blockchain in 2016 - advanced distributed ledger technologies

Copyright © 2016

Howard Smithv26, November 2016

Blockchain 2016Distributed Ledger Technologies

Towards a scalable real time Internet of Value (IoV) and Certainty-as-a-Service (CaaS)

2November 4, 2016Copyright © 2016

“So I thought I knew about the blockchain”

On traditional server architectures, every application has to set up its own servers that

run their own code in isolated silos, making sharing of data hard. If a single app is

compromised or goes offline, many users and other apps are affected. On a blockchain,

anyone can set up a node that replicates the necessary data for all nodes to reach an

agreement and be compensated by users and app developers. This, coupled to

appropriate cryptographic options, allows user data to remain private (when required) but

most importantly for apps to be decentralized. The blockchain is therefore a distributed

database that maintains a continuously growing list of data records that are hardened

against tampering and revision, even by operators of the data store's nodes.


Encountered / studied during my learning

• 21 Inc

• Adjoint.io

• AlignCommerce

• AlphaPoint

• AppliedBlockchain

• Ascribe.io

• AssemblyMade

• Augur.net

• Axoni

• Balanc3.net

• BigChainDB

• Bitcore.io

• BitFury

• BitHealth.io

• BitNation.io

• BitWage

• BlockApps

• Blockchain.com

• BlockChainLab

• Blockchain-X

• Blockcypher

• BlockFreight

• Blockstack.org

• Blockstream

• BlockVerify.io

• Bloq

• Boardroom.io

• Chain

• ChainThat

• ChromaWay

• Circle

• Clearmatics

• Coinbase

• CoinFabrik

• Coinfirm.io

• CoinsBank

• Colu

• Consensys

• CounterParty.io

• Dash.org

• DCG.co

• DigitalAsset

• Draglet

• E-Estonia

• Epiphyte

• Ethereum (Solidity)

• EverLedger

• Factum

• Farmshare.us

• Filament

• Funderbeam

• GenesisMining

• Gnosis.pm

• Guardtime

• HyperLedger.org

• HyprCorp

• IBM Adept

• ICONOMI.net

• ICOO.io

• Identify

• IncentLoyalty

• IPFS

• Jaak.io

• Jaccoo

• Kraken

• KrypC

• La’zooz

• Libra.tech

• Lightning.Network

• Lisk.io

• Monax.io (Eris)

• MultiChain

• Nxt.org

• OpenChain

• OneName

• Peernova

• ProofOfYou

• Provenance.org

• Purse.io

• R3cev

• RiddleAndCode

• Ripple

• Rubix (Deloitte)

• SericaTrading

• SkuChain

• Slock.it

• SmartLedger.io

• Stampery

• Symbiont.io

• Synereo (Rholang)

• TallySticks.io

• Tendermint

• Telehash.org

• Tezos

• Tierion

• Tramonex

• TransActiveGrid.net

• Ursium

• Velocity.technology

• WavesPlatform

• xapo


Sample of recent blockchain industry news (last 10 days)

• The launch of a new cryptocurrency, Z.Cash, whose ‘genesis block’ was minted on October 28, generating a price frenzy, pushing its value over that of BTC (Bitcoin)

• MasterCard opens APIs to its blockchain development/innovation lab to stimulate new applications in P2C, P2P and B2B payments & supply chain

• A group of banks in South Africa are following those in USA and Europe to establish collaborative trials of Ethereum blockchain solutions for asset swaps and syndicated loans

• Disney became a blockchain advocate, releasing a platform called Dragonchain, highlighting Disney tokens/coins, streamlining distributed operations to ride queue optimisation strategies

• Japan Bank Consortium formed (42 member banks) to trial Ripple blockchain services for payments and settlement, moving to 24-hour settlement and real time remittances

• Chain has decided to release an open source version of its blockchain platform, attracting more attention from Visa (similar move by RS CEV for its Corda oss via the HyperLedger Project)

• Capital One is to test blockchain for healthcare claims and analytics, in partnership with Gem and healthcare API platform PokitDok

• Commonwealth Bank and Wells Fargo announce they are testing blockchain to support trade finance and a digitized fraud resistant supply chain, initially focussed on the global cotton market, working with Skuchain

• Mediachain Labs has released an oss blockchain based image/media attribution engine that includes IPFS (Interplanetary File System)

• Bank of Chain and HSBC are aiming to launch a blockchain based property survey database, with integration to the bank’s mortgage systems

• Five of Europe’s biggest insurers have joined forces to create B3i (The Blockchain Insurance Industry Initiative), includes Allianz, Swiss Re and Zurich and uses cover the gamut of the entire insurance value chain

• Swift is spearheading a new Global Payments Initiative, led by leading banks, that approximates how the blockchain works

• ABN AMRO and Delft University of Technology have partnered to develop oss for complex blockchain applications

• Euler Hermes (insurance) has partnered with Fluent.Network to build insurance applications on the blockchain

• HyperLedger, the Linux foundation oss effort to advance standardisation of blockchain technology has added over 10 new members, including Huawei, Nokia and the National Stock Exchange of India

• South Korea is planning a national digital currency using a blockchain as part of a consorted effect in Fintech investments

• Estonia is expanding its leading e-Estonia digital citizen and e-residency services, by partnering with BitNation

• AT&T is seeking a patent for a blockchain server, describing subscriber home server consistent with Bitcoin


Scope

• Blockchain(s)

– The technology

– The applications

– The platforms

• Inspire ideas for applying blockchain architecture

– In different industries / use cases

– In domains other than digital currency

– Public, private and consortium-based

– Distributed trusted transactions

• Simple, complex, two party, escrow, multi-party

From digital currency to smart contracts to smart property (IoT) to distributed autonomous

organisations (DAOs)


Blockchain is more than bitcoins and altcoins

“We should think of blockchain as another class of thing like the Internet – a comprehensive information technology with tiered technical levels and multiple classes of applications for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money; hard assets (physical property, homes cares); and intangible assets (votes, ideas, reputation, intention, health data, information etc.) But the block concept is even more; it is a new organizing paradigm for the discovery, valuation, and transfer of all quanta (discrete units) of anything, and potentially for the coordination of all human activity at a much larger scale than has been possible before … The economic, political, humanitarian, and legal system benefits of blockchain start to make it clear that this is potentially an extremely disruptive technology that could have the capacity for reconfiguring all aspects of society and its operations”. -Melanie Swan 2015

• Blockchain 1.0

– Digital currency: the deployment of cryptocurrencies in applications related to cash transfers, remittances and payment systems

• Blockchain 2.0

– Digital contracts (shared P2P business logic): the entire panoply of economic, market and financial applications using the blockchain and that are more extensive (complex multi-party) than simple currency transfers: i.e. stocks, bonds, futures, loans, mortgages, titles, smart property (IoT + blockchain), and smart contracts

• Blockchain 3.0

– Digital applications beyond Fintech (currency, finance, markets): Areas such as government, health (records), science, literacy, culture, art.


Definitions of blockchain point in the same direction

“The Blockchain combines cryptography & distributed

computing to deliver secure, direct, peer to peer transactions

without the need for a central party. At its heart is the

Distributed Ledger. This is a tamper proof, public [or private],

network-hosted, record of all consensus verified transactions.

