT SECRETS

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BLOCKCHAINLAWCLASS.COM CRYPTOGRAPHY - A DEFINITION CRYPTOGRAPHY IS THE ART AND SCIENCE OF KEEPING INFORMATION SECURE FROM UNINTENDED AUDIENCES

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BLOCKCHAINLAWCLASS.COM CRYPTANALYSIS - A DEFINITION CRYPTANALYSIS IS THE ART AND SCIENCE OF BREAKING ENCODED DATA

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BLOCKCHAINLAWCLASS.COM CRYPTOGRAPHY IS (ALMOST) AS OLD AS WRITING

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BLOCKCHAINLAWCLASS.COM EGYPT ~2000 B.C. IN EGYPTIAN TOWN MENET KHUFU IN THE TOMB OF KHNUMHOTEP II IS A SET OF HIEROGLYPHIC SYMBOLS DESIGNED BY THEIR CREATOR TO OBSCURE THEIR MEANING

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BLOCKCHAINLAWCLASS.COM EGYPT ~2000 B.C. WHILE THE EXACT REASONS FOR THIS ARE UNKNOWN - THIS IS AN EARLY EXAMPLE OF A SUBSTITUTION CIPHER http://www.eng.utah.edu/~nmcdonal/Tutorials/EncryptionResearchReview.pdf

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BLOCKCHAINLAWCLASS.COM GREECE ~700 B.C. THE ANCIENT GREEKS USED THIS CIPHER AS A WAY TO COMMUNICATE AMONG MILITARY. SENDER AND RECIPIENT EACH HAD A CYLINDER OF EXACTLY THE SAME DIAMETER. THE SENDER WOULD WIND A RIBBON OF PARCHMENT PAPER AROUND THE CYLINDER AND WRITE ON IT LENGTHWISE.

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BLOCKCHAINLAWCLASS.COM AFTER THE RIBBON IS UNWOUND, THE WRITING COULD BE READ ONLY BY A PERSON WHO HAD A CYLINDER OF EXACTLY THE SAME CIRCUMFERENCE. IT IS WAS NOT OVERLY SECURE BUT DID IMPOSE SOME COST TO DECRYPTION GREECE ~700 B.C.

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BLOCKCHAINLAWCLASS.COM ROME ROMAN EMPIRE AT ITS HEIGHT WAS MASSIVE EMPIRE WITH MASSIVE COORDINATION PROBLEMS HOW DO YOU KEEP INFORMATION SAFE?

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BLOCKCHAINLAWCLASS.COM CAESAR’S CIPHER

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BLOCKCHAINLAWCLASS.COM THIS IS A SIMPLE SUBSTITUTION CIPHER WHERE LETTERS ARE SHIFTED BY A SET NUMBER CAESAR’S CIPHER

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BLOCKCHAINLAWCLASS.COM PLAINTEXT INPUT: DEFEND THE EAST WALL OF THE CASTLE

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BLOCKCHAINLAWCLASS.COM PLAINTEXT INPUT: DEFEND THE EAST WALL OF THE CASTLE CIPHER

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BLOCKCHAINLAWCLASS.COM PLAINTEXT INPUT: EFGFOE UIF FBTU XBMM PG UIF DBTUMF DEFEND THE EAST WALL OF THE CASTLE CIPHERTEXT: OUTPUT: CIPHER

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BLOCKCHAINLAWCLASS.COM ROT13 IS JUST A SPECIAL CASE OF THE CAESAR CIPHER ROT13 A CANONICAL EXAMPLE OF ‘WEAK’ ENCRYPTION ROTATE BY 13 PLACES

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BLOCKCHAINLAWCLASS.COM THOMAS JEFFERSON INVENTED A WHEEL CIPHER JEFFERSON DISK

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BLOCKCHAINLAWCLASS.COM “When Jefferson became America's minister to France (1784-1789), the adoption of codes [for diplomatic correspondence] was necessary. Codes were an essential part of his correspondence because European postmasters routinely opened and read all diplomatic and any suspect letters passing through their command.” https://www.monticello.org/site/research-and-collections/wheel-cipher JEFFERSON DISK It is not clear to what extent Jefferson actually used the invention.

