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Cybercurrency and Blockchain: Observations, status, impact and future

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Keynote by Bebo White held at the J. Boye Aarhus 17 conference

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Cybercurrency and Blockchain: Observations, status, impact and future

  1. 1. JBoye,Aarhus,2017 Cybercurrency and Blockchain (observations, status, impact, and future) Bebo White SLAC National Accelerator Laboratory/ Stanford University bebo@slac.stanford.edu
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  3. 3. JBoye,Aarhus,2017 A few observations/ caveats • The focus of this talk has changed from the original description (please refer to my previous JBoye talk for technical details) • Slides are dense for handouts • When I tell people that I research/discuss/advocate(?) cybercurrency/bitcoin and blockchain, they usually think that • I’m a techie/computer nerd/idealist academic, etc., • I’m a hacker or criminal • I am unaware (or willing to overlook) the social and/or environmental issues • Why do people think this?
  4. 4. JBoye,Aarhus,2017 Why do they think this?
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  6. 6. JBoye,Aarhus,2017 Here’s a weird one - LBMA = London Bullion Market Association
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  8. 8. JBoye,Aarhus,2017 How many of us have been around at the beginning of a totally new financial system? How many of us were dubious about WWW? WWW certainly caused a bubble that burst dramatically Does WWW still have issues?
  9. 9. JBoye,Aarhus,2017 What were our dreams for the Web? • Global collaboration • A positive use of technology • Empowerment (#WinningTogether) • Societal change (hopefully for the positive) • Free and open
  10. 10. JBoye,Aarhus,2017 And it all started with one geeky research paper
  11. 11. JBoye,Aarhus,2017 In the case of the Web • Sharing documents was easy • anyone could be an author/publisher • almost anyone could set up a server or readily find access to one • security/provenance became a major issue • Fear of the Web came later - it certainly did not curtail growth and use • Exchanging value/payments - now that was hard!
  12. 12. JBoye,Aarhus,2017 Why payments? • Network payments have long been a dream • eCash, DigiCash, Hashcash, Bit Gold, B- money, etc. • The growth of e-commerce • The growth of e-banking • The growth of social networking
  13. 13. JBoye,Aarhus,2017 In 2008 there was another geeky research paper that • defined a protocol for generating, validating, and exchanging cybercurrency • was implemented in publicly available, open source software • described a technology platform that goes far beyond its original purpose (the blockchain)
  14. 14. JBoye,Aarhus,2017 “Bitcoin is at the same stage as the Internet in 1992-1993.At that time it took UNIX command-line skills to send e-mail; no way near for mainstream adoption” -Andreas Antonopoulos
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  16. 16. JBoye,Aarhus,2017 Satoshi saw a way • “The network is robust in its unstructured simplicity. Nodes work all at once with little coordination” • A distributed, peer-to-peer network of payments ledgers (non- centralized) • Impossible (?) to forge/modify - based on rigorous technology and techniques • Doesn’t allow double-spending and provides proof-of-payment (non-repudiation) • Supported by “the power of the crowd” • Not based on dollars, euros, pounds, etc., but a currency “for the digital age” - bank-free, government-free, empowering
  17. 17. JBoye,Aarhus,2017 But, it’s more than just payments (1/2) • Empowerment • #WinningTogether • Transparency
  18. 18. JBoye,Aarhus,2017 But, it’s more than just payments (2/2) • “Some people are fed up with the centralized banking system” • “Paying with bitcoin makes moving money across borders easy and with low transaction fees and some degree of anonymity” Claudio Orlandi Aarhus University
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  22. 22. JBoye,Aarhus,2017 Is it the currencies that are important? Or the concept? Where is the disruption?
  23. 23. JBoye,Aarhus,2017 There are definite issues with cryptocurrencies (1/2) • Mining often requires huge use of computational resources and therefore has an appreciable environmental impact • Miners are ‘a new center of power’ - if five (estimated) mining pools control the creation of blocks, how is that de- centralized? • Might it be possible to make POW/POS and consensus less compute-intensive? • ICOs - cybercurrency as a mechanism for fundraising (the legacy of Kickstarter or Indiegogo) - do they have lasting value?
