Blockchain workshop PwC March 2018. Explanation of bitcoin and blockchain, Historical analogies, pros and cons, examlples. (Slides don't tell the full story, it included hands on activtiies)

1. Blockchain
What is it and what can we use it for?
1

2. Simpleweb Studio Block
Lon Barfield
Studio Block spun out from Simpleweb: 10 year history of humanising
technology.
A dedicated and experienced team of experts with a shared vision
● Expertise in thinking and building
● Research and development of new products and tools
2

3. Simpleweb Studio Block
We get a chance to find partners and develop interesting projects
You get an introduction to what Bitcoin is and what blockchain is…
and the sort of things blockchain can be used for.
3

4. Q&A after each part!
4

5. Blockchain
What is it and what can we use it for?
5

6. A lot of coverage...
Blockchain; because it’s the tech behind Bitcoin
Bitcoin; because people have been speculating on it
Speculation is nothing new...
Bitcoin and Blockchain are very new… and very interesting
6

7. Bitcoin
A digital currency based on blockchain
7

8. Bitcoin
Digital money
It’s a computer program, it’s software
I can use an app on my phone or a program on my computer to pay bitcoins to
other people
8

9. Bitcoin...
9
Bitcoin

10. Bitcoin… Digital wallets...
10
Bitcoin

11. No such thing as a Bitcoin
No such thing as ‘a Bitcoin’, no such thing as ‘a digital wallet’
Your ‘Bitcoin wallet’ is not a wallet… it’s your ID number
Bitcoin works by recording transactions between these ID numbers
I say “here’s my ID number and I transfer 3 Bitcoins to this ID number”
Bitcoin records this on a blockchain… ‘An immutable distributed ledger’
11

12. Bitcoin and Blockchain...
12
Bitcoin
Blockchain
Bitcoin

13. It’s software
It’s all public
I can download it, make a few changes and start running my own slightly
different version of Bitcoin
13

14. Bitcoin and Blockchain...
14
Bitcoin
Blockchain
MyCoin
Blockchain
Bitcoin MyCoin
Bitcoin MyCoin

15. Bitcoin... and the rest
Cryptocurrencies
15

16. Bitcoin and Blockchain...
16
Bitcoin
Blockchain
Ethereum
Blockchain
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies

17. Over 1,500
Digital currencies… and counting
17

18. Some you might have heard of...
● Ethereum, Litecoin
And others you might not have…
● Monero: Anonymous ‘Dark coin’
● Hicky: For profile data on dating sites
● Bitcoiin 2: Brand ambassador is… Steven Segal?!
● Cryptorouble:Putin announcement January this year
● Putincoin: Russian cryptocurrency already in place
18

19. And more...
● Ponzicoin: Has been forced to shut down now
● Paragon coin: For the cannabis industry
● TheresaMayCoin…
● Useless Ethereum Token: A parody ICO that raised $40,000 at its ICO...
19

20. ICO
Initial Coin Offering
20

21. Initial Coin Offering
Like an IPO, an Initial Public Offering of shares in a company
ICO initial offering of a cryptocurrency that will be part of an ecosystem that
they are going to build…
A bit like crowdfunding - ‘here’s our idea, buy our coins and we’ll use the money
to make it real’
21

22. Example
Solarcoin: Register your solar panels, get coins for generating solar electricity
(on top of other incomes from it). Spend the coins at selected retailers of
solar-equipment.
Steem: Token eco system based around publishing blogs and videos
22

23. Are they all really ‘currency’?
Commodity currency - bits of silver and gold
Representative currency - can be exchanged for silver and gold
Fiat currency - just ‘backed by the government’
Currency is money that is in circulation
It can be freely exchanged (liquidity)
It is a store of value
It is a measurement of value
23

24. Bitcoin; not a real currency…
Struggling with a classification
(IRS treats it as ‘property’)
A sort of ‘alternative currency’
24

25. Plenty of alternative currencies
When you want a degree of control:
● Casino chips
● Disney Dollar
● Company scrip
Or when there are problems with existing financial systems:
● Irish cheques - ad-hoc solution to bank strike
● Industrial Revolution - fast and small payments needed
● Chinese jiaozi used in Sichuan province 11C 25

26. Stamp scrip
German currency crash
post WW I
Scrip that encouraged
use. Pay for monthly
stamps if you hold it.
Central government got
worried, banned them and
everything crashed again!
26

27. … alternative currencies can fulfil a purpose
Stamp scrip - boosting the economy
Prison scrip - Geneva convention says pay prisoners
Swiss WIR system - fiscal stability
80 years, 2B CHF pa, 62,000 SMBs
Bristol Pound, German Chiemgauer - keeping money local
27

