blockchain research: start - prof. dr. florian matthes, 25. oktober … · 2018-02-19 · further...

Lehrstuhl Software Engineering betrieblicher Informationssysteme (sebis)

Fakultät für Informatik

Technische Universität München

wwwmatthes.in.tum.de

Blockchains – Funktionsweise, Chancen und RisikenProf. Dr. Florian Matthes, 25. Oktober 2017, Deutsches Museum, Wissenschaft für Jedermann

1. The blockchain is a significant socio-technical innovation

2. A comparison with established centralized solutions

3. Use cases of the blockchain

4. A call for interdisciplinary collaboration

Outline

© sebis171025 Matthes Blockchain Wissenschaft für Jedermann 2

A technical paper published online in the year of the financial crisis


http://nakamotoinstitute.org/bitcoin/

http://nakamotoinstitute.org/bitcoin/

What is a „Blockchain“?


“A blockchain […] is a distributed

database that maintains a continuously-

growing list of ordered records called

blocks. Each block contains a timestamp

and a link to a previous block. By design

blockchains are inherently resistant to

modification of the data: once recorded,

the data in a block cannot be altered

retroactively.”https://en.wikipedia.org/wiki/Blockchain_(database)

[...] are systems that enable parties

who don’t fully trust each other to form

and maintain consensus about the

existence, status and evolution of a

set of shared facts.

Richard Brown, R3 CTO

Technical definition Functional description

https://en.wikipedia.org/wiki/Blockchain_(database)

Hash-functions ensure the integrity of arbitrary (large) data.


Input

Spaceh ( ) Output Space

General

Example

h ( )

9f86d081884c7d659a2feaa0c55ad015

a3bf4f1b2b0b822cd15d6c15b0f00a08

38c307e27771c3c3099e2d21c596a26

978e23bcb16b89929c509ca9363e201

Analogy: Fingerprint

Public key signatures link messages with their authors.


▪ A user has a pair of two different but matching keys (very large digital numbers)

▪ The private key is kept secret and used to sign digital messages

▪ Example: Authorize a transaction to transfer own money to somebody else

▪ The public key is used by the receiver(s) of the message to validate that

the message was created by the sender

Alice Bob

Private key

Public key

sign validate

The structure of the blockchain

© sebis171025 Matthes Blockchain Wissenschaft für Jedermann 71In Bitcoin, the height is included in the Coinbase Transaction.

Block #100952

100952

2011-01-04 05:49:43

0000000000000dbb3...

f164821b6fd32308ac…

Transactions

Blockheader

Block #100951

Transactions

Height

Timestamp

Hash of prev. Block

Hash of Transactions

Blockheader

Block #100950

Transactions

Blockheader0000000000

0162a86510

6214fa547cc

778b98c4914

c37c8eb13cb

6bfeb6a3d6c

The blockchain records a strict sequence of transactions.

The state modified by the transactions is not stored on the blockchain.


Blockchain

State

Transactions

Block 0

A = 20

A => B: 3

A => C: 2

Block 1

A = 15

B = 3

C = 2

B => C: 1

A => C: 2

Block 2

A = 13

B = 2

C = 5

Roles in the blockchain network


Wallet Owner

• Has private key to unspent

transactions

• Owns the money

• Sends money by singing

and publishing new

transactions

Full Node

• Maintains the complete

blockchain

• Validates every transaction

and block

• Relays all new transactions

Miner

• Acts the same as the full

node

• Additionally creates new

blocks and tries to solve the

mining puzzle

• Gets rewarded for new

blocks

Signed

Transaction

Great News!

The network has only to agree on one block!(or the hash of it)


Reaching consensus in the network


Block 0 Block 1 Block 2Blockchain

Network

Block 3

Block 3

Block 4

1. Only valid blocks

2. Longest chain wins

3. First arriving block first Blockchain

The validation of a transaction through the blockchain network


The transaction is created

and signed by the wallet

owner.

The transaction is sent to

a full node. It validates the

transaction.

The transaction is spread

in the network and saved

into the memory pool.

Miner build the transaction

into a block and transfers it

to the network.

Other nodes validate the

block, update the memory

pool and start over.

1

2

3

4

5

Which node is allowed to issue new blocks?

Constraints

▪ Keep the network fully decentralized Random selection of node

▪ Avoid a 51% attack by a group of nodes allowing them to

▪ prevent new transactions from gaining confirmations, to halt payments between some or all users, or

▪ reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins.

▪ Avoid a 25% economic attack by a group of nodes that change the incentives for other nodes so

▪ they are incentivized to join the group of the attacker nodes or no longer work as a node

Approaches

▪ Proof of work Increase cost / difficulty of creating new blocks

▪ Solve a time-consuming mathematical puzzle Mining

▪ Solve a puzzle that requires a lot of computer memory

▪ Proof of stake Increase cost of creating invalid blocks

▪ Deposit an amount of money that gets transferred if an invalid block is detected


▪ The total amount of Bitcoins in the Bitcoin network is limited.

▪ A small transaction fee is deduced from each transaction.

▪ This fee is offered by the wallet owner

▪ Miners select transactions based on their fee / size ratio.

▪ Based on the random nature of the puzzle to be solved by miners, over time the transaction fees are

distributed over all the nodes that append blocks to the block chain.

▪ The dynamic pricing model of the Bitcoin network provides economic incentives

▪ for early participation as miner in the network

▪ for the addition of new users to the network

Additional economic rules apply for the Bitcoin network


There is an upper bound of 21 million Bitcoins issued over time.