  24. 24. JBoye,Aarhus,2017 Environmental/energy impact is definitely a current “show-stopper” IMHO
  25. 25. JBoye,Aarhus,2017 Yes, there are definite issues that should not be ignored, but • Assumes current technology and computational (mining/consensus) models • Supporting technologies e.g., energy, must (and will) also evolve
  26. 26. JBoye,Aarhus,2017 There are definite issues with cryptocurrencies (2/2) • Transaction times compared toVisa, etc. - related to POW and consensus times • A major target of government, bank, and financial institution examination - result can be regulation • But…
  27. 27. JBoye,Aarhus,2017 • JP Morgan Chase CEO Jaime Dimon said,“bitcoin is ‘stupid’ and ‘a fraud’” • but his firm is a member of of the pro- blockchain Enterprise Ethereum Alliance (EEA) • Vladimir Putin publicly said cryptocurrencies have “serious risks” • yet he just called for the development of a new digital currency, the ‘cryptoruble’ which will be legal tender throughout the federation
  28. 28. JBoye,Aarhus,2017 End of banking and triumph of cryptocurrency? • Right now no threat to fiat currencies and central banks • volatility, risky, energy efficiency, scaleability • opaque to regulators • vulnerable to hackers • Technology will be solved - remember PCs and tablets Christine Lagarde International Monetary Fund
  29. 29. JBoye,Aarhus,2017 “Bitcoin adoption could multiply the more people become aware of how much of their wealth is controlled by governments and the big banks” ——Frank Holmes, CEO,US Global Investors
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  32. 32. JBoye,Aarhus,2017 Perhaps the lasting disruptive legacy of the cybercurrency discussion is blockchain
  33. 33. JBoye,Aarhus,2017 What is the Blockchain? (1/3) • A distributed database/ledger that provides an unalterable, (semi-) public record of digital transactions; • Each block aggregates a timestamped batch of transactions to be included in the ledger (blockchain); • Each block is identified by a cryptographic signature;
  34. 34. JBoye,Aarhus,2017 What is the Blockchain? (2/3) • Blocks are all back-linked, i.e., they reference the signature of the previous block in the chain (kind of like a linked list); • That chain can be traced all the way back to the very first block created; • This provides an un-editable (compromised) record of all transactions made; • The chain can be controlled by any single entity; • The chain has no single point of failure.
  35. 35. JBoye,Aarhus,2017 What is the Blockchain? (3/3) • Most importantly (perhaps) - it is very hard to add blocks to the blockchain e.g., bitcoin mining • Its strengths are in • Distribution • Technical robustness • Lifespan • Non-modifiability • Unquestionable provenance
  36. 36. JBoye,Aarhus,2017 Why Blockchain? • Just because we can, should we? • “The idea that everyone (and their descendants) has to have a copy of THE ledger of all transactions in the universe (now and future) has always smelled fishy to me” • The idea that people could have computers in their homes… • The idea that people have all the world’s knowledge at their fingertips…
  37. 37. JBoye,Aarhus,2017 “Blockchain? - the equivalent of being the first to figure out that peanut butter and chocolate go well together” -Jeff Flowers
  38. 38. JBoye,Aarhus,2017 A blockchain is “a technology that allows people who don’t know each other to trust a shared record of events” - Bank of England
  39. 39. JBoye,Aarhus,2017 https://blockchain.info Does this mean that I have only done one bitcoin transaction ever?
  40. 40. JBoye,Aarhus,2017 Suppose your family history, personal preferences, etc. was on a blockchain? • You would control • content • credibility • visibility • would identity theft be a problem or would this be a true online identity? • could I use my personal information bits like coins/tokens of value?
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  43. 43. JBoye,Aarhus,2017 Could the Blockchain help to address “fake news?
