peering through the hype...set and enforce self-defined rules • a system that relies on authority...
TRANSCRIPT
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Blockchains: Peering Through
the HypeElaine Ou
Qcon London March 8 2017
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Blockchains and Distributed Ledgers• Some Blockchain History
o Crypto Anarchy o Early Distributed Ledgers
• Bitcoin Blockchain o Threat Model o What Makes a Blockchain Secure o What is a Bitcoin
• Programmable Ledgers o Smart Contracts
• Blockchain Use Cases
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Intro to Crypto Anarchy
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Set and Enforce Self-Defined Rules• A system that relies on authority is expensive and
inconsistent o Trusted third party may not be trustworthy o Vending machine vs human vendor
• Disintermediate financial authority o Private money (vs central bank) o Peer-to-peer transacQons (vs third-party payment processors)
• Remove the ability for anyone to seize control o DecentralizaQon o EncrypQon for privacy, access control
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Threat Model• Counterparty, who might try to cheat you • Government, which might try to stop you • Anyone else, who might be coerced by the first two • A liWle trust goes a long way. The less you use, the
further you’ll go.
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Replacing the Role of Government• A rule is only as good as its enforceability • Things a central authority should do
o Protect property rights o Enforce contractual obligaQons
• Use technology as a subsQtute for government o Maintain secure asset registries using digital signatures o Self-enforcing contracts
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Secure Asset Registries with Minimal Trust
BriQsh East India Company, 17th Century
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Distributed Ledgers are Hard
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Replication and Synchronization: Fault-Tolerant Distributed Ledgers
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How do we build secure distributed ledgers in the digital world?
• All the physical world problems, plus…
• InformaQon is cheap to copy o Fake news can flood out real
news o (In the physical world,
phantom ships can’t deliver fake records)
• InformaQon is easy to edit o Forged records o Double-entry bookkeeping
prevented edits
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The Blockchain SolutionProtecQng the Integrity of Data
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How About a Shared Spreadsheet?
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Threat Model• Counterparty, who might try to cheat you • Government, which might try to stop you • Anyone else, who might be coerced by the first two • If none of those are part of your threat model, use a
shared spreadsheet.
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Bitcoin Blockchain
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Merkle Trees
• Set of ledger entries o TransacQon data: eg, Alice
pays Bob
• Non-leaf nodes labeled with hash of child nodes
• Hash trees are used to verify that data are unaltered
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Bitcoin Blockchain
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Censorship-Resistance• AWempts at Digital Money
o DigiCash: Anonymous cash • refused to comply with regulators, bankrupt
o E-Gold: Gold-backed digital money • shut down, prosecuted, fined
o Liberty Reserve: Private currency • shut down, founder in prison
o PayPal: Private currency • caved to regulators
• SoluQon: Decentralize it
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Bitcoin Network
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• Nodes submit new blocks • Nodes check every block
received, drop if invalid • Longest blockchain is valid,
but a bad node can aWempt to create a longer chain
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Public Network Problems• Longest blockchain is valid • BUT! On the internet, no one knows you’re a sockpuppet
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Proof of Work• New blocks must contain proof of work
o Require parQcipant to complete a computaQonal challenge to signal honesty
• Proof o Unforgeable: Sacrifice something to produce it o Easily verified
• Useful for: o Deterring Denial of Service aWacks o Prevent spam o Encourage valid blocks o Store of value
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Proof of Work• Cryptographic hashes are hard to invert, easy to verify • Hashcash: Use brute force to find a hash result with a
certain number of leading 0s SHA256(SHA256(block_header, rand)) = “0000…”
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Work is Expensive (10 mins) Validation is Cheap
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• Proof of Work randomizes block submiWer
• Every block validated by every node
• Invalid blocks are dropped • Longest chain is valid
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What is a Bitcoin?• Each block has a block reward transacQon
o “Bitcoin Mining”
• Proof of Work o Unforgeable, Easily verified o Store of Value (Reusable)
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Programmable LedgersSmart Contracts
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Smart Assets on the Blockchain• Spreadsheets do more than store numbers – they can
perform calculaQons • Blockchain assets can be programmable
o Bitcoin already has simple funcQons available • We are already replicaQng ledgers. Now replicate
computaQons as well
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Bitcoin Script• There are no bitcoins. Only transacQon histories. • Encumbrance
o InstrucQons recorded with each transacQon that describe how to spend the output
Debit (input) Credit (output) Coinbase 100 Alice 100 Alice 100 Bob 100
Bob 100 Elaine!!! 100
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Bitcoin Script• OP_CHECKSIG <public key> <signature>
o Each Bitcoin address is a public key o Owner signs transacQon with private key o Is the signature valid for the public key?
• OP_CHECKMULTISIG OP_3 <public key1> <public key2> <public key3> OP_2 <signature1> <signature2> o Now we need 2 signatures out of the 3 public keys o Escrow
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Smart Contracts• Self-enforcing agreements that automate the exchange of
value • Ethereum
o Turing-complete smart contracts plakorm o Solware applicaQons run on all nodes across network
• PotenQal applicaQons o Gambling o Crowdfunding tokens o VoQng o Decentralized Autonomous OrganizaQon o Financial instruments with cash flows
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How Blockchains Will Save Billions of Dollars for Financial Institutions
(just kidding)
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Derivatives Processing Workflow
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Blockchains for Banks• Proof of Work • Public Network
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Do you need a blockchain?
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Do you need a blockchain?
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Disintermediation of Authority• Track and transfer digital asset ownership • Financial instruments • Management of idenQty or credenQals
o DNS o ReputaQon
• Distributed cloud storage market • Timestamps
o Future proof of current informaQon o (Like anagrams for scienQfic discoveries)
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Information Management• Electronic Data Interchange
o Access control for medical records o Shared informaQon for supply chain management
• Provenance of goods o Track farm to table
• Many more possibiliQes o The technology is sQll young!
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Conclusion• Blockchains can provide security from:
o Counterparty, who might try to cheat you o Government, which might try to stop you o Anyone else, who might be coerced by the first two
• Technology can create a way for people to set and enforce their own rules