Initially realised via Bitcoin and similar ‘cryptocurrencies’,

focus & investment is now shifting to the potential of

Blockchain technology to revolutionise the infrastructure and

processes of established Financial Institutions & other

enterprises.” – First Partner

“Blockchain basics: A network of nodes

puts transactions into blocks and blocks

into a single chain that represents the

"truth" of what has happened. If two

competing transactions happen at

about the same time, the network

resolves this conflict by choosing one

and rejecting the other, so all nodes

have the exact same copy of the

distributed ledger.” – Coindesk

“A blockchain is a distributed computing architecture where every network node executes and

records the same transactions, which are grouped into blocks. Only one block can be added at

a time, and every block contains a mathematical proof that verifies that it follows in sequence

from the previous block. In this way, the blockchain’s “distributed database” is kept in

consensus across the whole network. Individual user interactions with the ledger

(transactions) are secured by strong cryptography. Nodes that maintain and verify the network

are incentivized by mathematically enforced economic incentives coded into the protocol.” –

Ethereum Github ReadMe


Blockchain compared to traditional architectures

Source: Magister Advisors


Blockchain flavours

Source: Magister Advisors


How blockchain works, many visualizations via Google images


The community is finding ways to describe blockchain

• Blockchain timestamps

– Decentralized - no one entity controls the database of timestamps, and everyone in the network confirms that timestamp has happened

– Immutable - once a timestamp has been verified and recorded, you can’t un-do it

– Public - all of the timestamps are publicly visible, though some aspects of the data are encrypted

– Programmable - you can write code against the blockchain: for example, triggering some sort of action based on the details of a “smart contract” embedded in a timestamp.

“The blockchain is a database of verified public timestamps, we’ve never had that before”

“One way I’ve described this is similar to the way

people used to use postmarked envelopes to verify

that something had happened at a certain time. For

example, signing a will and putting it in an

envelope, and mailing it to yourself — the post

office’s postmark on the envelope, which has the date

of the stamp, proves that whatever was put in the

envelope was done so before the date of the stamp.”

“Previously, every app kept its own notion of time. So if

I post something on Facebook, Facebook saves that

post and timestamps it. We have to trust them to get

that right, and not to change it ever in the future. This

is fine for cat photos, but less fine for financial

transactions, or deeds to a house.”

“We're going from state-based datastores

(databases) to time-based datastores

(blockchains). The rationale is that state is space:

locality determines truth. If record X has a value of K in

the the "master" database, then that's its actual value.

In the blockchain, the value of X is not determined by

where you read it but by the transaction log.”

https://www.ouvre-boite.com/space-to-time/http://www.nickgrossman.is/2015/06/the-blockchain-as-time/


Blockchain viewed as an important new technology platform


Support existing or create new business models, public or private

Source: twitter.com/wmougayar

author of:Where will blockchain find its applications?

https://twitter.com/wmougayar


Potential applications

Financial

Currency

Private equities

Public equities

Bonds

Derivatives (futures, forwards,

swaps, options and more

complex variations)

Voting rights associated with

any of the above

Commodities

Spending records

Trading records

Mortgage / loan records

Servicing records

Crowd-funding

Micro-finance

Micro-charity

Record keeping

Land titles

Vehicle registries

Business license

Business incorporation /

dissolution records

Business ownership records

Regulatory records

Criminal records

Passports

Birth certificates

Death certificates

Voter IDs

Voting Health / Safety

Inspections

Building permits

Gun permits

Forensic evidence

Court records

Voting records

Non-profit records

Government/non-profit

accounting/transparency

Personal / public

Contracts

Signatures

Wills

Trusts

Escrows

GPS trails (personal)

Degree qualifications

Certifications

Learning

Outcomes

Grades

HR records (salary,

performance reviews,

accomplishment)

Medical records

Accounting records

Business transaction records

Genome data

GPS trails (institutional)

Delivery records

Arbitration


Potential applications cont.

Physical assets

Home / apartment keys

Vacation home / timeshare keys

Hotel room keys

Car keys

Rental car keys

Leased cars keys

Locker keys

Safety deposit box keys

Package delivery (split key

between delivery firm and

receiver)

Betting records

Fantasy sports records (!)

Intangibles

Coupons

Vouchers

Reservations (restaurants,

hotels, queues, etc.)

Movie tickets

Patents

Copyrights

Trademarks

Software licenses

Videogame licenses

Music/movie/book

licenses (DRM)

Domain names

Online identities

Proof of authorship / Proof

of prior art

And more …

Documentary records (photos,

audio, video)

Data records (sports scores,

temperature, etc.)

Sim Cards

GPS network identity

Gun unlock codes

Weapons unlock codes

Nuclear launch codes (!)

Spam control (micro-payments for

posting)


Recent news of enterprise efforts to leverage blockchains

Activity and news

• Beyond pure-play startups, industry and public sector are experimenting with blockchains

– Understanding scalability, interoperability, security and stability

– Establishing working groups, temporarily putting any concerns on hold

• Pilots / trials / demonstrations / plans

– Deloitte and ConsenSys (an Ethereum developer/integrator) announced plans in 2016 to create and demonstrate a digital bank

– An R3 CEV mock trading project connected 11 banks to a distributed ledger using a private Ethereum blockchain running on Microsoft Azure cloud

– Citibank is developing, testing and working on its own crypto-currency called CitiCoin and supporting blockchains

Cont.

– Estonia government services (e-Estonia) are securing healthcare records using blockchain

– Microsoft VS (Visual Studio) is making the Ethereum Solidity programming language available to a wider set of developers

– Innovate UK (government open innovation) is funding Tramonex to develop a cross border payments demonstration using Ethereum

– JP Morgan Chase is developing a blockchain on Ethereum to support private/public derivatives and payments in a way that would satisfy regulators while protecting privacy

– The Isle of Man Government is trailing blockchain based government services including identity

– The Royal Bank of Scotland claims to have built a Clearing and Settlement process based on Ethereum smart contracts, with promising performance for real world use


We could go on and on …

Cont.

– 40 R3 CEV members (banks) have trialled trading fixed income products over 5 separate blockchains, involving technology from Chain, Ethereum and Eris Industries (now known as Monax)

– The Bank of Russia has developed and tested an Ethereum-based blockchain prototype called ‘Masterchain’ for financial messaging, to be used by banks in Russia

– The Australian Securities Exchange is building a blockchain replacement for its current systems and strengthen its role in the markets

– IBM and Credit Mutual are working on customer identity services for verification and support in blockchain applications

– Visa and Mastercard have live pilots in the domain of cross border payments and exploring how to extend financial services to adjunct business, e.g. car leasing

Cont.

– Phillips is building a blockchain based application for medical records management

– Siemens existing IoT activities has been extended to encompass blockchain with a view to developing the nascent area of Ledger of Things

– Deloitte is working with several blockchain start ups, including BlockCypher, Bloq and Consensys, working on a range of banking, insurance and payments processes. Deloitte has a division on this called RUBIX.