  44. 44. JBoye,Aarhus,2017 Back to empowerment and transparency • “Diamond Blockchain” • Slave labor goods • Hernando DeSoto’s work on land titles
  45. 45. JBoye,Aarhus,2017 Is a Blockchain for you? - public or private?
  46. 46. JBoye,Aarhus,2017 Blockchain as a platform - another geeky paper • “Let’s make the blockchain programmable” - “a world computer” • Ethereum specifications • “a child of Bitcoin and BitTorrent” • Ether is not just another coin • Redefines mining/POW • Quantifies “smart contracts” • enables “cryptoeconomics” Ethereum White Paper A NEXT GENERATION SMART CONTRACT & DECENTRALIZED APPLICATION PLATFORM By Vitalik Buterin When Satoshi Nakamoto first set the Bitcoin blockchain into motion in January 2009, he was simultaneously introducing two radical and untested concepts. The first is the "bitcoin", a decentralized peer-to-peer online currency that maintains a value without any backing, intrinsic value or central issuer. So far, the "bitcoin" as a currency unit has taken up the bulk of the public attention, both in terms of the political aspects of a currency without a central bank and its extreme upward and downward volatility in price. However, there is also another, equally important, part to Satoshi's grand experiment: the concept of a proof of work-based blockchain to allow for public agreement on the order of transactions. Bitcoin as an application can be described as a first-to-file system: if one entity has 50 BTC, and simultaneously sends the same 50 BTC to A and to B, only the transaction that gets confirmed first will process. There is no intrinsic way of determining from two transactions which came earlier, and for decades this stymied the development of decentralized digital currency. Satoshi's blockchain was the first credible decentralized solution. And now, attention is rapidly starting to shift toward this second part of Bitcoin's technology, and how the blockchain concept can be used for more than just money. Commonly cited applications include using on-blockchain digital assets to represent custom currencies and financial instruments ("colored coins"), the ownership of an underlying physical device ("smart property"), non-fungible assets such as domain names ("Namecoin") as well as more advanced applications such as decentralized exchange, financial derivatives, peer-to-peer gambling and on-blockchain identity and reputation systems. Another important area of inquiry is "smart contracts" - systems which automatically move digital assets according to arbitrary pre-specified rules. For example, one might have a treasury contract of the form "A can withdraw up to X currency units per day, B can withdraw up to Y per day, A and B together can withdraw anything, and A can shut off B's ability to withdraw". The logical extension of this is decentralized autonomous organizations (DAOs) - long-term smart contracts that contain the assets and encode the bylaws of an entire organization. What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create "contracts" that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code. Page 1 ethereum.org
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  48. 48. JBoye,Aarhus,2017 “A compelling FinTech example is the potential for Blockchain technology to replace legacy post-trade processes that currently require trusted third parties such as clearinghouses and depositories to manage and administer the clearing, settlement, and custody associated with trades and payments” —Dhar & Stein, CACM, 10/2017
  49. 49. JBoye,Aarhus,2017 “Blockchain is the new quantum physics: A really, really hard science that no one understands, ambushed by clowns like Deepak Chopra looking to make a quick buck on solutionist nonsense” ——-Chris DeRose (TED talk) “Blockchain does nothing but circumvent the rules we have imposed on banks to keep them honest” ——-Izabella Kaminska (FT Alphaville)
  50. 50. JBoye,Aarhus,2017 Cryptoeconomics • The 3rd part of Satoshi’s vision • “past is provable, future is predictable” • Uses cryptography to prove actions occurring in the past • Predicts that economics can ensure that actions occur in the future (Ref: Justin Poirier)
  51. 51. JBoye,Aarhus,2017 Cryptoeconomics - why does it work? • Works because people trust math and people like money • Establishes trust, even between pseudoymous parties • Makes trust in a person or third party optional • Reduces the cost of an intermediary to only the actual transaction cost (remember the UN example?) (Ref: Justin Poirier)
  52. 52. JBoye,Aarhus,2017 Disintermediation • Third parties are no longer needed to • establish identity or prove creditworthiness • distribute media • mediate communication between parties • mediate transfers of value
  53. 53. JBoye,Aarhus,2017 ICOs and ITOs • What could follow KickStarter and Indiegogo? • The construction of a “token/coin infrastructure” using a standard toolkit • Developers can design according to certain rules and know that their tokens/coins will be easily compatible with wallets, exchanges, etc. • Have resulted in the raising of millions of dollars of capital in very short time periods • Purchasers do not own a stake in a company, just the coins/tokens • Too good to be true or shady?
