Cryptocurrency

On Bitcoin basics from a technical point of view + alternative cryptocurrency networks.
Presented at Tech Talk Lunch Thursday, Neo Singapore

Transcript

1. Cryptocurrency Wei Lu June 2014
2. • How does it work? • How much is it? • Is it a currency? • What does it mean?
3. Bitcoin 2009 by Satoshi Nakamoto
4. Exercise: Let’s invent a cryptocurrency
5. http://en.wikipedia.org/wiki/Rai_stones#mediaviewer/File:Yap_Stone_Money.jpg
6. Public declaration of ownership
7. Public Ledger
8. A -50, B +50
9. Server designed by Sergio Luna from the Noun Project
10. Single point of failure? Trust?
12. Consensus?
13. foo foo foo bar bar foo
14. Finalize a record/decision?
15. A -50, B +50 A -50, A’ +50 Evil designed by Austin Condiff from the Noun Projec
16. A -50, B +50 A -50, A’ +50
17. A -50, B +50 A -50, A’ +50
18. Record processor / bookkeeper
19. A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 Stamp designed by Rohith M S from the Noun Project
20. A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33
21. A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 A -50, B +50 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33
22. Authority?
23. Proof of work bundle_hash = ! SHA256(SHA256(prev_bundle_hash + records + nonce))! ! find nonce s.t. bundle_hash starts with n 0s
24. proof of work B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 proof of work B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33
25. Incentive?
26. proof of work P +50 B -27, D +27 D -19, A +19 A -33, C +33 proof of work P +50 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33
27. A -50, B +50 A -50, A’ +50
28. proof of work P +50 A -50, B +50 D -19, A +19 A -33, C +33 proof of work P +50 A -50, A’ +50 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33
29. proof of work P +50 A -50, A’ +50 D -19, A +19 A -33, C +33 proof of work P +50 A -50, B +50 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33
30. proof of work P +50 A -50, B’ +50 D -19, A +19 A -33, C +33 proof of work P +50 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 proof of work P +50 A -50, A’ +50 D -19, A +19 A -33, C +33 proof of work P +50 B -27, D +27 D -19, A +19 A -33, C +33
31. A -50, B +50 A -50, A’ +50
32. A -50, B +50 A -50, A’ +50
33. 51% attack
34. Bitcoin invented* *close enough
35. (relay) node miner proof of work P +50 B -27, D +27 D -19, A +19 A -33, C +33 proof of work P +50 B -27, D +27 D -19, A +19 A -33, C +33 B -12, C +12 B -27, D +27 D -19, A +19 A -33, C +33 A -50, B +50 transaction blockchain block block block
36. More on transaction A -50, B +50 input output
37. input output input output input output
38. input output input output input output previous tx output scriptSig
39. input output input output input output previous tx output scriptSig amount scriptPubKey
40. input output input output input output previous tx output scriptSig amount scriptPubKey destination address how it can be spent
41. Bitcoin As A State Transition System https://github.com/ethereum/wiki/wiki/%5BEnglish%5D-White-Paper
42. Alternative protocols altcoins?
43. • decentralized registry for .bit domains • has its own blockchain namecoin
44. litecoin • proof-of-work algo: scrypt (serialized, memory hard problem) • faster tx confirmation & more blocks in blockchain • has its own blockchain
45. dogecoin • “the fun cryptocurrency” • inflationary coins: infinite supply • proof-of-work algo: scrypt • has its own blockchain
46. colored coins • create currency by assigning “colors" to unspent transaction outputs • smart property • uses bitcoin blockchain & script (OP_RETURN)
47. mastercoin • similar to colored coins
48. counterparty • similar to master coin • better implemented (“actually works”)
49. Issues with protocols on top of Bitcoin • scalability: unable to utilize Simplified Payment Verification • limited scripting power
50. ethereum • has its own blockchain • contracts are first-class citizens • turing complete script • still in development • cryptocurrency 2.0?
51. References • http://en.wikipedia.org/wiki/Rai_stones • https://en.bitcoin.it/wiki/Hashcash • https://en.bitcoin.it/wiki/Block_hashing_algorithm • https://github.com/ethereum/wiki/wiki/%5BEnglish%5D-White-Paper • http://bitcoin.stackexchange.com/questions/10165/what-motivates-nodes-or- miners-to-relay-transactions • https://wiki.namecoin.info/index.php?title=Domain_Name_Specification • http://www.coindesk.com/information/comparing-litecoin-bitcoin/ • https://docs.google.com/document/d/ 1AnkP_cVZTCMLIzw4DvsW6M8Q2JC0lIzrTLuoWu2z1BE/edit