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Blockchain Explained
qais.ammari@triphop.com
JAN 2018
Qais Ammari
Knowledge Transfer
2
Agenda
• Setting the Stage
– Internet Revolution
– Security Concepts
– Centralized Solutions
• What is Blockchain (and what is not)
• How Blockchain works
• CryptoCurrency Example on Blockchain (฿itcoin)
• Blockchain evolution (Blockchain 2) SC
• Other Blockchain / De-Centralized apps
• Blockchain potential for travel
• Q&A
• References
3
Internet Revolution
4
Internet Revolution
Before
• Cost
• Intermediary
• Slow
5
Internet Revolution
After
• Free
• Direct
• Fast
6
Internet Revolution
Internet is GOOD for information but BAD for
digital assets !
A digital asset, in essence, is anything
that exists in a binary format and comes
with the right to use
7
Internet Revolution
Internet GOOD for information but BAD for
digital assets !
A digital asset, in essence, is anything
that exists in a binary format and comes
with the right to use
8
Internet Revolution
Internet GOOD for information but BAD for
digital assets !
Intermediary
9
LACK OF TRUST!
Comes with a cost
Intermediary
TrustTrust
$10$9
$1
$13$12.1
$0.9
$10$9.9
$0.1
10
Ledger
Centralized
collection of financial accounts
$10$9.9
$0.1
B A
$20 $100
+$9.9 -$10
$29.9 $90
11
Ledger
Centralized
$10$9.9
B A
$20 $100
+$9.9 -$10
$29.9 $90
• Centralized Ledger
• Sees all data/txn
• Takes high fee
• Can be slow in process
• Full trust in single party
12
Ledger
Centralized
Ledger in title company
# Desc When
008 Electric fire 2005
006 Sold to z 2003
005 Failed inspection 2002
004 Sold to y 2001
003 Approved extension 2000
002 20k improvement 1990
001 Sold to x 1980
13
Lack of Trust & Transparency
Centralized
Ledger in title company
# Desc When
008 Electric fire 2005
006 Sold to z 2003
004 Sold to y 2001
003 Approved extension 2000
002 20k improvement 1990
001 Sold to x 1980
14
Lack of Trust & Transparency
Centralized
Ledger in title company
Tamper-able
# Desc When
008 Electric fire 2005
006 Sold to z 2003
005 New Chimney 2002
004 Sold to y 2001
003 Approved extension 2000
002 20k improvement 1990
001 Sold to x 1980
15
Lack of Trust & Transparency
Centralized
Ledger in title company
B Owns the car
Full trust in single party
16
Security
17
What Hacker can do ?
Modules
18
Secure Data?
Modules
19
Deliver Secured Data?
Modules
20
Deliver Secure Data ?
Modules
21
Verify Identity
Modules
22
Hashing
Modules
• One way mathematical operation
• Generates encrypted result
• It is irreversible
• The only way to hack it is by guessing
• Some hashing mechanisms (SHA-256)
could take TRILLION years to solve it
from a single computer
SHA = Secure Hashing Algorithm
Versions = SHA-1 , SHA-2 , SHA-256
23
Blockchain
24
Blockchain
Modules
Internet Google
Internet
Search Engine
Google
Blockchain
CryptoCurrency
Bitcoin
Blackchain Bitcoin Satoshi Nakamoto
25
Why Blockchain
Modules
BLOCKCHAIN IS A NETWORK
• Eliminate (unnecessary) intermediaries
• Total Transparent
• Decentralized Solutions
• Democratize Trust
26
Crypto Currency
27
Ledger
Centralized
Remember ?
