Origins

• Satoshi Nakamura whitepaper, 2008
  • Bitcoin: A Peer-to-Peer Electronic Cash System
• Blockchain is an underlying component of bitcoin
  • Open sourced code in 2009
• Bitcoin was created as a distributed electronic payment system
  • Not a new idea, but an elegant implementation
  • Working distributed payment systems existed in 2007, were discussed in academic literature since 1998 or earlier
• Main issue with prior work: the double spending problem

The double spending problem

• Physical currency – give to someone else
• Debit card – bank won’t let you go below 0
• Credit card – payment processor and banks handle this
  • Credit limits
  • Legal measures
• Bitcoin
  • Cryptographic proof of transaction
  • Can be verified by anyone…
    • Unless someone holds >50% of CPU power (majority attack)

Transactions

Transactions

Transactions

Transactions

Consequences of structure

• Everyone knows what your public key is tied to
  • No one knows who the key represents
  • Ex.: 1HB5XMLmzFVj8ALj6mfBsbifRoD4miY36v
• Transaction record is permanent
  • Can’t be lost*
  • Can’t be faked*
• The network acts as an escrow service of sorts
  • Charges a fee (0.0000026 BTC, 0.018362 USD)

Where is it?

• Currently 1,246 currencies across 6,344 markets (coinmarketcap.com)

Let’s look at some data

 {
      "hash": "1dae2ffb42469c6afad79fc0a7454ea704d444497151971bf36aca31e3a1a7c4",
      "ver": 1,
      "vin_sz": 1,
      "vout_sz": 2,
      "lock_time": 0,
      "size": 225,
      "in": [
        {
          "prev_out": {
            "hash": "976656f4e6008b29b4fad81b94347da2a3c8c49e10eee3c9bf27a0ad86c8de38",
            "n": 1
          },
          "scriptSig": "304402204a5eefcce2c9d87743eb099fec6c76731164cf4be9d30c56e60b7cdf9d0c374902206fde8d03cca5cccb67c9a8f2e0144297cbf9361dd63222de78e28d2f7b89369501 0305594a7ecc821f6e9392f0ef757eaee8430b83cedf76eb359b6c247e5299b3ce"
        }
      ],
      "out": [
        {
          "value": "10.00000000",
          "scriptPubKey": "OP_DUP OP_HASH160 fef3cbaa76b111e4fb6a97ee3e5931ced799f201 OP_EQUALVERIFY OP_CHECKSIG",
          "address": "1QF4gwQi3bfU8gMEFnudYroHcdnzizXgFz",
          "next_in": {
            "hash": "cd6e7702c8271e9337ecc18ecb7393b2b38e7e5830b99c6bc3456e2684698e4f",
            "n": 0
          }
        },
        {
          "value": "18.68775000",
          "scriptPubKey": "OP_DUP OP_HASH160 ecf7a3fbf1b866e12f147ff792242331ec575bec OP_EQUALVERIFY OP_CHECKSIG",
          "address": "1Nby8e7oL1yEWYYwXZAmjSSodB4161rwzH",
          "next_in": {
            "hash": "36a032c515f88450a858a5b4efe57f119fb43bb1bc5db6e5e87f72cc5e9bf724",
            "n": 0
          }
        }
      ],
      "nid": "06406fb7ffbadd5fcf2e42e3fa43ec9de8a2bb271a799bc21c9a12f5e27916cc"
    },

• 64GB of this stored in binary files as of 2017 Oct 28.

Block 1

ID: 000000000000000000f061205567dc79c4e718209a568879d66132e016968ac6 – Time: 2016-12-17 20:26:21 UTC Access here – CPU intensive!

Block 2

ID: 000000000000000001806a922d4d35a37ad9324c690f72d556c6445cb7a9c214 – Time: 2016-12-17 20:26:24 UTC

Access here – not so CPU intensive

Block 3

ID: 0000000000000000000cdc0d2a9b33c2d4b34b4d4fa8920f074338d0dc1164dc – Time: 2016-12-17 20:29:03 UTC

Access here – CPU intensive!

Prior 3 Blocks (30 minutes)

Access here – CPU intensive!

Why is this popular with illegal activities?

        Electronic  Anonymous  Payment_Guaranteed  Not_Traceable
Ideal       ✓          ✓              ✓               ✓  

Cash

            ✘          ~               ~               ✘

Credit

            ✓          ✘              ✘               ✘

Crypto

            ✓        ✓/~              ✓              ✓/~
 > Bitcoin  ✓          ~               ✓               ~

Supply and demand

• Dash: $2,024,105,117
• Monero: $1,297,543,102
• Zcash: $552,128,266
• Verge (VGX): $85,833,225
• PIVX: $134,685,332
• Zencash, zcoin, DeepOnion, …

For comparison, BTC: $117,659,487,106

Accounting systems

1. Control systems
   • Project Gutenberg uses it to validate their files IDs here
     • Comments from Chief Scientist at Factom
2. Inventory systems
   • IBM Fabric (Hyperledger)
3. Distributed ledger: Factom
   • Property rights in Hondurus @ Economist

Can it replace accounting?

Blockchain allows someone to claim ownership over an asset in a trustworthy manner visable to all

• It does not allow them to claim disownership
• It only implies a lower bound of ownership
  • Conservative for assets
  • Not so conservative for liabilities…

What/who to watch

• Etherium and hyperledger
  • Platforms for blockchain
• Microsoft, IBM
  • Large R&D efforts
• ICOs
  • Example campaign
  • During campaign
  • Some transactions

Thanks