– Blockchain ‘smart contract’ equity swaps demonstrated with Barclays, Citi, Credit Suisse and JP Morgan (Next slide)

– IBM in China building a blockchain application to track the food supply chain, e.g. Pork, food health


Recommended books / papers

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/492972/gs-16-1-distributed-ledger-technology.pdf

UK Government:


Keeping up to date

• Coindesk.com

– Leader in digital currency and blockchain news

– Consensus 2016 conference drew 1500+ attendees

– Publish the “State of Blockchain” report

• http://www.coindesk.com/state-of-blockchain-q1-2016/

• The-blockchain.com

– A blockchain portal and education site

– Good selection of videos

• Lots of other Web resources, as you can imagine

http://www.coindesk.com/state-of-blockchain-q1-2016/


Deeper learning resources

• Bitcoin and Decentralized Technology

• https://www.pluralsight.com/courses/bitcoin-decentralized-technology

• By the same author

– Understanding the bitcoin blockchain in 5 minutes and in 24 minutes

• https://www.youtube.com/watch?v=l9jOJk30eQs

• https://www.youtube.com/watch?v=Lx9zgZCMqXE

• Coursera

• https://www.coursera.org/learn/cryptocurrency

imponderablethings.com coursera.org

https://www.pluralsight.com/courses/bitcoin-decentralized-technology

https://www.youtube.com/watch?v=l9jOJk30eQs

https://www.youtube.com/watch?v=Lx9zgZCMqXE

https://www.coursera.org/learn/cryptocurrency

Copyright © 2016

Technology details & Standardisation efforts


Segmenting the technology

• All blockchains are not the same

• Public / private

– Unpermissioned (~ Web 3.0)

– Permissioned (Enterprise)

• Orientation

– Transactions

• Cryptocurrencies

• Digital Assets

– Logic

• Distributed Applications (dApps)

• a.k.a. Smart Contracts

• And other dimensions

– e.g. Anonymity, Pseudonymous (indirectly discoverable identity)

– Consensus Protocols

Source: Eris Industries, now Monax.io


Blockchain technologies differ

• Differences will pan out over time, leading a more standardised platform, similar to the evolution of databases and traditional app server stacks

– Cryptographic keys supported

– Data structures supported

– Consensus protocol employed

– Sophistication of sharding – data partitioning

– Permissioning layer details

– Role of ‘coins’ and ‘tokens’ in the architecture

– Concurrency model supported

– Block confirmation time / performance / throughput

– Fixed or dynamic block sizes

– Limits on size of a ‘transaction’ or ‘smart contract’ on the blockchain

– Contract expressiveness, run time system and language

– Interfaces with clients and other ecosystem components

– Open source or proprietary


Blockchains utilise distributed “consensus” protocols

• The Byzantine General Problem analogy

– From systems fault tolerance to consistent database transactions & beyond to blockchain

• Proof of work

– Repeatedly run hashing algorithms or other mathematical puzzles to validate transactions

– In the Bitcoin blockchain, for example, significant energy/electricity costs are incurred by ‘miners’, some of which operate large scale data centres for the purpose

• Proof of stake

– Asks users to prove ownership of a certain amount of their cryptocurrency or crypto-tokens (their ‘stake’)

– Proof of stake currencies can be orders of magnitude more computing efficient than proof of work mining

• Proof of space, proof of bandwidth

– Similar to proof of work, but focussed on providing a dedicated amount of memory, disk space or bandwidth instead of CPU time

• Proof of ownership

– Algorithms that focus on the consensual provable ownership of a digital asset

• Proof of authority

– For private chains, authorised notes are able to collaborate to create / validate new secured blocks on the chain

Each protocol type has variations, for example to

define the next valid block in the chain


Standardisation …. the Hyperledger Project

• A Linux Foundation project, a collaborative effort created to

– Advance blockchain technology by identifying and addressing important features for a cross-industry open standard for distributed ledgers

– Not dependent on ‘mining’ for ‘proof of work’ (as in Bitcoin), consensus based on the Practical Byzantine Fault Tolerance Algorithm (PBFT)

– Transform the way business transactions are conducted globally

– An operating system for trusted, accountable and transparent interactions

• Actively involved include Accenture, IBM, Intel, JPMorgan, R, financial institutions

www.hyperledger.org

http://www.coindesk.com/stellar-ripple-hyperledger-rivals-bitcoin-proof-work/


Chain

• The team at Chain has built products at Google, Salesforce, Visa, Microsoft, Square, and Heroku

• Chain partners with leading organizations to build blockchain networks that transform markets

– Chain is a collaboration between financial firms and a team of SV engineers, cryptographers and data scientists

• The Chain Open Standard optimizes for security, privacy, and scalability in highly regulated environments

– Real use cases across payments industry, banking and capital markets

• Comprehensive framework covering protocols and medium including:

chain.com

Chain approach to

standards development

Issuance

Payments

Bilateral trade

Order book

Loans

Auctions

Assets

Smart contracts

Privacy

Metadata

Data model

Consensus


Chain Open Standard chain.com/os


Chain Core, OS and Sandbox

• Enterprise blockchain software for production deployment

• The software implementation of the Chain Open Standard

• Designed to run in or with enterprise IT environments

• Enables institutions to initiate, operate, or connect to a blockchain network

• More than a blockchain node - enterprise-grade distributed system to build secure, scalable, highly available blockchain networks

chain.com/core

chain.com/showcase

Copyright © 2016

Examples


Coinbase

• A Bitcoin wallet and platform for merchants and customers

– Aiming to be the trusted brand in the Bitcoin marketplace

– Integrate Bitcoin into many product and service categories

• $106m funding including Andreessen Horowitz, NYSE, IDG Ventures, Y-Combinator

• 5.6M wallets deployed, 43,000 merchants, $3.5B in Bitcoin exchanged, 3.8M customers served, 8000 API developers

– Mobile wallet

– Bitcoin insurance protection

– Instant Bitcoin exchange to local currency

– Secure off line storage

– Full user control of private keys

• Multi-signature vault

– Support for recurring buys / subscription economy

www.coinbase.com


Circle

• A social payments app

– Send money as easily as sending an email, a txt message or a Facebook like

– e.g. “Txt your flatmate half the electric bill”

• Aiming to use open Internet standards, and blockchain, to make “payments” easier to use, safer and more convenient

• Embedding innovative approaches to risk, including machine learning

• Partnership with Barclays, granted an e-money license by the UK Financial Conduct Authority

• $76M VC funding including Goldman Sacks

www.circle.com


Kraken

• A prominent trusted bitcoin exchange (bitcoin, Ethereum, others)

• Used by professional bitcoin traders – long or short positions

• Provides bitcoin liquidity – bitcoin dark pool

• Leveraged trading possible up to 5x, shorting allowed

• Stop loss order controls, automated

• Trading in and out of bitcoin from USD, Canadian dollars, British pounds and Japanese yen

• First bitcoin exchange to have trading price and volume displayed on a Bloomberg Terminal

• First to pass a cryptographically verifiable proof-of-reserves audit

• Acquiring other otherwise non-viable exchanges

www.kraken.com


EverLedger

• A blockchain based fraud detection system, overlaying big data from closed sources such as insurers and law enforcement

• Permanent, immutable, a ledger for diamond certification & transaction history

• Verifiable by insurance companies, owners, claimants and the police

• Extensible technology to track any asset that carries a unique identifier and which is difficult to destroy or replicate

• API provides access to certificates, policy and claims information

– REST, JSON, resource-oriented URLs, standard HTTP verbs

– Client requests require signed HMAC-SHA512 signatures

• API key and Secret key

www.everledger.io


Supply chain commerce

SKUChain

• Blockchain solutions for B2B Trade and Supply Chain Finance

• Frictionless collaborative commerce

– Direct relationships

• Pos, invoices, Inventory, forward payment obligations, loans

– Deep tier financing

• Real time views, linked to ‘Oracles’

BlockFreight

• Blockchain solutions for global freight

– Connecting banks, insurers, freight forwarders, shipping carriers, port operators and regulators

• Built on Ethereum

– Smart contracts to encode bill of lading process, payment terms and cargo

– Tradeable token for transaction fees

– Storage of freight information sets (bill of lading, supporting documentation) using the Interplanetary File System (IPFS)

www.skuchain.com

www.blockfreight.com


R3

• R3 is a financial innovation firm that leads a consortium partnership with over 40 of the world's leading banks

• Design and deliver advanced distributed ledger technologies to global financial markets

• Collaborates with partner banks on research, experimentation, design and engineering