$10$9.9
$0.1
B A
$20 $100
28
Blockchain has Ledger
Decentralized
$10
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
• Distributed Ledger: everyone in the system has a copy (no
centralized copy exist)
• Democratize Trust: No user Trusted more than any other
• Digital Signatures (Security)
• Privacy (anonymous)
• Cheaper Transfer Fees
• Faster Processing
• No Single Party Connection
29
Blockchain Network
Decentralized
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
Miners
Participants (A , B)
Everyone has a copy of the
Same distributed ledger
30
Main Blockchain network properties
• Peer to Peer
• Nothing Centralized (Distributed)
• Everybody trusted equally
• Node not necessarily connected to all
nodes but at least some of them
31
Bitcoin Blockchain Components
Centralized
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
Miners
Participants (A , B)
Everyone has a copy of the
Same distributed ledger
ID = A
Money = $100
Private Key = 3786
ID = B
Money = $20
Private Key = 3786
32
How it works
B A
$20 $100
Miners
Participants (A , B)
name = A
Money = $100
P = 3786
• A (with P) wants to send
Money ($5) to B
(Transaction) = T
(33434468293746484)
• T broadcasted on the
network
• A Makes mathematical
operation on this operation
(i.e. Hash) bitcoin uses
SHA-256 along with the P
• The result makes X (so X
has the user signature and
the transaction )
• Miners add the transaction
(T) to work on
T
Even with a computer it will take really long time to
find P (could reach Trillion Years) and the only way is
by guessing
33
Bitcoin Blockchain Components
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
Miners
Participants (A , B)
Everyone has a copy of the
Same distributed ledger
T sent to all Miners
T T
T
T
T
34
What does a Miner do ?
B A
$20 $100
T sent to all Miners
• Confirms that A really has $100 from the
verified ledger
• Confirms that actually A is sending the $5 and
not someone else (using the user signature)
(verify Identity)
• Tries to guess S using computer power by
using mathematical operation (hashing)
• i.e. for Bitcoin S has to generate a hash with
13 leading zeros (i.e.
000000000000000012232883394) and to be less
than target value G ( Smaller G , More Difficult to Guess)
• Once Guessed , broadcasts S to all miners to
verify
• If verified by more than 50% of Miners
– Transaction takes place (B gets the $5)
– and the ledger gets updated with the hash of the
previous block and redistributed so everybody has
the same updated ledger
• Miner wins a reward (i.e. $0.1) from the
network (this is the only way to generate
money – quantitative easing sort of)
Anyone with
processing power
T
S Proof of Work
35
Mining Example
B A
$20 $100
T sent to all Miners
Hash of latest block
00000000000001adf44c7d69767585
Transaction that is crafted
5572eca4dd4 (A sending B $5)
Guessing S that is generating hash with leading
13 zeros
Try S=1
00000000000001adf44c7d69767585--5572eca4dd4-1
Result
5b7ce5bcc07a2822f227fcae7792fd90 (No Luck)
… (a lot of miners are competing to solve this ..)
Try S=9389238928392893
00000000000001adf44c7d69767585--5572eca4dd4-
9389238928392893
Result
00000000000001adf44c7d69767585 --- horray
36
Bitcoin Blockchain Components
232343 123457
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
B A
$20 $100
Miners
Participants (A , B)
Sent for all miners
to verify
T sent to all Miners
S
S
SS
37
Blockchain Ledger
Over simplified
Name Desc Time Key (Cryptography)
7 A=$95 , B=$25 … 14:00
6 A=$100 , B=$20 …. 13:50
5 A=$80 , B=$15 …. 13:40
4 A=$60 , B=$15 …. 13:30
3 A=$40 , B=$15 …. 13:20
2 A=$20 , B=$15 …. 13:10
1 A=$0 , B=$10 …. 13:00
https://blockchain.info/
38
Blockchain Ledger Properties
Over simplified
• Ordered
• Back linked
• Each block computationally impractical to modify because you need to
modify all successor blocks
39
Bitcoin Monetary base
Over simplified
The ID / P has
Access to $100 from
the monetary base
ID = 123457
Money = $100
Private Key = 3786
Mining is controlled
40
Blockchain 2
41
Blockchain Evolution
Over simplified
• Used to be for financial application (currency)
• Now can run applications / programs in the same manner (decentralized)
(i.e. Smart Contracts)
• And even more …!
Eg. Etherium has CryptoCurrency and Smart Contract (Program) the has
rules to evaluate any kind of contract that is running on nodes in the
Blockchain network
42
Title company Blockchain-ed !