28. … the underlying ledger
Bristol Pound
Uses paper money - or app and ledger
Cryptocurrencies
No paper money, just a ledger...
Just a ledger?
28

29. Bitcoin and Blockchain...
29
Bitcoin
Blockchain
Ethereum
Blockchain
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies

30. Bitcoin and Blockchain...
30
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...

31. Bitcoin and the other cryptocurrencies...
31
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
Bitcoin Ether
LiteCoin

32. Blockchain: the Ledger ...
32
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
Bitcoin
Blockchain
Ethereum
Blockchain
LiteCoin
Blockchain
Some other
Blockchain

33. Ledgers
Recording everything in a book
33

34. Ledger - a list
Old style ledger:
● ‘Principal book of account’
● Centralised - there’s only one copy
● Changeable - owner can alter the entries
Modern day digital ledgers are still old-style ledgers really…
Centralised, changeable, (and open to hacking).
34

35. Commodity ledgers - gold
German gold repatriation
366 tons of gold shifted from New York And Paris
Owned by Germany but was in other countries
Ownership on a ledger, commodity is based elsewhere
35

36. Other sorts of ledgers?
My bank account
● Bank has a ledger
● I have a ledger (my bank statements)
I alter my copy, can I convince the bank?...
Yes, two people have a copy, but only one has the ledger
Trust resides in the institution, not in the ledger
36

37. Tally sticks
Recording a debt
Notches on a stick, then
split the stick
Two copies of
ledger/transaction
Good for 600 years!
37

38. Tally sticks - embodying trust
Less changeable than a ledger,
● I try adding/filling-in a notch to my part
● I try and make a different version of my part from another piece of wood
● I can add notches (transactions) by bringing the two halves together
Less central than a ledger
● Two copies in circulation, both of equal value, no ‘master copy’
It embodies trust in the ledger technology, not in the institution that holds it 38

39. Tally sticks
Stopped in 1826
Leftovers burnt in houses
of parliament 1834
New houses of
parliament built and in
use 1847
39

40. Blockchain is a ledger
It’s a technology that enables other things
40

41. A new sort of ledger
Not an old sort of ledger in digital form, it’s a new sort of ledger:
These are actually terms
that we don’t use much!
“Distributed Ledger
Technology is
immutable and
distributed”
41

42. Immutable & Distributed
Ledger: It’s a list
Immutable: It is a permanent list, once you add an entry no one can take it off,
or hack it or alter it. It has high data-integrity.
Distributed: There are copies on many different computers. It is in the public
arena. Everyone (on the internet) can access it.
It’s a bit like… carving information in stone for everyone to see it.
42

43. Immutable & Distributed
43

44. Immutable & Distributed
It is the opposite of the web!
Web is plastic, editable. You can delete things, change things
It’s run off a single server, under one agent’s control
Blockchain is a permanent, trusted record of information,
distributed to the public
Less like the web revolution…
more like the printing press revolution.
44

45. Distributed ledgers - no new tech!
iPhone
Not a breakthrough, but a novel amalgam of existing technologies
A beautiful design
Blockchain
A novel amalgam of lots of existing data/cryptographic ideas
A beautiful design
45

46. Blockchain
technical
ingredients
Some of the technologies date back to
the late 70s
46

47. Immutable & Distributed
How does it do it?
We’ll do ‘Immutable’ now and ‘Distributed’ later
Anything stored digitally can be changed. Best we can do is check if it’s been
tampered with and replace it with a good copy if required.
A list of entries with a ‘tamper alarm’. I can tell if anyone tweaks it and replace
it with my un-tweaked back-up copy.
47

48. Tamper alarm - use a Hash code
“It’s a bit like a shadow…”
“A bit like a fingerprint”, “like DNA”, “like…”
“It’s like when James Bond puts a damp hair across the door in Doctor No”
A code generated from some information. You always get the same code when
you do it. If someone changes the information then you get a different code.
48

49. Hashing - industry strength
49

50. Hashing - a simple version
Hashing a list of numbers. Add them all up and take the units digit of the result.
2, 4, 6 Add them up, total is 12, units part is 2
Is someone changes the last digit to a 7 then…
2, 4, 7 Add them up, total is 13, units part is 3
If I have a copy of the original hash (2) I can say; “Wait a minute, someone has
been tampering with the data! I’ll replace it with the back-up.”
50

51. Making a chain of blocks
We’re going to use that hash in a paper based model
1 First making a hash in a block
2 Then checking for tampering
3 Then linking blocks
51

52. It’s not that easy!
00000000000000000048afcd073
08786b558f7b96a6038b3d267ba
823dac2609
52

53. Immutable & Distributed
I have a ledger, I can check it for tampering, and correct it with my back-up.
I know I can trust the ledger, but everybody else has to trust me! I have the
ledger.
Only part of the solution.
What about if no-one has the ledger?
53