– Pillar 1: Base layer reference architecture to underpin financial grade Blockchain ledgers

– Pillar 2: Secure, multi-institution collaborative lab to test and benchmark blockchain based technologies and services

– Pillar 3: Run use cases to identify and design “up the stack” commercial blockchain applications

• Activities:

– Crypto 2.0: Intelligent application of cryptographic technology and distributed ledger-based protocols within global financial markets

– Exchanges: New execution solutions which redefine the trading experience for existing and evolving asset classes

– Ventures: Targeted early stage investments in forward thinking companies that seek to shape the next generation of financial services

r3cev.com


Ripple

• A blockchain based Global Settlement Network

• Cryptographically secure end-to-end payment flow with transaction immutability and information redundancy

– 10 of the top 50 banks work with Ripple

– CGI and Accenture acting as Integrators

– Distributed financial technology allows for banks around the world to directly transact with each other without the need for a central counterparty or correspondent

– Compress operational costs and offer new services for cross-border payments

• Instant, certain, low-cost international payments

– Cross currency settlement

– FX market making

ripple.com


Ripple architecture ripple.com/technology

The Ripple network contains the Ripple

Consensus Ledger (RCL), a secure distributed

ledger that uses the consensus process to settle

transactions. Because of its distributed nature, it

does not require a central operator, and offers

transaction immutability and information

redundancy. RCL holds the order book with

bid/ask offers from payment initiators and market

makers. Its path-finding algorithm enables it to find

the lowest foreign exchange rate across all order

books and currency pairs.

Ripple Stream is an interface for market

makers to submit bid/ask offers to the Ripple

network. It uses FIX and .NET APIs to plug

into the market makers’ existing systems,

allowing for an easy interface with their

trading clients. Ripple Stream can be used by

FX trading desks within your bank for an

internal market making use case. For

corridors that your bank does not have an

internal FX trading capability, you can allow

external market makers to provide liquidity for

your cross-border payment customers.

Ripple Connect is a plug-and-play module that processes international payments for banks. It connects to the receiving bank’s

Ripple Connect to exchange KYC and risk information, fees, payment details and expected time of funds delivery. It communicates

with the Ripple network to get the lowest currency quotes. It packages this information and presents the entire cost structure to the

sending bank, providing unprecedented visibility into the total costs of the transaction. Once the sender approves the transaction, it

interfaces with RCL to settle the trade and notifies all parties of the transaction confirmation.


Ripple implements the XRP cryptocurrency

• Banks perceive cryptocurrencies as tokens representing digital assets

• Ripple in conjunction with a consortium of banks have demonstrated the viability of XRP (Ripple’s native asset)

– Reduce the cost of liquidity operations

– Enhance liquidity

• Demonstrates the possibility of removing the need for local currency

– So called nostro accounts

• Participating banks included Barclays, CIBC, Intesa Sanpaolo, the Royal Bank of Canada and Santander

– Control of their own wallets and transactions

• The trial adhered to local (national) regulations

http://www.coindesk.com/global-banks-test-ripples-digital-currency-new-blockchain-trial/


Align Commerce

• Venture funded by KPCB and other prestigious investors

– “Rethinking B2B wire transfers”

• Blockchain powered wire transfers, no intermediary banks involved

– Just like a FedEx package, track your funds transfer with a great Web UX

– 60 countries now served, 1 to 3 days transfers, account to account, zero fees

• Many small and medium business struggle with cross border payments

– Most banks cannot send funds transfers directly as transactions

– The blockchain under the AlignCommerce hood is invisible to the UX

– Blockchain protocol with end points as bank accounts, API coming

http://www.kpcb.com/blog/the-real-reason-why-blockchain-technology-is-worth-investing-in

www.aligncommerce.com


Axoni

• Axoni develop blockchain infrastructure for Capital Markets

• Blockchain ‘smart contract’ equity swaps demonstrated with Barclays, Citi, Credit Suisse and JP Morgan (October 2016)

– Automated lifecycle management and synchronisation of single stock, index, and portfolio swaps

– A diverse set of 133 structured test cases to assess the functional and non-functional capabilities of the blockchain technology, 100% success rate

– Million active trade contracts onto the network, 100s of thousands of new trades and updates in a matter of minutes

– Ability to query that data on a system-wide view in real time

– More than 50 tests of the underlying Axoni Core infrastructure, adding and removing permissions for participants, and the ability to update the protocol in a simulated live environment.

– Reduction in reconciliation costs reduced risk of a payment not being made on time because of disputes over what it's meant to be

– A standardised framework for firms to connect into - even if the swaps remain custom

• Historically a gold record for any OTC trade has required a trusted third party like the DTCC or a clearing house

– Integrated market data feeds from Thomson Reuters blockchain to facilitate automated, synchronized life cycle calculations like accruals and margin payments related to changes in prices and corporate actions

• "The proof of concept has shown that blockchain technology lends itself well to solving for the operational complexity and volumes of Equity Swaps lifecycle processing.“ – Credit Suisse

• “Banks now looking for opportunities to apply smart contracts and shared ledgers to drive process simplification including increasing both standardization and the degree of straight-through-processing” - Barclays

• “Swaps are generally customised by dealers for the individual clients. Not only is it costly to maintain these systems, but you also frequently have what's known as a payment break; one party thinks they are supposed to receive X, but their counterparty believes they owe Y. Reconciliation on this is some of the most complex, difficult and costly in the industry.“ -- Axoni

http://www.ibtimes.co.uk/axoni-delivers-blockchain-equity-swaps-barclays-citi-credit-suisse-jp-morgan-1586964

axoni.com


Symbiont

• Enterprise ready Issuance and Trading platform, helping Wall Street get on board the blockchain ecosystem

• Symbiont Assembly, a distributed ledger component

• Easily model complex financial instruments and contracts and digitize to a blockchain

• Corporate required actions are stored in the distributed ledger

• Allows for manual or automatic/self executing terms and conditions

• Crytographically authorised custom workflows for any multi-party process –sufficient to support the entire lifecycle of a financial instrument

• Share the current state of an instrument with the market in a tamper proof and controlled manner

symbiont.io


Factom

• A scalable data layer for the blockchain

• Using the technology behind Bitcoin to change how businesses manage data and keep records

– Audit systems, medical records, supply chain management, voting systems, property titles, legal applications, and financial systems

• Factom maintains a permanent, time-stamped record of your data in the Blockchain

– Reduce the cost and complexity of conducting audits, managing records, and complying with government regulations.

1. Proof of existence: Document existed in this form at a certain time

2. Proof of process: Document is linked to this new updated document

3. Proof of audit: Verifying the changes in the updated document

factom.org

Factom white paper


MasterCard announce blockchain public API/lab

• MasterCard have opened up APIs into their blockchain development lab

• Draw in developers / SMEs around the implications of blockchain that MasterCard view as relevant to their business, including

– P2M payments

– P2P payments

– B2B payments

– Trade Finance chains

– Supply chain commerce https://developer.mastercard.com/product/mastercard-blockchain


Blockchain in defence industry

Use case 1

• Secured messaging system / apps via a ‘permissioned’ blockchain

• Decentralised ledgers for military applications, including battlefield processes

– Map business logic of DoD ecosystem onto network of known entities

– Smart contract send/receive reducing exposure to active hackers, with prosaic objectives of simplifying and speeding otherwise complex communications, including back office

• Interesting features including repudiation, deniability, perfect forward and backward secrecy, time to live/self deleting messages, one time view messages

Use case 2

• Secure sensitive information to enhance “information integrity”

– Track when a system, device or piece of data has been viewed or modified

– Know who is inside the castle and what they are doing

– Critical oversight of sensitive databases, e.g. nuclear systems command and control

DARPA. DoD and NATO have put out requests for military applications of the blockchain

Galois formal mathematical verification

of the Guardtime blockchain


Guardtime

• An industrial blockchain platform powering digital transformation

• 100 cryptographers, developers and security architects

• Defending networks from nation-state attack

– Telecommunications, A&D, financial markets, insurance, eGovernment

• Black Lantern network security appliance

– KSI blockchain service (Keyless Signature Infrastructure)

– State of all instrumented digital assets registered on blockchain

– Mathematically verifiable baseline image of network or software defined network

– Verification of network remaining in a clean state, detect changes and act when compromise detected

• Firmware, operating systems, routing tables, switch and router configurations, event logs, data stores, memory

www.guardtime.com


Blockchain APIs in the cloud? Yes.