Oct 2017





Outline


Advantages

▪ Decentralized management (trust in one party trust in a system of multiple parties)

▪ Transparency of all transactions

▪ Traceability of the complete transaction history

▪ Pseudonymity of the wallet owners

▪ Built-in financial incentives for early adopters and network growth ( business model)

Opportunities

▪ Innovation thrust for IT solutions in the global finance system

▪ Lowered entry barriers for IT-savvy players with limited financial resources

▪ Impetus to re-evaluate established business models and economic mechanisms

Comparison with established centralized solutions


Intrinsic disadvantages

▪ Exorbitantly high energy consumption for the proof of work 203 KWh / transaction

▪ Long delay until transaction confirmation several minutes

▪ Very low transaction rate 3-4 transactions per second

▪ Continuously increasing storage requirements for the blockchain 134 GB as of October 2017



Transaction rate 2017 Average rate Maximum rate

Bitcoin ~ 3.5 ~ 3.5

VISA 1667 >56.000

PayPal 193 400

http://www.altcointoday.com/bitcoin-ethereum-vs-visa-paypal-transactions-per-second/

Estimated Bitcoin energy consumption


As of October 2017 Source: https://digiconomist.net/bitcoin-energy-consumption

Bitcoin average transaction confirmation time


Min

Growth of blockchain size


Similar IT risks

▪ Software errors and risks

▪ Communication protocoll risks (e.g. denial of service attacks)

▪ Crypto-protocol risks

Additional risks

▪ Regulatory risks



Additional analysis required

for economic, social and legal apects

depending on specific use cases!





Outline


Currently, the most successful use cases are in the financial sector.


C2C, B2C, B2B business models

Further innovations based on blockchain technologies

Idea

▪ Replace the fixed data structures, algorithms and protocols of individual blockchain solutions (e.g. Bitcoin,

voting, bidding, lottery, proof of ownership, …) by programs, written in a domain-specific programming

language (e.g. Solidity) on top of a single public blockchain (Ethereum) and currency (Ether).

▪ Use cryptography to secure the immutability of the program code (contract)

▪ Wallet owners agree on the contract(s) to be used for their future interactions

▪ No or very limited access of the code to the “real world” (sensors, actuators)

Similar to centralized solutions for workflow management and automated case management


Smart Contracts

Further innovations based on blockchain technologies

▪ Create a fully digital (virtual) organisation.

▪ The organisation exclusively uses Smart Contracts to

interact with its shareholders, employees, customers,

suppliers, partners and public authorities.

▪ These stakeholders can be humans or organizations in the

“real world” or other DAOs.


Decentralized Autonomous Organizations (DAOs)

Gartner sees the blockchain at the peak of inflated expectations.


Money and internationally very popular authors drive the hype.


Blockchains and Bitcoin have a reputation problem


How to gain or lose the trust of customer

▪ Speculative trading

▪ Gambling

▪ Trafficking (humans, drugs, …)

▪ Cyber crime

▪ Ransomware attacks

▪ …

Compare with the early business

models on the Web!





Outline


▪ Interdisciplinary research projects

▪ Joint conferences and workshops with▪ Start-ups

▪ Established IT providers

▪ IT consultants

▪ Law firms

▪ Notary‘s offices

▪ Auditors

▪ Public administrations

▪ Law and policy makers, …

▪ Interdisciplinary seminars, lectures and practical courses

▪ Joint initiatives and projects

Computer scientists and law experts can be friends


Interdisciplinary research and development


Chair Prof. Matthes, TUM Fakultät für Informatik


Interdisciplinary collaboration in research and academic education


Fakultät für Informatik der TUM, Juristische Fakultät der LMU

www.lexalyze.de

Interdisciplinary collaboration in research and academic education


Fakultät für Informatik der TUM, TUM School of Management

www.blockchain.tum.de

Technische Universität München

Faculty of Informatics

Chair of Software Engineering for Business

Information Systems

Boltzmannstraße 3

85748 Garching bei München

Tel +49.89.289.

Fax +49.89.289.17136


Florian Matthes

Prof. Dr.

17132

[email protected]

http://wwwmatthes.in.tum.de/

Ankündigungstext

Blockchains - Funktionsweise, Chancen und Risiken

Prof. Florian Matthes

Lehrstuhl für Software Engineering betrieblicher Informationssysteme

Der Vortrag erklärt zunächst, wie die Konzepte, Funktionen und Akteure der Blockchain ineinandergreifen, um

eine verteilte digitale Buchführung basierend auf kryptographischen Protokollen zu realisieren. Am Beispiel der

Bitcoin als bisher erfolgreichster Anwendung der Blockchain-Technologie werden die Chancen und Vorteile

aber auch Risiken und Einschränkungen Blockchain-basierter Anwendungen illustriert. Der Vortrag endet mit

einem Ausblick auf Nutzungsszenarien im Rechtsverkehr (Smart Contracts und Distributed Autonomous

Organizations).

Dauer: 60 Minunten

25. Oktober 2017 in der Reihe "Wissenschaft für jedermann" im Ehrensaal des Deutschen Museums

Empfohlene Literatur:

Roger Wattenhofer: The Science of the Blockchain, 2017.Don Tapscott, Alex Tapscott: Blockchain Revolution:

How the Technology Behind Bitcoin Is Changing Money, Business, and the World, 2016


blockchain research: start - prof. dr. florian matthes, 25. oktober … · 2018-02-19 · further...

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