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BLOCKCHAINLAWCLASS.COM THOMAS JEFFERSON INVENTED A WHEEL CIPHER (JEFFERSON DISK) THERE ARE 36 WHEELS AND THUS 36! WAYS TO ARRANGE (I.E. 3.72 X 1041) EACH WHEEL HAS A RANDOM ARRAY OF THE ALPHABET

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BLOCKCHAINLAWCLASS.COM ENCRYPT: TURN WHEEL TO DISPLAY THE PLAINTEXT INPUT THEN SELECT A RANDOM ROW AS THE CIPHERTEXT OUTPUT

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BLOCKCHAINLAWCLASS.COM ENCRYPT: TURN WHEEL TO DISPLAY THE PLAINTEXT INPUT THEN SELECT A RANDOM ROW AS THE CIPHERTEXT OUTPUT MESSENGER ONLY HAS THE CIPHERTEXT NOT THE DEVICE

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BLOCKCHAINLAWCLASS.COM ENCRYPT: TURN WHEEL TO DISPLAY THE PLAINTEXT INPUT THEN SELECT A RANDOM ROW AS THE CIPHERTEXT OUTPUT DECRYPT: USING AN IDENTICAL COPY OF THE JEFFERSON DISK TURN WHEEL TO THE CIPHERTEXT OUTPUT AND LOOK FOR AN INTELLIGIBLE ROW MESSENGER ONLY HAS THE CIPHERTEXT NOT THE DEVICE

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BLOCKCHAINLAWCLASS.COM THE DEVICE WAS DEVELOPED BY MAJOR JOSEPH MAUBORGNE IN 1917 BASED ON A SYSTEM INVENTED BY THOMAS JEFFERSON AND ETIENNE BAZERIES THE M-94

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BLOCKCHAINLAWCLASS.COM M4 DESIGNED FOR USE BY THE GERMAN NAVY DURING WWII ENIGMA

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BLOCKCHAINLAWCLASS.COM ENIGMA POLISH MATHEMATICIANS BROKE THE INITIAL VERSION OF ENIGMA BUT THE GERMANS MADE A SET OF IMPORTANT CHANGES INCLUDING CHANGING THE CIPHER SYSTEM DAILY

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BLOCKCHAINLAWCLASS.COM ALAN TURING HELPED INVENT A MACHINE KNOWN AS THE BOMBE

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BLOCKCHAINLAWCLASS.COM THE BOMBE ALLOWED FOR RAPID DECRYPTION OF GERMAN SIGNALS

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BLOCKCHAINLAWCLASS.COM SIMON SINGH, THE CODE BOOK: THE SCIENCE OF SECRECY FROM ANCIENT EGYPT TO QUANTUM CRYPTOGRAPHY, DOUBLEDAY PRESS (1999) A POPULAR TREATMENT OF THE HISTORY OF CRYPTOGRAPHY

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BLOCKCHAINLAWCLASS.COM FOR OUR PURPOSES, WE ARE INTERESTED IN THE MODERN IMPLEMENTATION OF THESE IDEAS

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BLOCKCHAINLAWCLASS.COM KEY CONCEPTS ENCRYPTION DECRYPTION HASHING / MERKLE TREES DIGITAL SIGNATURES

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BLOCKCHAINLAWCLASS.COM ENCRYPTION DEFINITION PROCESS BY WHICH INFORMATION IS ENCODED INTO A FORMAT ONLY READABLE BY SOMEONE THAT KNOWS THE ENCRYPTION ALGORITHM OR CIPHER

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BLOCKCHAINLAWCLASS.COM DECRYPTION DEFINITION PROCESS BY WHICH INFORMATION IS DECODED INTO A READABLE FORMAT

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BLOCKCHAINLAWCLASS.COM ENCRYPTION MAY BE SYMMETRIC OR ASYMMETRIC

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BLOCKCHAINLAWCLASS.COM SYMMETRIC ENCRYPTION - DEFINITION BOTH PARTIES TO A MESSAGE, SENDER AND RECIPIENT, USE THE SAME KEY FOR ENCRYPTING AND DECRYPTING THE MESSAGE INFORMATION IS ON A TWO WAY STREET USER MUST KEEP THE KEY SECRET

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BLOCKCHAINLAWCLASS.COM ASYMMETRIC ENCRYPTION - DEFINITION USES TWO KEYS FOR HANDLING OF INFORMATION INFORMATION IS ON A ONE WAY STREET ONE KEY ENCRYPTS AND OTHER DECRYPTS TYPICALLY KNOWN AS PUBLIC-KEY CRYPTOGRAPHY

