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Blockchain: Trust, securely decentralized Stefan Tilkov
 [email protected]
 @stilkov Cyber Security Meetup Berlin

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1.

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Bitcoin • Practical application of cryptography to • maintain a pseudonymous, global history of transactions • with guaranteed consistency • without centralization or intermediaries • resistant to forgery and fraud • Created in 2009 by Satoshi Nakamoto • Most successful crypto-currency to date

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Cryptography?
 Oh no! Don’t worry.

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Hashing Hashing Algorithm 0100101001001 01011111100101 0010101001010 11010101001011 1000100101001 00101011111100 12CA0219FABC1236

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Hashing Algorithm 0100101001001 01011111101101 0010101001010 11010101001011 1000100101001 00101011111100 ABC8329FF129878E Hashing

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0100101001001 01011111100101 0010101001010 11010101001011 1000100101001 00101011111100 12CA0219FABC1236 Hashing

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Public & Private Keys Private Key Public Key Derive

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Public & Private Keys Private Key Public Key Derive Sign 0100101001001 01011111100101 0010101001010 11010101001011 1000100101001 00101011111100 12CA0219FABC1236 Private Key Public Key Derive

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Sign 0100101001001 01011111100101 0010101001010 11010101001011 1000100101001 00101011111100 12CA0219FABC1236 Private Key Public Key Validate Derive Public & Private Keys

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Bitcoin: Vocabulary Transaction Block Wallet Address Node Blockchain Private Key Public Key maintains copy of creates consists of inputs encumbered with derived from derived from maintains validated by includes creates references previous Bitcoin contains

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Bitcoin • The technology • The currency • Created via “mining” (coinbase tx) • 1 Bitcoin (BTC) = 1,000 mBTC = 1,000,000 μBTC = 100,000,000 Satoshi • Coins are maintained as part of transactions Transaction Block Wallet Address Node Blockchain Private Key Public Key maintains copy of creates consists of inputs encumbered with derived from maintains validated by includes creates references previous Bitcoin contains

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Bitcoin: Wallet • Maintains private keys, public keys, addresses • Used to sign transactions (sort of) • Implementations for mobile devices, Mac, Windows, Linux • “Online wallets” a.k.a. “a very bad idea” • Hardware & offline wallets Transaction Block Wallet Address Node Blockchain Private Key Public Key maintains copy of creates consists of inputs encumbered with derived from derived from maintains validated by includes creates references previous Bitcoin contains

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Bitcoin: Transactions • Multiple inputs (unspent transaction output, UTXO) • Inputs can only be spent by owner • Multiple outputs • “Unspent” outputs are “encumbered” with recipient key • Can be sent to any node • Will be included in (validated by) block Transaction Block Wallet Address Node Blockchain Key Public Key maintains copy of creates consists of inputs encumbered with derived from maintains validated by includes creates references previous

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Bitcoin: Blocks • Reference transactions • Include proof of work • Reference previous block • Number of blocks relate to level of trust Transaction Block Wallet Address Node Blockchain maintains copy of creates consists of inputs encumbered with maintains validated by includes creates references previous

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Bitcoin: Mining & proof of work • Proof: Find a SHA256 input that meets network “difficulty target” • Cheaper to play by the rules than to cheat • Difficulty adjusted over time • Only way for new bitcoins to get introduced • Optional transaction fee

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Bitcoin: Nodes • Form a peer-to-peer network • Relay messages • Validate transactions and blocks • Maintain a copy of the blockchain Block Address Node Blockchain maintains copy of creates consists of encumbered with validated by references previous

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Bitcoin: Blockchain • Linked list of all blocks ever created • Can and will be validated by every node • History of every transaction ever performed • Not actually a ledger Block Address Node Blockchain maintains copy of creates consists of encumbered with validated by references previous

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Bitcoin: Validation/Consensus • Blocks chain – the more blocks reference a block, the better • Transactions considered immutable after 6 blocks • Consensus by means of “longest chain”

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Bitcoin: Script • Intentionally limited scripting • P2SH (“pay to script hash”) address
 (as opposed to P2PKH) • Usage e.g. for multi-signature (joint accounts) • Challenge: To spend, provide valid input to script • Base script: Ensure recipient has private key matching a public key

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2.

