Introduction to Bitcoin, Blockchain, and Ethereum by Justin Wu
- 1. An Introduction to Bitcoin, Blockchains, Ethereum Justin Wu, MBA @blockchainLX [email protected] +351 967 461 477
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- 3. What is Bitcoin? ❖ Digital Money you can send through the Internet ❖ Transferred directly from peer-to-peer via the net, without going through a bank or clearing house (Decentralization, Disintermediation) ❖ Fees are much lower; usable wherever there's Internet; account cannot be frozen; no arbitrary limits…vs. Fiat Currency ❖ Sending BTC is similar to sending an email ❖ Purchase (mostly) anything with bitcoins It’s Money!!!
- 4. Core Technologies ❖ Public/Private Key Cryptography ❖ Cryptographic Hash Function ❖ Peer to Peer Networking (Wei-Dai's B-Money + Bittorent = Idea for Bitcoin?) ❖ The Blockchain ❖ Proof of Work (How to Solve Byzantine General’s Problem)
- 5. Bitcoin: What’s the Big Deal? ❖ Tim Draper, DFJ Venture Capital: Banks “hugely threatened" by Bitcoin ❖ Marc Andreessen, Co-Founder of Netscape, Andreessen Horowitz VC: Bitcoin “Like the Internet in 1994.” ❖ Patrick M. Byrne, CEO of overstock.com : “Money is too important to leave in the hands of government…the long-run value of all fiat currencies goes to zero.”
- 6. Purchasing Power of USD from when Gold Standard Abolished
- 7. Not Possible with Bitcoin ❖ Supply strictly capped at 21 Million coins by 2140 ❖ Supply increases by 25 coins every 10 minutes as rewards go to miners for securing the network ❖ Bitcoins cannot be “printed out of thin air” like fiat currency ❖ “Proof of Work” vs. “Proof of Violence” ❖ Based on a “Blockchain”
- 8. Blockchains, Transactions, Miners ❖ A Blockchain is simply a database for recording transactions, one that is copied and updated to all computers participating in a network: a “distributed ledger”. ❖ “Blocks” in a blockchain are individual pages in the ledger, like pages in a physical book. ❖ Blocks have “headers” for meta-data and content, such as transactions ❖ Participants called “Miners” verify legitimate blocks and reject illegitimate ones, getting rewarded for their efforts with newly minted bitcoins. ❖ Each verified block is linked to the previous block in a chain, all the way to the first, hence a “Blockchain”.
- 9. Advantages of a Blockchain ❖ Secure: Using a blockchain is cryptographically secure - the ledger is distributed across all nodes in the system making hacking near-impossible. ❖ Transparency: All transactions are publicly recorded, and available for scrutiny ❖ Low-Counterparty Risk: No party can transfer assets (e.g., money, authority, property, data rights) they do not have and all transactions are recorded and cannot be revoked or tampered with…VS. Fraud ❖ Decentralized: No single authority has control -- the network cannot be distorted or manipulated by a single controlling authority…VS. The Fed ❖ Privacy: Users are anonymous and do not need to provide credentials beyond their node address…VS. Your Local Bank ❖ Low Transaction Cost: The system removes the need for intermediaries and thus lowers transaction costs…VS. Western Union, Paypal, etc.