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BLOCKCHAINLAWCLASS.COM PUBLIC-KEY CRYPTOGRAPHY

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BLOCKCHAINLAWCLASS.COM HOW ARE THE KEYS GENERATED? LARGE “RANDOM” NUMBER IS USED AS A SEED
 THE LARGE RANDOM NUMBER MUST BE HARD TO GUESS TYPICALLY THIS IS A LARGE PRIME NUMBER

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BLOCKCHAINLAWCLASS.COM HOW ARE THE KEYS GENERATED?

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BLOCKCHAINLAWCLASS.COM

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BLOCKCHAINLAWCLASS.COM MOST CRYPTOCURRENCY BLOCKCHAINS USE PUBLIC-KEY CRYPTOGRAPHY

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BLOCKCHAINLAWCLASS.COM THEY ALSO LEVERAGE HASHING AND DIGITAL SIGNATURES

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BLOCKCHAINLAWCLASS.COM HASHING AND DIGITAL SIGNATURES ARE USED TO SECURE INFORMATION TRANSMITTED ON NETWORKS

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BLOCKCHAINLAWCLASS.COM HASHING - DEFINITION A FUNCTION THAT IS USED TO MAP DATA OF ANY SIZE TO A FIXED SIZE

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BLOCKCHAINLAWCLASS.COM TAKE A GIVEN INPUT OF AN ARBITRARY LENGTH

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BLOCKCHAINLAWCLASS.COM GET THE SAME HASH FUNCTION BACK AS OUTPUT

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BLOCKCHAINLAWCLASS.COM HASHING - AN EXAMPLE This old man, he played three, he played knick- knack on his knee INPUT TEXT E5B2621834F9F271503F12 AB984EF2312EC9CBBF257 AE27DAD7E1BE9F93104F9 This old man, he played three, he played knick- knack on his Knee A4AD6A051622F3E1BEBD90 F434A728DB36A62BB8A62D 59782DA2CB9F575FFCB2 SHA-256 SHA-256 HASH FUNCTION HASH VALUE

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BLOCKCHAINLAWCLASS.COM ANY CHANGE GENERATES A DIFFERENT HASH VALUE

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BLOCKCHAINLAWCLASS.COM https://passwordsgenerator.net/sha256-hash-generator/ FUN WITH HASHING

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BLOCKCHAINLAWCLASS.COM https://cran.r-project.org/web/ packages/digest/index.html SOME HASH RELATED PACKAGES https://docs.python.org/3/library/ hashlib.html#module-hashlib

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BLOCKCHAINLAWCLASS.COM FIVE IDEAL PROPERTIES FOR A HASHING ALGORITHM 5. UNLIKELY TWO MESSAGES HAVE SAME HASH 1. SAME MESSAGE RESULTS IN THE SAME HASH 2. QUICK TO COMPUTE THE HASH VALUE 3. ONE WAY STREET 4. SMALL CHANGES TO MESSAGE GENERATE DIFFERENT HASHES

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BLOCKCHAINLAWCLASS.COM HASHING HELPS ENSURE AGAINST TAMPERING WITH INFORMATION

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BLOCKCHAINLAWCLASS.COM DIGITAL SIGNATURE A MATHEMATICAL WAY TO AUTHENTICATE AND VERIFY THE INTEGRITY OF A RECEIVED MESSAGE

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BLOCKCHAINLAWCLASS.COM DIGITAL SIGNATURE HASH ALGORITHMS HASH VALUE SENDER PRIVATE KEY SIGNED MESSAGE SENDER RECEIVER SIGNED MESSAGE SENDER PUBLIC KEY HASH VALUE

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BLOCKCHAINLAWCLASS.COM DIGITAL SIGNATURE DIGITAL SIGNATURES ALLOWS A USER TO PROVE WHO SENT A MESSAGE AND THAT THERE HAS BEEN NO MESSAGE TAMPERING

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BLOCKCHAINLAWCLASS.COM MERKLE TREE MERKLE TREE OR HASH TREE IS NAMED AFTER RALPH MERKLE WHO PATENTED THE IDEA IN 1979 https://patents.google.com/patent/US4309569A/en