  54. 54. JBoye,Aarhus,2017 #WinningTogether ?
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  59. 59. JBoye,Aarhus,2017 Are you on this list? Tell me about it
  60. 60. JBoye,Aarhus,2017 Price: US$100,000
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  62. 62. JBoye,Aarhus,2017 What’s wrong with the Internet? • Centralized (?) - DNS?, CAs? • Vulnerable to censorship • Client/server architecture/model is vulnerable to attack • Suspicious incentives (?) • Content and infrastructure often controlled by the same players • Lack of permanence(?) • Users have lost control of their data
  63. 63. JBoye,Aarhus,2017 Example - Net Neutrality • Media consolidation • Media owned by the same parties that control infrastructure • User data is controlled by those who control media and infrastructure • Net neutrality is vulnerable to political tampering • Rules can be changed arbitrarily by private parties
  64. 64. JBoye,Aarhus,2017 Is the Blockchain a foundation for a new Internet? (please don’t call it 3.0!) • Decentralized • P2P architecture • Neutral • Censor-proof • Geographically diverse • Encrypted natively • Incentivized protocols • Native payments • Transferable value • User owned • What would a decentralized Web look like?
  65. 65. JBoye,Aarhus,2017 Can Blockchain really help drive the next important tech eras? • Does it really represent one of the next important tech era after mainframe, PC, Internet/Web, cloud, mobile? • Internet: transfer of information; Blockchain: Internet++ • De-centralized systems vs. centralized systems • Public, private, parallel/forking, and intersecting blockchains - a network of Blockchains? • What could its role be in • Commerce/business/shared economies • Security/Privacy • Internet of Things • etc,etc,etc.
  66. 66. JBoye,Aarhus,2017 Summary and conclusions • Cybercurrency and blockchain • are grand experiments in technology, sociology, economics, business, environmental issues, etc. that should not be ignored - #WinningTogether • have lead to significant disruptive technologies based upon established principles • has begun to evolve and spawn/fork exciting new variations • provides a powerful development platform comparable to that of the Internet • will continue to raise non-trivial issues surrounding adoption and regulation • defines a rich area for innovative research • requires a new wave of SMEs and developers
  67. 67. JBoye,Aarhus,2017 (“Consumer Digital Payments - US” 11 October 2017)
  68. 68. JBoye,Aarhus,2017 What shall we make of this?
  69. 69. JBoye,Aarhus,2017 For those of you who like numbers https://coinmarketcap.com
  70. 70. JBoye,Aarhus,2017 https://bravenewcoin.com/assets/Weekly-Bitcoin-Blockchain-Stats/
  71. 71. JBoye,Aarhus,2017 https://digiconomist.net/bitcoin-energy-consumption
  72. 72. The Distinguished Speakers Program is made possible by For additional information, please visit http://dsp.acm.org/
  73. 73. About ACM ACM, the Association for Computing Machinery is the world’s largest educational and scientific computing society, uniting educators, researchers and professionals to inspire dialogue, share resources and address the field’s challenges. ACM strengthens the computing profession’s collective voice through strong leadership, promotion of the highest standards, and recognition of technical excellence. ACM supports the professional growth of its members by providing opportunities for life-long learning, career development, and professional networking. 
 
 With over 100,000 members from over 100 countries, ACM works to advance computing as a science and a profession. www.acm.org
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  75. 75. JBoye,Aarhus,2017 ThankYou! Questions? Comments? Want the slides?* bebo.white@gmail.com *win a bitcoin souvenir - remember the question about “fake news?” - best 2 answers

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