54. Immutable & Distributed
Have loads of copies on different computers.
No one in charge deciding what transactions are in the next blocks.
Each computer is trying to add a new block of transactions that are floating
around, trying to finish that block.
When a block gets finished it is sent off to the other computers.
Then it all starts again!
54

55. Immutable & Distributed
Each computer busy with a different new block.
Sheet 4 - Got to get the tamper alarm finished off.
All computers will finish at about the same time!
Leads to collisions, ‘chaos’, lots of sorting out which block to use.
55

56. Immutable & Distributed
Got to slow it all down, give all the others time to get the winning block so that
it all happens on a level playing field.
Make it artificially difficult.
56

57. Mining
That’s the ‘mining’ bit!
What if there are loads more computers joining in with the mining? That’s going
to speed it all up again isn’t it?
57

58. Once again, it’s not that easy!
00000000000000000048afcd073
08786b558f7b96a6038b3d267ba
823dac2609
58

59. Mining/Proof of work
59
Big long hash has to have 8 preceding zeros in it
Have to adjust a dummy value in the contents and then hash the contents and
see if the hash begins with 8 zeros. Adjust the dummy value again and do it
again. Eventually you will get a hash with 8 zeros at the start then you have
‘sealed’ that block. https://btc.com/
That’s what ‘mining’ is...

60. Mining

62. 62

63. Break...
63

64. Break...
64

65. Recap
65
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
Bitcoin Ether
LiteCoin

66. Ledgers, blockchain, paper version
66
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
Bitcoin
Blockchain
Ethereum
Blockchain
LiteCoin
Blockchain
Some other
Blockchain

67. Blockchain pros and cons
67

68. Security
No central point to hack! (good)
Hash codes can be devised so that it takes a lot of work to generate them
(Proof of Work). Re-doing a whole chain takes huge amounts of work. There
are systems to catch a tweak but even doing that tweak in the first place takes
a huge amount of effort. (good)
68

69. Security
Consensus can still be subverted - 51% attack (bad)
Who is doing the mining, is it mostly happening in one state? (bad)
Privacy, all data is very much ‘out there’ (bad?)
Integrity, BitCoin is worth $ 160 Billion, never had a glitch in the blockchain
(good)
69

70. Anonymity
Can be totally anonymous (bad, for crime prevention)
Can show all transactions transparently (good, for crime prevention)
70

71. More
Scalability - computation and storage is costly (bad)
Scalability - energy consumption an issue (bad)
Errors are difficult to ‘unwind’ - DAO hack $2B, Parity contract wallet self
destruct $280M frozen (bad?)
But they can be unwound! (good?)
71

72. Transparency
Public documents, many people have a copy and anybody can read them
(good)
It’s like the plans in the council planning department
… only much better.
72

73. No agent-in-the-middle
Agent in the middle has to have the trust of both parties
With blockchain the trust lies in the technology of the blockchain
● No corruption
● No high fees for shared trust
● No delays (all good)
73

74. Bitcoin and Blockchain...
74
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...

75. Smart contracts...
75
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
Some other
Service
Some other
Service
Some other
Service

76. Smart contracts
& internet of things
76

77. Contracts
As immutable as possible (difficult to change)
As durable as possible (lifetime longer than the contract terms)
As high a level of integrity as possible (witnesses, authenticity stamps)
77

78. Blockchains store data
Transactions are data: ‘I paid John 10 Bitcoins’
A promise/contract is data
‘John and I agree that I will pay John 10 Bitcoins on June 12th 2018’
But executable code is also data!
‘John and I agree that I will pay John 10 Bitcoins on June 12th 2018’ and the
blockchain will actually do it!
A ‘smart contract’
78

79. Smart contracts
Code that manipulates digital money and digital assets based on conditions
and time. And because it is in the blockchain it is fixed, visible and trusted
Software licensing, media licensing, digital assets
Will need lawyers and coders working together
Very early stages. Currently they are clunky
And not really ‘smart’!
79

80. Internet of Things
Things in the real world connected through sensors
to the digital world
● Printer ordering more ink
● Where’s my iphone?
● Traffic jams
“By 2020 there will be over 26 billion connected devices” - Gartner
Tracking things that have smart tags. Shipping containers etc.
80

81. Many companies, many ledgers
81

82. Internet of Things, provenance/tracking
Charity/aid donations
Pharmaceutical authenticity
Provenance (UK based), using blockchain and smart tagging to track
sustainably fished tuna from fishing line to dining plate
You and I are ‘things’!
Usually companies have ledgers, but things don’t
82