• BlockCypher is an infrastructure fabric for blockchain applications

– Developers and businesses

• Partners include Deloitte, CapGemini, EY and pwc

• Multiple data centers, REST APIs, robust hosted blockchains / nodes, 24/7 support

www.blockcypher.com


21 Inc.

• Vision to build software and devices to enable blockchain / bitcoin applications on any device

– Building a global network of machines (Internet of Things) that are “financially” connected to each other via Bitcoin

– A micropayments marketplace, a new system resource for the machine economy

• $116M investment (as of March 10, 2015) including Andreesen Horowitz, Khosla Ventures, eBay and PayPal founders

• Andreessen Horowitz compared the ambitions of 21 Inc to the development of 56-kilobit Internet modems and wireless Internet towers

• Working with the community to foster bitcoin programming design patterns and applications

– The 21 Bitcoin Computer is “the fastest way for developers to learn Bitcoin. It has everything you need to build your first app in a weekend: a micropayments server, a full copy of the Blockchain, and a command line interface for programmatically mining, buying, and selling digital goods for bitcoin.”

– BETA download for putting Bitcoin on any device

– Ping21 for experimenting with the bitcoin enabled IoT

• 21 Inc. is developing the sort of structure that could eventually power decentralised versions of many cloud-based computing services

– “decentralized Bitcoin-incentivized grid computing that are qualitatively different from -- and complementary to -- what you can get from centralized cloud computing”

21.co

https://21.co/learn/

Copyright © 2016

Moving onto Smart Contracts, Ethereum et al


Introducing the terminology of “Smart Contracts”

Technology

• Programmable currency

– Cryptographic tokens with programmatic behaviours

• Smart contracts(*)

– Self-executing contractual (consistent) states, a.k.a. distributed business logic

– Abstracting distributing programming to represent meaningful social or commercial contracts (beyond simple coin exchange between two parties)

– Trusted, shared execution

• Smart property

– Digital Assets that understand their ownership and can be exchanged P2P

– Physical Assets, a Ledger of Things, linking smart contracts to IoT

• Dapps – decentralised applications

– Same code + same data = same result

– Implemented smart contracts and smart property as trusted tamper proof code on a blockchain

Higher level concepts

• DAO – decentralised autonomous organisation

– Implemented as a set of Dapps

• DAC – decentralised autonomous corporation

– Well formed DAO that can operate as a business: for profit or non-profit

– Examples: Uber without Uber, eBay without eBay, Facebook without Facebook

– Includes automatic markets, trade nets …

• DAS – decentralised automatous society

– Community without Community Makers

– Governance without Government

* The word “contract” does not imply a

commercial contract at the business level, but

blockchain based solutions may lead to this


Monax (was Eris Industries)

• Described as ‘process automation for enterprise ecosystems’

– B2B processes/Web services/microservices without central authority or system

• Software and ‘legal engineers’ build a ‘smart contract’ library to

– Reduce time to market for new processes

– Increase certainty in transactions and processes

• Customers include Swift, Deloitte, Accenture, R3 CEV, EY, Microsoft, AWS

• Targeting ecosystem processes in claims management, supply chain management and B2B certification

• A platform for building, testing and operating ecosystem applications with a blockchain back end –easing the way to smart contracts

– Glue for 2B blockchain applications

monax.io


Monax

• Verifiable execution

– Transaction engine

– Consensus engine

monax.io/platform

https://monax.io/2016/03/02/eris-and-tendermint


Ethereum

• “A worldwide decentralised computer with theoretically unlimited power and few barriers to entry”

www.ethereum.org


Blockchain 2.0 as described by Ethereum.org

• A decentralised platform that runs smart contracts

– Applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference

– Unstoppable applications, running a distributed virtual machine able to execute and integrate with an all–purpose (Turing complete) programming language

– Run on a custom built blockchain globally shared infrastructure that can move value around and represent the ownership of property

• Ethereum developers can

– Develop many different kinds of applications

– Create markets

– Store registries of debts or promises

– Move funds in accordance with instructions given long in the past (similar to the role of a will or futures contract)

– All without a middle man or counter party risk

• In a traditional architecture, every application has to set up its own servers in isolated silos, making sharing of data hard

– And if a single app is compromised or goes offline, many users and other apps are affected


Ethereum conceptsA simple smart

contract might be

a bet between two

parties about

tomorrow’s

temperature at

midday. The

contract could be

automatically

completed by a

software program

checking the

official

temperature

reading from

weather.com, with

the result of a

transfer of bitcoin

held in escrow

from the loser to

the winner’s

account.

Adapted from page 23,

The Blockchain, Blueprint

for a New Economy,

O’Reilly


Solidity and Dapps

• A blockchain app platform for ‘unstoppable’ applications, including DAOs

– Distributed Autonomous Organizations

– Smart Contract execution (distributed peer-to-peer)

• Create tradeable digital tokens

– Use as a currency, a representation of an asset, a virtual share, a proof of membership or anything at all

• Smart contracts run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference

– Developers can create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counterparty risk

• Solidity, a new programming language for smart contracts and DAOs

– MIX an IDE for the Blockchain era, create:

– Tradeable token networks with fixed supply

– Central “banks” that can issue money

– Puzzle-based crypto currency or surrogate applications

– Autonomic crowd funding and auction models

– Virtual organizations where members vote on issues

– Transparent associations based on shareholder voting

– Delegative democratic systems, unchangeable constitutions

dapps.ethercasts.com


DAOs and The DAO

• DAO, a Distributed Autonomous Organization

– Digital democratization of business

• The DAO, a DAO curated by the Ethereum Project

– Comparable to an autonomic cooperative, bank, VC, hedge fund

– Bylaws hard-coded into a set of blockchain protocols

– Executable smart contract engine

– Cloud based “financial” code

• Proposals for new smart contracts including:

– Blockchain + IoT for a new decentralised “sharing” economy

– P2P car rental, fully autonomous self-renting vehicles

daohub.org


Synereo

• Began life as a life to build a truly distributed social network with ‘attention’ economics as opposed to centralised models (Facebook et al)

• Scalable functional block stack, with a strong and provable distributed processing model

– Sharded and composable

– All subprocesses run in parallel, leading to potential infinite scalability

– A proof of stake (not mining) consensus protocol

• Rholang smart contract language

– Based on process calculi (specifically a variant of the pi calculus)

– Predictable reliable and provable programs

– Allows for the scalable (composable) development of very complex Dapps

– More than a scripting language

Technology vision and blueprinthttps://docs.google.com/document/d/1xmRvAjJEQ72-sR9luS34TG0BOpPn_6ztZjYBFCByKxo

synereo.com

Copyright © 2016

Dark, Anonymity and Social Directions


From the dark web, to dark coins and dark orgs

https://letstalkbitcoin.com/blog/post/darkcoin-anonymity-is-now-fully-functional-and-open-source-instant-transactions-on-the-way


Nxt.org is trying to anonymise and decentralize the future

• Open Source (GPL v2), decentralised crypto platform and API

• Nxt builds on and improves the basic functionality of pioneering cryptocurrencies such as Bitcoin

• “Cryptocurrency and financial systems are the first widely used applications of blockchain technology, but the blockchain and its associated technology can be used for so much more.”