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BLOCKCHAINLAWCLASS.COM MERKLE TREE “A MERKLE TREE IS A HASH BASED DATA STRUCTURE … IN WHICH EACH LEAF NODE IS A HASH OF A BLOCK OF DATA, AND EACH NON-LEAF NODE IS A HASH OF ITS CHILDREN. MERKLE TREES ARE USED IN DISTRIBUTED SYSTEMS FOR EFFICIENT DATA VERIFICATION. THEY ARE EFFICIENT BECAUSE THE USES HASHES INSTEAD OF FULL FILES.” VIA BRILLIANT.ORG

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BLOCKCHAINLAWCLASS.COM MERKLE TREE WHAT IS CRITICAL ABOUT A THE TREE BASED STRUCTURE IS THAT NODES FURTHER UP IN THE TREE ARE THE HASHES OF THEIR RESPECTIVE CHILDREN — ANY TAMPERING UPSTREAM CHANGES DOWNSTREAM …

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BLOCKCHAINLAWCLASS.COM MERKLE TREE FOR EXAMPLE — HASH 0 IS THE RESULT OF HASHING THE CONCATENATION OF HASH 0-0 AND HASH 0-1. THAT IS, HASH 0 = HASH( HASH 0-0 + HASH 0-1) WHERE + DENOTES CONCATENATION

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BLOCKCHAINLAWCLASS.COM CRYPTOGRAPHY A REVIEW 1. USED TO PROTECT SECRETS 2. PUBLIC-KEY CRYPTOGRAPHY USES KEY PAIRS GENERATED BY USE OF A LARGE RANDOM NUMBER 3. HASHING SECURES THE INTEGRITY OF INFORMATION SENT ON A NETWORK 4. DIGITAL SIGNATURES AUTHENTICATE WHO SENT A MESSAGE AND VALIDATE THE INTEGRITY OF THE SENT MESSAGE

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BLOCKCHAINLAWCLASS.COM BUILDING BLOCKS PUT TOGETHER NETWORKS PEER-TO-PEER NETWORKS ALLOW PARTICIPANTS TO DIRECTLY CONNECT WITH EACH OTHER AND PERFORM TRANSACTIONS LEDGERS DISTRIBUTED LEDGERS ARE MAINTAINED BY EVERYONE ON THE PEER-TO-PEER NETWORK CRYPTOGRAPHY PUBLIC-KEY CRYPTOGRAPHY PROVIDES THE ADDRESSES AND AUTHENTICATION OF USERS IN THE PEER-TO-PEER NETWORK INFORMATION IS PROTECTED THROUGH THE USE OF HASHES AND DIGITAL SIGNATURES

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BLOCKCHAINLAWCLASS.COM HOW DOES IT ALL FIT TOGETHER?

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BLOCKCHAINLAWCLASS.COM WHAT ABOUT THE ECONOMIC INCENTIVES?

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BLOCKCHAINLAWCLASS.COM IN THE LATER MODULES, WE WILL DISCUSS CROWDS AND CONSENSUS

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BLOCKCHAINLAWCLASS.COM WE WILL ALSO DISCUSS ECONOMIC INCENTIVES ASSOCIATED WITH PEER TO PEER PARTICIPATION (I.E. CURRENCY, REPUTATION, ETC.)

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BLOCKCHAINLAWCLASS.COM FOR MORE MODULES VISIT

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DANIEL MARTIN KATZ E D U | I L L I N O I S T E C H + S TA N F O R D C O D E X B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M PAG E | DA N I E L M A R T I N K AT Z . C O M C O R P | L E X P R E D I C T. C O M NELSON ROSARIO B LO G | L AWO F C RY P TO C U R R E N C Y. C O M PAG E | N E L S O N M RO S A R I O . C O M F I R M | M A R S H A L L I P. C O M BLOCKCHAINLAWCLASS.COM L A B | T H E L AW L A B . C O M E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW

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@ computational professor daniel martin katz danielmartinkatz.com BLOCKCHAIN, CRYPTOCURRENCY AND LAW professor nelson rosario THE BUILDING BLOCKS OF THE BLOCKCHAIN — NETWORKS + LEDGERS + CRYPTOGRAPHY nelsonmrosario.com @ nelsonmrosario BLOCKCHAINLAWCLASS.COM