Over simplified
Who Desc When Key (Crypto)
Insurance Electric fire 2005
Real Estate Sold to z 2003
Gov Failed inspection 2002
Real Estate Sold to y 2001
Architect Approved extension 2000
Owner 20k improvement 1990
Builder Sold to x 1980
43
Title company Blockchain-ed !
Over simplified
Who Desc When Key (Crypto)
Insurance Electric fire 2005
Real Estate Sold to z 2003
Real Estate Sold to y 2001
Architect Approved extension 2000
Owner 20k improvement 1990
Builder Sold to x 1980
44
Blockchain Definitions
Modules
Technology running the bitcoin
Distributed database that maintains continuously
growing list of records called blocks secured from
tampering and revision
Secured protocol enabling peer to peer
exchanges on a distributed network in a secured ,
public and non-repudiable way
TRUST PROTOCOL
https://en.wikipedia.org/wiki/Blockchain
45
Shortfalls of Blockchain
Modules
Trust and Confusion
Liability Backstop
Returns and Incorrect Transfers
46
Real world Blockchain Applications
Modules
General Speaking .. Any piece of paper
requires proving of an asset that is signed
and dated and held with a trusted central
entity
Piece Central Entity
Land Deed Land Registery
Car Ownership DMV
Music Rights iTunes
Company Shares Min. Of Commerce
Votes Gov.
Real Estate History Title Company
Some assets don’t have central entity yet
47
Blockchain&Travel
48
What about Blockchain-ing Travel !
Modules
• Eliminate Intermediaries … Expedia , Priceline, AirBnB, Amadeus
• Peer to Peer … Hoteliers with Guests, Airlines with Passengers
• Reduce Cost … no rate parity
• Ledger … Chain of distributed Bookings
• CryptoCurrency … Leverage CryptoCurrency to be the fuel of the
network (incentive for miners)
49
References
Modules
• https://blockchain.info/blocks
• https://www.youtube.com/watch?v=KP_hGPQVLpA
• https://www.youtube.com/watch?v=k53LUZxUF50
• https://www.slideshare.net/JrmeKehrli/the-blockchain-the-technology-behind-
bitcoin
• https://www.amazon.com/Blockchain-Revolution-Technology-Changing-
Business/dp/1101980133
• https://www.slideshare.net/JrmeKehrli/blockchain-20-69472625
• https://www.tnooz.com/article/applications-of-blockchain-travel/
Blockchain explained (Technology running Bitcoin)
www.Triphop.com
Thank you
qais.ammari@triphop.com
JAN 2018
Qais Ammari

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Blockchain explained (Technology running Bitcoin)

  • 2. 2 Agenda • Setting the Stage – Internet Revolution – Security Concepts – Centralized Solutions • What is Blockchain (and what is not) • How Blockchain works • CryptoCurrency Example on Blockchain (฿itcoin) • Blockchain evolution (Blockchain 2) SC • Other Blockchain / De-Centralized apps • Blockchain potential for travel • Q&A • References
  • 6. 6 Internet Revolution Internet is GOOD for information but BAD for digital assets ! A digital asset, in essence, is anything that exists in a binary format and comes with the right to use
  • 7. 7 Internet Revolution Internet GOOD for information but BAD for digital assets ! A digital asset, in essence, is anything that exists in a binary format and comes with the right to use
  • 8. 8 Internet Revolution Internet GOOD for information but BAD for digital assets ! Intermediary
  • 9. 9 LACK OF TRUST! Comes with a cost Intermediary TrustTrust $10$9 $1 $13$12.1 $0.9 $10$9.9 $0.1
  • 10. 10 Ledger Centralized collection of financial accounts $10$9.9 $0.1 B A $20 $100 +$9.9 -$10 $29.9 $90
  • 11. 11 Ledger Centralized $10$9.9 B A $20 $100 +$9.9 -$10 $29.9 $90 • Centralized Ledger • Sees all data/txn • Takes high fee • Can be slow in process • Full trust in single party
  • 12. 12 Ledger Centralized Ledger in title company # Desc When 008 Electric fire 2005 006 Sold to z 2003 005 Failed inspection 2002 004 Sold to y 2001 003 Approved extension 2000 002 20k improvement 1990 001 Sold to x 1980