• Build new applications directly on the blockchain itself

– Nxt gives users complete freedom to create their own applications, e.g. Russia experimenting with a Nxt based e-proxy voting system, central securities depository

– Create your own asset exchange for secure peer to peer trading

– Launch your own digital currency or token system for any purpose, including exchange, trading, hedging, voting, contract processes

– The Nxt blockchain provides data storage, publication and verification

– Create decentralised autonomous organizations using multi-signature blind accounts

• Alias System, one piece of text to be substituted for another, so that keywords or keyphrases can be used to represent other things


Going ‘dark’ may not be such a bad thing

• The Darkcoin open source foundation was re-branded “Dash” (Digital Cash) in March 2015

– Disassociation from the Darkweb

– Bitcoin does not guarantee anonymity, unlike physical cash

• The Dash mission remains the same however, to be the world’s first privacy centric crypto-currency

– Private, instant, secure, peer to peer, global

– Dash founders believe privacy is a universal human need, and not a haven for criminals

– Many people have apprehensions about privacy vs accountability – Dash may be able to address both?

www.darkcoinfoundation.org

www.dashfoundation.io

www.dash.org

https://cointelegraph.com/news/darkcoin-is-now-dash-and-not-a-moment-too-soon

“Recently it became apparent that our branding was getting in the way of our

mission, so we started investigating rebranding. We believe Dash, which

stands for digital cash, is a great representation of what we want to become.”

“Dash is what Bitcoin would be if Bitcoin had a transaction mixer

(tumbler) built into its protocol, and if its confirmation times were

instant.”

https://cointelegraph.com/news/darkcoin-is-now-dash-and-not-a-moment-too-soon


Z.Cash

• First open, permissionless financial system employing zero-knowledge security

• ‘Genesis block’ was minted on October 28, generating a price frenzy, pushing its value over that of BTC (Bitcoin)

– Effective anonymity of transactions, hiding sender, recipient and value

– View keys under user/participant control, without central authority

– Employs a zero-knowledge proof construction called a zk-SNARK

• Dash responds:

1. Governance

2. Trajectory of infrastructure

3. Independence of development

4. Privacy for user

5. Double spend protection in real time

6. User friendliness at the protocol level

https://z.cash/

“If Bitcoin is like http for money, Zcash is https”

https://www.youtube.com/watch?v=591J9KcKgHM


Identity for the digital era? The blockchain passport concept


A new global citizenship?

• From e-Estonia to BITNATION

– Digital nations without borders?

– Or nations providing “e-Residency” access to Government services?

– e-Estonia using blockchain to secure healthcare records (Guardtime)

• BITNATION “provides the same services traditional governments provides, from dispute resolution and insurance to security and much more – but in a geographically unbound, decentralized, and voluntary way”

– Bitcoin 2.0 – a cryptographically secured public ledger distributed amongst all of its users

– Global Citizenship IS, Public Notaries, Embassies, Consulates, Refugee Emergency, Education Network, Bitcoin Services Etc.

https://e-estonia.com/

https://bitnation.co

e-Estonia and BITNATION now collaborating,

but that’s another story for another time!

https://e-estonia.com/

https://bitnation.co/


Trend

Society

• Nations are becoming e-Nations

– e-Estonia led the way

• Borders will become e-Borders

– e-Residency has value

• e-Nations will compete with e-Services for:

– Citizens, Businesses

– e-Residents, e-Businesses

– Valuable Migrant Skills, Labour

– Refugee services

– Global citizen fluidity

• Reciprocal relationships between Nations and e-Nations

– Spreading governance best practices

Technology

• Blockchains as

– The shared systems of record, identity and ownership

– The modernisation technology for previous generation ‘digital government’

• Initially adjunct to existing integration architectures, SOA, Web services

• Smart contracts as

– The shared data/code of rules of governance and interaction

• Blockchain based DAOs as

– A new organising principle for governance and value-added e-Government services

Additional slide deck available

Copyright © 2016

How fast are things moving?


Examples of blockchain activity in the IT Services industry

Projects

• Accenture launches blockchain practice

– Capital markets, investment banks

– Proposes ‘editable’ blockchain, filing a new patent

• Chameleon hash

• Capgemini publishes position papers

– Incubating solutions with selected technology partners

– Claims to be building 100 person strong team of blockchain specialists

• CGI implements a Ripple Validator node

– Launches blockchain lab for trade finance

– Blockchain enables payment solutions

• Cognizant talking about the blockchain disruption

– Banking, finance, smart contracts

– Defining solution propositions

• IBM

– Establishes Blockchain technology group and research, puts blockchain on Z series

– Incubating solutions around specific business issues, e.g. Loyalty points, IoT products, Finance

– Private Blockchain via Bluemix PaaS for developer experiments (Monax / Eris technology)

– Collaborating with Digital Currency Group (DCG)

Services

• AWS

– Blockchain-as-a-Service (BaaS)

– Monax / Eris technology

– https://aws.amazon.com/marketplace/pp/B01BTB1EP8

• IBM

– Bluemix blockchain services/API

– HyperLedger technology

– http://www.ibm.com/blockchain/bluemix.html

• Intel

– Sawtooth Lake (IntelLedger)

– https://intelledger.github.io/

• Microsoft

– Azure Blockchain-as-a-Service (BaaS)

– Monax / Eris technology

– https://azure.microsoft.com/en-gb/solutions/blockchain/

https://aws.amazon.com/marketplace/pp/B01BTB1EP8

http://www.ibm.com/blockchain/bluemix.html

https://intelledger.github.io/

https://azure.microsoft.com/en-gb/solutions/blockchain/


Ernst & Young blockchain start up challenge

• Mentors from the accounting firm to build products focused on digital rights management and energy trading

• Aimed at ensuring intellectual property rights can be more easily managed and to make it easier for new business models to evolve in the energy trading space

• Selected startups include

– Adjoint, BitFury, BlockVerify, BTL Group LTD, JAAK and Tallysticks


IBM Adept and the IoT Blockchain

• An IoT research project led by IBM

– Machine-to-machine commerce

– Cost, monetisation, interoperability, discoverability, authentication, scale

– To support long term service commitments/customer experiences

• Smart connected products transacting on the blockchain and participating in smart contracts

– Autonomous devices, inter-device commerce

– Decentralisation of ownership and control/interaction

– Inter device / stakeholder agreements, payments and services

• Related efforts

– Filament, 21 Inc

IBM Institute of Business Value


Funding and funding bubbles

• In 2015, Bitcoin and Blockchain-related startups raised over $1B in total investment

• 21 Inc. raised $116M and Coinbase raised $75M, dwarfing the investment in start ups that drove the early days of the Internet

• Financial institutions (banks, insurers, market makers) are investing millions in blockchain related projects

• VCs are betting on more than the financial sector, investing in promising non-financial applications, for example, smart contracts

– e.g. the Ethereum blockchain


Peak of hype: Where are we with blockchain according to Gartner?