- 10. Blockchain: A Summary ❖ A Single Source of Collective Truth ❖ A common ledger that all Bitcoin (or Ethereum) users share and agree upon ❖ Secured by Mining (mathematical proofs) to validate legitimate transactions and reject illegitimate ones ❖ Consensus: everyone agrees on who has what with no middle man extracting fees acting as a trusted third party
- 11. Blockchain: The Trust Machine
- 12. Blockchain Technology: Who Cares? ❖ “Business decision-makers on the boards of every Fortune 500 company are essentially mandating their technologists to understand what the blockchain is and how it can effect their business.” - Andrew Keys, Consensys - Microsoft Partner Firm ❖ "Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.” - Mark Walport, UK Gov’t Chief Scientific Advisor ❖ “Blockchain will become a reality in 2016.” - Eric Piscini, Deloitte
- 13. What does this mean for… ❖ Application Developers? ❖ Businesses with large data silos? ❖ Governments with various branches that don’t necessarily talk to each other? ❖ Napster vs. Bittorent. (Centralized Server architecture vs. distributed network of nodes) ❖ Reduce costs; Increase Security ❖ Streamline inter-agency cooperation and information sharing; serve the public better
- 14. Bitcoin is Awesome! But… ❖ It is only has one function: currency ❖ Proof of Work is very wasteful ❖ What if you wanted to do more with “Blockchain Technology?” ❖ Enter…
- 16. What is Ethereum? ❖ “A planetary scale computer built on blockchain technology” ❖ Open for all to use; zero infrastructure ❖ Turing-Complete: Build arbitrarily complex applications ❖ “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.” ❖ Ethereum Virtual Machine, runs on Ether, Pay per computational step
- 17. Ethereum Virtual Machine (EVM) ❖ A Turing Complete Virtual Machine accessible from anywhere in the world has a number of benefits for the automated-economy: ❖ The Ethereum Blockchain is: ❖ A blockchain with a built-in programming language ❖ A decentralized, massively replicated database where the current state of all accounts is stored ❖ A consensus-based globally executed virtual machine Source: Melanie Swan; https://github.com/ethereum/wiki/wiki/Ethereum-Development- Tutorial
- 18. Ethereum Virtual Machine (EVM) Cont. ❖ The Ethereum Virtual Machine (EVM) handles internal state and computation ❖ States are stored on the distributed global ledger: The Ethereum Blockchain ❖ Computation is paid for with Ether, per computational step ❖ Large decentralized computer with millions of account objects ❖ Each account object: ❖ Has its own internal code (Smart Contract) ❖ Contains a 32-byte key/value database called storage ❖ Can call or send messages to other objects Source: Melanie Swan; https://github.com/ethereum/wiki/wiki/Ethereum-Development- Tutorial
- 20. With Ethereum You Can ❖ Build Unstoppable Applications ❖ Write Immutable, Self-Enforcing Smart Contracts ❖ Pay-for-play. No centralized servers or worrying about uptime ❖ Access new and once impenetrable markets ❖ Ethereum is sometimes defined as a ‘world computer’ but this definition doesn’t really convey its core value proposition. ❖ Access a “generalised platform for marketplaces where individuals can adopt various roles and freely participate in economic interactions.” ❖ Programmable Money
- 21. Smart Contracts ❖ What if a contract could enforce itself without the need of lawyers, courts, governments? ❖ Smart Contracts are: Pre-written logic (code); stored and replicated on a blockchain; self-executing by running the code; can enforce the code to make payments, update blockchain, transfer ownership, etc. ❖ Breach of Contract not possible from any party once the Smart Contract is “live” ❖ Disintermediation factor: High
- 22. Ethereum + Smart Contracts + Devices = ❖ The Internet of Things ❖ slock.it : “If you can lock it, we’ll let you rent, sell, or share it.” ❖ Use Cases: Home Automation, Rent Your Mostly Unused Property: Flat / Car / Parking Spot / Bike / Other Stuff ❖ Smart Locks, Smart Lights, Smart Sensors ❖ Decentralized Sharing Economy