  • 13. 13 Lack of Trust & Transparency Centralized Ledger in title company # Desc When 008 Electric fire 2005 006 Sold to z 2003 004 Sold to y 2001 003 Approved extension 2000 002 20k improvement 1990 001 Sold to x 1980
  • 14. 14 Lack of Trust & Transparency Centralized Ledger in title company Tamper-able # Desc When 008 Electric fire 2005 006 Sold to z 2003 005 New Chimney 2002 004 Sold to y 2001 003 Approved extension 2000 002 20k improvement 1990 001 Sold to x 1980
  • 15. 15 Lack of Trust & Transparency Centralized Ledger in title company B Owns the car Full trust in single party
  • 17. 17 What Hacker can do ? Modules
  • 22. 22 Hashing Modules • One way mathematical operation • Generates encrypted result • It is irreversible • The only way to hack it is by guessing • Some hashing mechanisms (SHA-256) could take TRILLION years to solve it from a single computer SHA = Secure Hashing Algorithm Versions = SHA-1 , SHA-2 , SHA-256
  • 25. 25 Why Blockchain Modules BLOCKCHAIN IS A NETWORK • Eliminate (unnecessary) intermediaries • Total Transparent • Decentralized Solutions • Democratize Trust
  • 28. 28 Blockchain has Ledger Decentralized $10 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 • Distributed Ledger: everyone in the system has a copy (no centralized copy exist) • Democratize Trust: No user Trusted more than any other • Digital Signatures (Security) • Privacy (anonymous) • Cheaper Transfer Fees • Faster Processing • No Single Party Connection
  • 29. 29 Blockchain Network Decentralized B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 Miners Participants (A , B) Everyone has a copy of the Same distributed ledger
  • 30. 30 Main Blockchain network properties • Peer to Peer • Nothing Centralized (Distributed) • Everybody trusted equally • Node not necessarily connected to all nodes but at least some of them
  • 31. 31 Bitcoin Blockchain Components Centralized B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 Miners Participants (A , B) Everyone has a copy of the Same distributed ledger ID = A Money = $100 Private Key = 3786 ID = B Money = $20 Private Key = 3786
  • 32. 32 How it works B A $20 $100 Miners Participants (A , B) name = A Money = $100 P = 3786 • A (with P) wants to send Money ($5) to B (Transaction) = T (33434468293746484) • T broadcasted on the network • A Makes mathematical operation on this operation (i.e. Hash) bitcoin uses SHA-256 along with the P • The result makes X (so X has the user signature and the transaction ) • Miners add the transaction (T) to work on T Even with a computer it will take really long time to find P (could reach Trillion Years) and the only way is by guessing
  • 33. 33 Bitcoin Blockchain Components B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 Miners Participants (A , B) Everyone has a copy of the Same distributed ledger T sent to all Miners T T T T T
  • 34. 34 What does a Miner do ? B A $20 $100 T sent to all Miners • Confirms that A really has $100 from the verified ledger • Confirms that actually A is sending the $5 and not someone else (using the user signature) (verify Identity) • Tries to guess S using computer power by using mathematical operation (hashing) • i.e. for Bitcoin S has to generate a hash with 13 leading zeros (i.e. 000000000000000012232883394) and to be less than target value G ( Smaller G , More Difficult to Guess) • Once Guessed , broadcasts S to all miners to verify • If verified by more than 50% of Miners – Transaction takes place (B gets the $5) – and the ledger gets updated with the hash of the previous block and redistributed so everybody has the same updated ledger • Miner wins a reward (i.e. $0.1) from the network (this is the only way to generate money – quantitative easing sort of) Anyone with processing power T S Proof of Work
