Blockchain is this hot new buzzword.
- We have to start with the big one, Bitcoin.
+ We have to start with the big one, Bitcoin.
Bitcoin was started in late 2008. Open-sourced January 2009.
- Creator pseudonym Satoshi Nakamoto.
- First decentralized virtual currency.
+ Creator pseudonym Satoshi Nakamoto.
+ First decentralized virtual currency.
- Before we talk about Bitcoin we need to talk about what money even is.
+ Before we talk about Bitcoin we need to talk about what money even is.
What is money?
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- Medium of exchange: portable, durable, fungible
- Unit of account: divisible, fungible
- Store of value: durable, scarce, fungible
- One more property: acceptable (people like using it)
+ Medium of exchange: portable, durable, fungible
+ Unit of account: divisible, fungible
+ Store of value: durable, scarce, fungible
+ One more property: acceptable (people like using it)
- Next: things we've used as money
+ Next: things we've used as money
@@ -214,11 +214,12 @@
How could we make digital currency?
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Digital items can be duplicated; how can I send you something the way I do in the physical world? The Yapanese people had the right idea: use a ledger.
+
Digital items can be duplicated; how can I send you something the way I do in the physical world? The people on the island of Yap had the right idea: use a ledger.
+
Sorry, wrong Ledger.
@@ -249,10 +250,10 @@
A ledger keeps track each person's money.
- To send money, reduce my account and increase their account.
- Like Paypal.
+ To send money, reduce my account and increase their account.
+ Like Paypal.
- BUT - requires trust. One way to reduce the trust required is with...
+ BUT - requires trust. One way to reduce the trust required is with...
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There's a company that actually did this, called DigiCash. They used a centralized ledger with cryptographically controlled balances. Consumers weren't concerned enough about security or privacy and they ran out of money.
- Centralized providers can be fragile since there's a single point of failure.
+ Centralized providers can be fragile since there's a single point of failure.
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Double Spending
What if I send two transactions at once, spending the same money in two places?
- Real world, double spending is easy. Write two checks, first one cashed "wins", it's about timing.
- How can a decentralized network solve timing issues?
- Analogous problem:
+ Real world, double spending is easy. Write two checks, first one cashed "wins", it's about timing.
+ How can a decentralized network solve timing issues?
+ Analogous problem:
@@ -344,14 +345,14 @@
problem
The Byzantine army is divided into groups, each group led by a general. But some of the generals are traitors. How can the loyal generals share one plan of attack, even in the presence of a small group of traitors?
- This kind of tamper-proof consensus they are looking for is called "Byzantine consensus".
+ This kind of tamper-proof consensus they are looking for is called "Byzantine consensus".
Hashes
Hashing is a one-way transformation of some arbitrary data into some random-seeming but bounded output.
- We can get Byzantine consensus with creative use of hashes.
+ We can get Byzantine consensus with creative use of hashes.
@@ -380,69 +381,91 @@
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Applications
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So what can we use this technology for? It's a tamper-proof ledger, with timestamps and encryption and a giant network of computers running it.
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Implications
+
So what can we use this technology for? It's a tamper-proof ledger, with timestamps and encryption and a giant network of computers keeping it secure.
+ The key is that blockchains are a decentralized authority, rendering trusted third parties obsolete.
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Money
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Trusted Third Parties
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Central banks & payment services
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Blockchains are pretty great as money. Bitcoin specifically is only anonymous, not fully private, but there are ways to improve that. Blockchains' value as money is at the heart of their incentives. Private blockchains that don't try to be money face serious challenges.
+
Blockchains' value as money is at the heart of their incentives. Private blockchains that don't try to be money face serious challenges. The ability to transfer value globally without using or trusting a third party can save money and time, especially for traditionally burdensome cases like international remittance.
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Verifiable Data
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Register of deeds, copyright office
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Embedding a hash in the blockchain demonstrates an item's existence at point in the past.
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- (Bitcoin, Factoids, Sia, Maidsafe, Storj, NXT)
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+ (Bitcoin, Factoids, Emercoin)
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Identity
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Cloud storage providers
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DNS
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- (Namecoin)
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Digital Assets
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Instead of monetary value, we can treat blockchain tokens as deeds, and use the blockchain as a decentralized register of ownership.
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- (Bitcoin, LBRY, NXT)
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(Maidsafe, Storjcoin, SIAcoin, NXT)
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DNS providers
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(Namecoin, Emercoin)
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Social networks
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(Steem, Synereo)
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Media rights & compensation
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Ethereum classic
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Identity providers
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Smart Contracts
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SSL certificate authorities
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We can attach scripts to blockchain tokens, and the network will execute the script to find out who the money belongs to. This enables the creation of self-executing contracts and complicated financial arrangements.
- (Ethereum, Counterparty)
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