- 23. Ethereum + Smart Contracts + Oracles = ❖ Decentralized Prediction Markets ❖ Augur: Bet on the outcome of any event, most accurate future forecasting ❖ Augur (DPM) + slock.it (smart sensors) = Information Economy ❖ Ex: Sell your information to be used in prediction markets: Who will win the 2016 US Presidential election? ❖ Smart sensors count number of people going to district polling centers—> Smart contract compares this data with historical Rep/Dem districts —-> Publish data to blockchain OR encrypt data for sale to private oracles —-> Prediction market resolves ❖ Prior to the outcome of election, the current share price is the most accurate prediction of who will win. ❖ Real World Example: Intrade correctly predicted 48 out of 50 states election results in 2012
- 24. Ethereum + Smart Contracts + Biometrics = ❖ Self-Sovereign Identity vs. Facebook ❖ Link “meat-space” actors to digital persons on the blockchain: Birth Cert/KYC ❖ Reputation Systems ❖ Digital Mapping of Social Structures (Community Formation) ❖ Humanitarian/Identity Theft/ Supra-National Identity ❖ Next-Generation Sharing and Attention Economy Source: The Verge
- 26. Synergies on Ethereum: Key Considerations ❖ Just like different programs on a computer can increase productivity and value, so too different Dapps on the Ethereum World computer. ❖ Ethereum is a “a generalized platform for marketplaces where individuals can adopt various roles and freely participate in economic interactions.” ❖ Zero-Infrastructure and open-source means rapid iteration/evolution, meme-like spread: survival of the fittest Dapps and Developers ❖ Low to Zero switching costs for users ❖ Infrastructure, security, identities, payments, execution/enforcement all built into the Ethereum platform. ❖ Huge or unlimited upside, downside only limited to developer time building new Dapps
- 27. Putting it all together for Portugal ❖ High-levels of Internet Use and Innovation Good for Blockchain Acceptance ❖ High Disintermediation potential in Public Institutions and Banking ❖ Streamlined taxation ❖ Other Use Cases not yet conceived
- 28. Thank You ❖ Justin Wu ❖ +351 967 461 477 ❖ [email protected] ❖ Follow Me On Twitter: @blockchainLX ❖ https://pt.linkedin.com/in/justinwuglobal
- 29. Reflection Tasks ❖ Introduce yourself to one person you don’t know, and find out one thing you two have in common ❖ Find another pair(s) of people to speak to and discuss the following in a group of four or more: ❖ Who are the worst middlemen in Portugal, and how could you replace them with a smart contract/Dapp? ❖ What existing applications could be decentralized and coded in Ethereum to increase revenue/save money/increase security and insurance? ❖ How could you use the synergies of Ethereum to create the next big Dapp?
- 30. Sources ❖ https://xabierbarandiaran.wordpress.com/2016/01/03/everything-you-need-to-know- about-bitcoin-blockchain-and-ethereum-in-less-than-90-minutes-of-short-videos/ ❖ https://medium.com/@creole/1-a-simple-view-of-blockchain-500654a55d1d#.buxxtsb7t ❖ http://www.coindesk.com/bitcoin-explained-global-currency-wall-street-veteran/? utm_content=bufferfc796&utm_medium=social&utm_source=twitter.com&utm_campaig n=buffer ❖ https://www.oreilly.com/ideas/blockchains-by-analogies-and-applications ❖ http://realmoney.thestreet.com/articles/01/21/2016/bitcoin-dead-long-live-blockchain ❖ http://dailyfintech.com/2016/02/05/ethereum-is-winning-in-both-enterprise- consumer-markets/ ❖ https://bitcoinmagazine.com/articles/imf-virtual-currencies-and-their-underlying- technologies-can-provide-faster-and-cheaper-financial-services-1454089937
- 31. Sources Continued ❖ http://www.bizjournals.com/newyork/news/2016/02/01/ernst-and-young- blockchain-future.html?ana=twt ❖ http://www.bbc.com/news/business-35370304 ❖ http://www.coindesk.com/deloitte-report-blockchain-use-cases-adoption/ ❖ http://bitsonblocks.net/2016/02/01/a-gentle-introduction-to-smart-contracts/ ❖ https://www.pwc.com/us/en/financial-services/fintech/blockchain.html ❖ http://www.forbes.com/sites/laurashin/2016/01/26/how-will-bitcoin- technology-go-mainstream-an-analysis-of-5-strategies/#9ad50813c31d ❖ https://medium.com/@angelomilan/ethereum-explained-to-my-mom- infographic-673e32054c1c#.klu0ytzde
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