  • 35. 35 Mining Example B A $20 $100 T sent to all Miners Hash of latest block 00000000000001adf44c7d69767585 Transaction that is crafted 5572eca4dd4 (A sending B $5) Guessing S that is generating hash with leading 13 zeros Try S=1 00000000000001adf44c7d69767585--5572eca4dd4-1 Result 5b7ce5bcc07a2822f227fcae7792fd90 (No Luck) … (a lot of miners are competing to solve this ..) Try S=9389238928392893 00000000000001adf44c7d69767585--5572eca4dd4- 9389238928392893 Result 00000000000001adf44c7d69767585 --- horray
  • 36. 36 Bitcoin Blockchain Components 232343 123457 $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 B A $20 $100 Miners Participants (A , B) Sent for all miners to verify T sent to all Miners S S SS
  • 37. 37 Blockchain Ledger Over simplified Name Desc Time Key (Cryptography) 7 A=$95 , B=$25 … 14:00 6 A=$100 , B=$20 …. 13:50 5 A=$80 , B=$15 …. 13:40 4 A=$60 , B=$15 …. 13:30 3 A=$40 , B=$15 …. 13:20 2 A=$20 , B=$15 …. 13:10 1 A=$0 , B=$10 …. 13:00 https://blockchain.info/
  • 38. 38 Blockchain Ledger Properties Over simplified • Ordered • Back linked • Each block computationally impractical to modify because you need to modify all successor blocks
  • 39. 39 Bitcoin Monetary base Over simplified The ID / P has Access to $100 from the monetary base ID = 123457 Money = $100 Private Key = 3786 Mining is controlled
  • 41. 41 Blockchain Evolution Over simplified • Used to be for financial application (currency) • Now can run applications / programs in the same manner (decentralized) (i.e. Smart Contracts) • And even more …! Eg. Etherium has CryptoCurrency and Smart Contract (Program) the has rules to evaluate any kind of contract that is running on nodes in the Blockchain network
  • 42. 42 Title company Blockchain-ed ! Over simplified Who Desc When Key (Crypto) Insurance Electric fire 2005 Real Estate Sold to z 2003 Gov Failed inspection 2002 Real Estate Sold to y 2001 Architect Approved extension 2000 Owner 20k improvement 1990 Builder Sold to x 1980
  • 43. 43 Title company Blockchain-ed ! Over simplified Who Desc When Key (Crypto) Insurance Electric fire 2005 Real Estate Sold to z 2003 Real Estate Sold to y 2001 Architect Approved extension 2000 Owner 20k improvement 1990 Builder Sold to x 1980
  • 44. 44 Blockchain Definitions Modules Technology running the bitcoin Distributed database that maintains continuously growing list of records called blocks secured from tampering and revision Secured protocol enabling peer to peer exchanges on a distributed network in a secured , public and non-repudiable way TRUST PROTOCOL https://en.wikipedia.org/wiki/Blockchain
  • 45. 45 Shortfalls of Blockchain Modules Trust and Confusion Liability Backstop Returns and Incorrect Transfers
  • 46. 46 Real world Blockchain Applications Modules General Speaking .. Any piece of paper requires proving of an asset that is signed and dated and held with a trusted central entity Piece Central Entity Land Deed Land Registery Car Ownership DMV Music Rights iTunes Company Shares Min. Of Commerce Votes Gov. Real Estate History Title Company Some assets don’t have central entity yet
  • 48. 48 What about Blockchain-ing Travel ! Modules • Eliminate Intermediaries … Expedia , Priceline, AirBnB, Amadeus • Peer to Peer … Hoteliers with Guests, Airlines with Passengers • Reduce Cost … no rate parity • Ledger … Chain of distributed Bookings • CryptoCurrency … Leverage CryptoCurrency to be the fuel of the network (incentive for miners)
  • 49. 49 References Modules • https://blockchain.info/blocks • https://www.youtube.com/watch?v=KP_hGPQVLpA • https://www.youtube.com/watch?v=k53LUZxUF50 • https://www.slideshare.net/JrmeKehrli/the-blockchain-the-technology-behind- bitcoin • https://www.amazon.com/Blockchain-Revolution-Technology-Changing- Business/dp/1101980133 • https://www.slideshare.net/JrmeKehrli/blockchain-20-69472625 • https://www.tnooz.com/article/applications-of-blockchain-travel/