The ‘Let’s Talk Payments’ Blockchain Momentum infographic 2016

• Use cases of blockchain in the financial and non-financial sector (2015)

• Study of sectors in which blockchain activity is growing or lagging (2016)

– Companies (startups, unicorns) operating in each sector

– Deals and partnerships struck

– Funding raised by these companies

https://letstalkpayments.com/ltp-blockchain-momentum-2016-infographic/

Also see:

https://angel.co/blockchains


Expect bumps in the road

• In June 2016, The DAO, a platform for the autonomous governance of investment capital built on a public Ethereum blockchain, was found to contain an unexpected code path allowing one sophisticated user to withdraw funds (Ether cryptocurrency) from the chain, at the time valued at $50m USD

– Ether transferred to a clone of the DAO chain (“childDAO”) under control of the user

– With no central authority, community consensus decided a course of action

• Close The DAO

• Hard fork the Ethereum-based blockchain, with no possibility to reverse the fork (no backward compatibility)

• Partial return of funds, with some controversy

– Cast a shadow over the immutability of blockchains

At approximately 14:30 UTC July 20 2016, China-based

Ethereum miner BW.com mined the Ethereum blockchain's

192,000th block. Seconds later the mining pool also mined the

first block on the new blockchain, which returned funds lost in

the collapse of The DAO to an account available to its original

investors.

http://www.coindesk.com/ethereum-executes-blockchain-hard-fork-return-dao-investor-funds/

http://www.coindesk.com/understanding-dao-hack-journalists/


Are concerns about the vision real?

Questions

• Are we really on the cusp of solving long standing theoretical problems in distributed computing?

– Claims that blockchains and smart contracts work at small scale but, by design, break at large scale

– Trying to reconcile two conflicting directions – 1) put more data in the chain and 2) reduce the time for the chain to be globally consistent

– Can we run untrusted code with 100% guarantee that it won’t crash other applications?

– Are we putting complexity in the network, which is the enemy of security?

– Verifying the blockchain from the beginning would require running every single computation that every user even run, from the genesis code forward

– Will this design choice limit end to end scalability?

Directions

• Not to solve these problems would effectively stop the chain from making forward progress

– Is Ethereum Turing complete?

– Are Ethereum smart contracts verifiable?

– Do we need to solve these problems at a fundamental level?

• Languages

– Ethereum Solidity

– Synereo Rholang

• Reflexive higher order processes (pi-calculus formalism)

– What about Tezos’ direction?


Accenture proposed an editable (redactable) blockchain

• Accenture files patent that allows an authorised third party to edit or delete information stored in a permissioned blockchain, governed by agreed upon rules/policy

– Proposal and prototypes aims to make blockchain more practical for use in real world financial applications

• The Accenture proposed method utilizes a “chameleon hash” to allow authorized administrators to edit a single “block” while not compromising the integrity of the entire chain

– Financial services providers need a means to quickly correct errors on the blockchain, since in the real world there are non-technological reasons why revisions may be required

– The Accenture proposal is controversial because blockchain was conceived by design to be an immutable, tamper proof ledger, eliminating the need for such central authorities

– Accenture claim immutability is not needed in permissioned blockchains because everything is overseen by a central authority, many of which are Accenture clients

– Blockchain purists point out that Accenture’s proposal for a mutable blockchain loses it ability to act as a non-refutable record for legal purposes and that the mechanism could be exploited by hackers

– Accenture believe that allowing for forks in the chain, without having to disrupt the ongoing operations in the overall chain, is needed for practical applications

– Blockchain technologists propose that the edit feature is unnecessary in any case, since multi-party smart contracts could be implemented on an immutable chain allowing for whatever ‘corrective’ actions to be implemented as robust processes, themselves immutable and tamper proof


Challenges ahead for blockchain

• Throughout

– Bitcoin processing 7 tps (2015), VISA 2,000 tps, 10,000 peak, Twitter, 10,000tps

• Latency

– 10 minutes to clear, with longer wait recommended for large transactions, VISA takes seconds at most

• Size and bandwidth

– The bitcoin blockchain grew by 14GB in 2014 to 45GB in 2016, 1 to 2 days to download. At VISA transaction rates it will grow by 1.42PB/year. At global currency exchange rates by >200PB/year.

• Security

– Architecture leads to centralisation of mining, 51% mining control attacks, double-spend attacks, extreme user spoofing, core Elliptic Cryptography cracked by new techniques

• Wasted resources

– Electricity, energy used by data centre scale bitcoin mining (“proof of work”) operations –push for alternate consensus protocols

• Usability

– Wallets, applications, APIs, identities

• Versioning, forks and multiple chains

– Proliferation of competing blockchains, availability of clouds, potential to bring >51% compute resources to bear from multiple chains to a smaller target chain/application or side chain of interest to a criminal

• Ecosystem

– Applications may not be accepted or viable until there is a full ecosystem of interoperable solutions or alternative solutions – especially complex for crypto-infostructures

– Blockchain fabric analogy to the development of viable IaaS cloud solutions: messaging, transport, protocols, address management, administration, operations

• Privacy

– Pervasive use of blockchain applications in society may lead to identity theft to the degree that you no longer have your identity at all!


Lightning Network

• Addressing scalability of blockchain using persistent bitcoin-based micropayment channels

• Lightning-fast blockchain payments without worrying about block confirmation times

– Security is enforced by blockchain smart-contracts without creating a on-blockchain transaction for individual payments

– Payment speed measured in milliseconds to seconds

– Capable of millions to billions of transactions per second across the network

– Attaching payment per action/click is now possible without custodians

– By transacting and settling off-blockchain, allows for exceptionally low fees

– Which allows for emerging use cases such as instant micropayments, ‘streaming money’

– Cross-chain atomic swaps can occur off-chain instantly with heterogeneous blockchain consensus rules

lightning.network/lightning-network-paper.pdf

Scalability

https://lightning.network/lightning-network-paper.pdf


Thunder Network

• Lightening.Network moves from the theoretical to the practical

• Alpha version of the Thunder Network

– Off chain Bitcoin payments that settle back to the main Bitcoin blockchain

– Instant Payments that are irrevocable the moment you use them

– Scale: Tests indicate 11K TPS, better than Visa with only a few 1000 nodes

– Extremely low payment overheads

https://blog.blockchain.com/2016/05/16/announcing-the-thunder-network-alpha-release/

https://blog.blockchain.com/2016/05/16/transaction-0/

www.blockchain.com/thunder/index.html

https://blog.blockchain.com/2016/05/16/announcing-the-thunder-network-alpha-release/

https://blog.blockchain.com/2016/05/16/transaction-0/


Tezos

• A self-amending (evolving) blockchain

– Decentralised technology governance

– Preventing unnecessary forks or side chains

– Allow for innovation to occur

• Consensus governs more than state (as with BTC and ETH)

– Base (seed) protocol determines how the protocol and the nodes should adapt and upgrade

– Deliberately conservative initial rules

• A layered cryptographic ledger

– Network layer

– Consensus layer

– Transaction layer

• Decoupling allows the protocol to evolve in a decentralised fashion

https://tezos.com/

Think of this as using a

blockchain to govern the

evolution of another blockchain

https://www.youtube.com/watch?v=3mgaDpuMSc0


But won’t Apple Pay (and its ilk) be enough?

Evolution

• A mobile payment and digital wallet from Apple on iPhones and Watches

• Can work with existing contactless payment terminals

• Based on EMV Payment Tokenisation Specification

• 1 million credit cards registered on Apple Pay in the first 3 days of its availability, 220,000 vendors launched

• Interoperability between payment instruments may be the name of the game, including cryptocurrencies as and when they are more accepted as legal tender

Revolution

• Is Bitcoin, Dash or ZCash actually needed? Will they be trusted?