83. Examples...
83
Bitcoin
Blockchain
Ethereum
Blockchain
Some other
Blockchain
Some other
Service
Bitcoin Ether
Bitcoin
LiteCoin
Blockchain
LiteCoin
Other
cryptocurrencies
Some other
Blockchain
Some other
Service
Some other
Blockchain
Some other
Service
New services...
Some other
Service
Some other
Service
Some other
Service

84. Examples
Blockchain is very much a ‘work in progress’
84

85. A really good example
Great to have other ‘in-the-wild’ blockchains that were being used and were
publicly viewable, you’d be able to watch it grow in real time. Where should we
be looking?...
85

86. Where should we be looking?
Companies do not yet trust the idea of setting core data free.
Grass-root individuals do not yet have the scale/resources
NGOs and the disenfranchised, scarcity of tech and dedicated budget
Supply chains, but who sets them up?
Governments; admin savings, transparency
86

87. Example (Proof of Concept)
MIT MedRec
Private blockchain, demonstration
Medical record, researchers do the processing of transactions in exchange for
aggregate medical information from the records
87

88. Example (“progressing development”)
deBeers, Diamond tracking
Public blockchain, deBeers are “progressing development”
Each diamond has a unique signature in terms of its properties (cut, colour,
clarity, carat). Record of provenance will be public and immutable and follow
diamond around.
88

89. Example (First steps)
CREDIT SUISSE AND ING EXECUTE FIRST LIVE TRANSACTION USING HQLAX
SECURITIES LENDING APP ON R3’S CORDA BLOCKCHAIN PLATFORM
Credit Suisse and ING swapped baskets of securities of value EUR 25 million
using the HQLAx Corda-based collateral lending application.
89

90. Example (Government)
Estonia (pop. 1.3 M, tech friendly laws)
Advanced digital government infrastructure
Only ever fill in your details once
Uses blockchains for some of its government data
Dubai, South Korea, Lichtenstein also talking about it
90

91. Example (undergoing trials)
UK Department of Work and Pensions, cryptocurrency for benefit payments,
Govcoin, project since early 2016
Fast transfer of benefits and help with targeted saving
“Three days going through the banking system may mean using a payday
lender, or being thrown out of your house.”
But objections raised on the idea of opening up the data to commercial
enterprises 91

92. Example (first steps again)
Sweden’s land-ownership authority is soon expected to conduct their first
Blockchain technology property transaction after two years of testing…
Sierra Leone national elections 7 March 2018. Blockchain used in part of the
counting process
“A private, permissioned blockchain to oversee the results of a national election
in real time. It then relayed the data to individuals entrusted to oversee and
verify the nation's democratic process.”
92

93. “A company is a nexus
of contracts”
Jensen & Meckling
93

94. Example (new organisations)
DAO, decentralized autonomous organization
Investment body with no directors, investors vote on investments
Based on Ethereum cryptocurrency
Raised $168 million
94

95. Conclusions
What’s the problem?
95

96. Blockchain useful if...
You have multiple parties with a shared set of data
Parties (may) have conflicting interests
The database has to be immutable
“Is it something you want set in stone on the marketplace”
(but it can be private as well!)
96

97. Blockchain is a solution, not THE solution
● Blockchain getting a lot of coverage
● What is the problem you want to solve with it?
● Is it the best way of solving the problem?
97

98. And finally: Where should we be looking?
Companies do not yet trust the idea of setting core data free.
Grass-root individuals do not yet have the scale/resources
NGOs and the disenfranchised, scarcity of tech and dedicated budget
Supply chains, but who sets them up?
Governments; admin savings, transparency
98

99. And finally: Where should we be looking?
Companies do not yet trust the idea of setting core data free.
Grass-root individuals do not yet have the scale/resources
NGOs and the disenfranchised, scarcity of tech and dedicated budget
Supply chains, but who sets them up?
Governments; admin savings, transparency
99

100. And finally...
Digital breakthroughs have enabled distributed individuals to do things that
previously only organisations have done before:
● Open source software
● (and hardware)
● Wikipedia
● Crowdfunding
● Media distribution
● AirBnB
100

101. And finally...
Blockchain...
Blockchain now gives us the ability to enable groups of individuals to do other
things that organisations do…
...but also new things that no-one has ever done before
101

102. The End
102

103. ITEMS list
● Bristol pounds
● Ledger book
● Tally stick
● Tulip bulbs BAG
● Casino chips BAG
● Silver sixpences BAG
● Clicker and spare bats
● Bic Pens
● Dice
● Cheque book
● Bank statement
● Vellum contract
● PRINT Feedback sheets
● PRINT Handouts
● HDMI cable, adapter cable ANDY
● Honey, water, strepsils
● USB stick
● Laptop and mains lead
103

104. 104