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Ethereum vs. Bitcoin • Blockchain as technical basis • Currency: Ether • 1 Block approx. every minute • Currently proof of work, change to proof of stake planned • Platform for arbitrary contracts • State as part of the blockchain

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Ethereum: Contracts & Code • Accounts can externally owned • Accounts can be embodied by code (“contract account”) • Contracts specify rules for interactions

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“Here, run that code
 for me, will ya?”

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Ethereum: Gas • Computation requires payment (“gas”) • Amount determined by caller • Execution of instructions consumes gas

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Ethereum: Programming • Low-level byte code: EVM • Multiple languages • LLL (Lisp-like, low-level) • Serpent (Pythonesque) • Solidity (similar to JavaScript, but statically typed) • Executed by every node mining or validating blocks

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3. Alternatives

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Alternative approaches • Altcoins (Litecoin, Namecoin, Dogecoin, Devcoin, Bytecoin, …) • Colored coin • Metacoin • Sidechains

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Private (“permissioned”) ledgers • Used internally or with trusted partners • Lots of startups: clearmatics, Eris, Peernova, BigchainDB, … • OSS initiative: HyperLedger (Fabric, Sawtooth Lake)

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4. What’s cool about it?

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Distributed Consensus • Trustable, secure • Immediate • (Mostly) Unbreakable

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Open access • Anyone can participate • No centralized control • Globalized • Detour: Politics

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Disrupting intermediaries • Intermediaries provide consistency as a service • Risk of monopolies • Expensive • Possibly influenced by politics • Blockchain cuts out the middle man

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Cost reduction for clearing • Collaborations rely on clearing e.g. in finance, logistics, energy • Reduced cost due to “permissioned” model (more trust)

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5. Use Cases

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Property Management • Record (partial) ownership • Trade property/shares • Identity • DRM • Access Control • Digital Assets

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Obligations • Emission fees • Debt • Clean energy fares

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Distributed Autonomous Organizations • Complex interactions among participants • Multi-tiered • Corporation contracts as code

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Other use cases • Fully automated payment (Charging, Usage fees “Maut”) • Public records of GPS tracking • Safe auditing with legitimate (limited) law enforcement access

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Common problem: Commercialization

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7. Summary (a.k.a. what I believe today)

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Trusted, distributed, decentralized platforms will play a significant role in many industries

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Don’t dismiss Bitcoin, Ethereum or public, permissionless blockchains in general just yet

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Permissioned ledgers may be the future – or just an intermediate step to a new shared platform
 (similarly to the Internet)

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The barrier to entry has never been this low – commercially as well as from a technical perspective

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Disrupt or be disrupted :-)

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Stefan Tilkov @stilkov
 [email protected]
 Phone: +49 170 471 2625 innoQ Deutschland GmbH Krischerstr. 100 40789 Monheim am Rhein Germany Phone: +49 2173 3366-0 innoQ Schweiz GmbH Gewerbestr. 11 CH-6330 Cham Switzerland Phone: +41 41 743 0116 www.innoq.com Ohlauer Straße 43 10999 Berlin Germany Phone: +49 2173 3366-0 Ludwigstr. 180E 63067 Offenbach Germany Phone: +49 2173 3366-0 Kreuzstraße 16
 80331 München Germany Phone: +49 2173 3366-0 @stilkov That’s all I have.
 Thanks for listening! Questions?

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www.innoq.com About INNOQ • Offices in Monheim (near Cologne), Berlin, Offenbach, Munich, Zurich • ~125 employees • Core competencies: software architecture consulting and software development • Privately owned, vendor-independent • Clients in finance, telecommunications, logistics, e- commerce; Fortune 500, SMBs, startups