• Bitcoin today is not a currency (backed by capital, insurances with options to intervene in markets in order to improve the health of an economy)

• Bitcoin and other altcoins are more like convertible commodities, such as gold or diamonds, in which one can speculate and trade

– Thus subject to the applicable laws

• Blockchain is more than any payment system, and more important than bitcoin

• Apple Pay is not a platform for distributed computing/ smart contracts

https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country


Beware the hype but understand the potential

• Disintermediating central authorities from industry processes is not so easy, and will take time, because customers would need to join the new ‘chains

• Central authorities provide valuable services in a market or ecosystem, which may not be so simple to programmatically magic away using a ‘smart contract’ on a blockchain

– Financial experts report

• Many central mechanisms mutualise risk and this is an not an inherent feature of a technology, but may be programmed at some higher level

• Complex markets involve many kinds of value-added participants, some processes can be unbundled from central players, but this may not mean they go away or the value they bring is irrelevant

– There may be markets and processes that depend on the role of intermediaries for entirely valid reasons accepted by those who join the party

• Programmatic self executing and enforcing software (smart contracts) can be rigid in the way rules are applied, as anyone knows who has programmed a rules engine, and can lead to unexpected behaviours via tight coupling and feedback loops

– Analogy of automated trading on the financial markets

• Human actors in a process will still be necessary in many instances, despite the technologists natural desire to push to machine learning on the blockchain!

It is perfectly reasonable, therefore, to use blockchain technology as an improved (lower cost,

less mutable) substitute for existing processes without the need to overturn decades of learning


Finally, let’s not forget

• Bitcoin (and all other tokens/ currencies) is not the same as the blockchain

• Blockchains can be public, private or hybrid

• There will be several blockchain implementations / distributions

– Open source, claiming open source and deliberately commercial

– Advancing the technology, increasing scalability, adding features, layers

• Blockchains, like databases before them, are places to build applications

– Smart contracts, distributed applications (dApps), distributed organisations (DAOs)

– Remember: real world solutions take a long time to mature

• Expect all the usual ecosystem players around blockchain technologies

– Originators / communities

– Developers / integrators

– Consultants / support partners

– Solution providers / specialists

– Blockchain infrastructure (as a service) providers, API providers

– Blockchain-powered SaaS applications etc.

• Development of the public blockchainswill continue in parallel with maturing blockchain-based enterprise applications

– Regulation in each vertical sector will no doubt put a brake on some commercial applications, at least initially


More and more applications are envisaged

• App development: Proof of ownership of modules in app development

• Company incorporations: Digitizing company incorporations, transfer of equity/ownership and governance

• Decentralized storage: Decentralized storage using a network of computers on blockchain

• Decentralized Internet and computing resources: Decentralized Internet and computing resources to cover every home and business

• Digital content: Proof of ownership for digital content storage and delivery

• Digital identity: Provides digital identity that protects consumer privacy

• Digital security trading: Ownership and transfer

• Digitizing assets: Improves anti-counterfeit measures

• Digitization of documents/contracts: Digitization of documents/contracts and proof of ownership for transfers

• Enables authenticity of a review: Enables authenticity of a review through trustworthy endorsements for employee peer reviews

• Escrow/custodian service: Escrow/custodian service for the gaming industry; loan servicing and e-commerce

• Home automation: Platform to link the home network and electrical devices to the cloud

• IT portal: A smart contract IT portal executing order fulfilment in ecommerce/manufacturing

• Marketplace for sales and purchases of digital assets: Proof of ownership and a marketplace for sales and purchases of digital assets

• Patient records: Decentralized patient records management

• Prediction platform: Decentralized prediction platform for the share markets, elections, etc.

• Reputation management: Helps users engage, share reputation and collect feedback

• Ride-sharing: Points-based value transfer for ride-sharing

Source: William Mougayer


In more and more sectors

Crucial Blockchain Properties

• Cryptoledger

• Decentralized network

• Trustless

counterparties

• Independent

consensus-confirmed

transactions

• Permanent record

• Public records

repository

• Notarization time-

stamping hashes

• Universal format

• Accessibility

Government

& Legal

• Transnational orgs

• Personalized

governance services

• Voting, propositions

• P2P bonds, land titles

• Tele-attorney services

• IP registration and

exchange

• Tax receipts

• Notary service and

document registry

Markets

• Currency

• Payments &

Remittance

• Banking & Finance

• Clearing &

Settlement

• Insurance

• FinTech

• Trading & Derivatives

• QA & Internal Audit

• Crowdfunding

IOT

• Agricultural & drone

sensor networks

• Smarthome networks

• Integrated smartcity,

connected car,

smarthome sensors

• Self-driving car

• Personalized robots,

robotic companions

• Personalized drones

• Digital assistants

• Communication

(messaging)

• Large-scale

coordination

• Entity ingress/egress

• Transaction security

• Universal format

• Large-scale multi-

data-stream

integration

• Privacy and security

Real-time

accessibility

Health

• Universal EMR

• Health databanks

• QS Data Commons

• Big health data

stream analytics

• Digital health wallet

• Smart property

• HealthToken

• Personal

development

contracts

• Large-scale

infrastructural

element for

coordination

• Checks-and-

balances system

for ‘good-player’

access

• Community

supercomputing

• Crowd analysis

• P2P resourcenets

• Film, dataviz

• AI: blockchain

advocates, friendly

AI, blockchain

learners, digital

mindfile services

Science,

Art, AI

Source: Melanie Swan


Financial and Public Records Applications

• Financial instruments

1. Currency

2. Private equities

3. Public equities

4. Bonds

5. Derivatives Commodities

6. Spending records

7. Trading records

8. Mortgage/loan records

9. Servicing records

10. Crowdfunding

11. Microfinance

• Public Records

1. Land titles

2. Vehicle registries

3. Business incorporations

4. Criminal records

5. Passports

6. Birth certificates

7. Death certificates

8. Voter Registration

9. Voting Records

10. Health/safety inspections

11. Building permits

12. Court records

90

http://forum.ethereum.org/discussion/1402/how-to-get-started-your-first-dapp-under-one-hour

Source: Melanie Swan


Ethereum

• A (complex) blockchain based distributed computing platform

– “Smart contract” functionality

– Robust tamper proof decentralised applications

• A decentralised virtual machine (EVM)

– Computationally “Turing” complete, unlike simple Bitcoin VM (share data not behaviour)

– Ability to run any coin, protocol or blockchain

– Executes peer to peer “contracts” using a crypto token called an ether

• Solidity, a JavaScript-like programming language, compiled to EVM bytecode

– Possibility to translate other languages to Solidity, e.g. VB, C# to Solidity

• Truffle, IDE

– Development environment, testing framework and asset pipeline for Ethereum

• Ethereum platform + Solidity applications =

– Decentralised Autonomous Organisations (DAOs) defined via smart contracts


A Solidity cheat sheet


Operation of smart contracts

• Smart contracts track performance in real time and can take immediate action based on their predefined conditions; replacing costly human error and fraud prone processes

• They need access to external data that won’t necessarily be available on the blockchain in a practical sense

www.smartcontract.com


Oracles in Smart Contract architecture

• “Oracles” sit between a smart contract and the external world, providing the data needed by the smart contract to prove performance, while sending its commands to external systems

– Inbound oracles provide smart contracts with data from external data feeds so they can make a determination about events outside the smart contract network in which they are required to run e.g., Ethereum, Bitcoin, etc.

– Outbound oracles allow smart contracts to send commands to your internal systems and traditional payment methods that release payment to a recipient in their preferred local currency

Source: about.smartcontract.com